Key Highlights
- A consortium led by Blackstone alongside La Caisse is acquiring a 25% interest in Air Canada’s Aeroplan loyalty division for approximately US$2 billion.
- The transaction assigns Aeroplan a total valuation of C$10 billion (US$7.2 billion), surpassing market expectations.
- The Canadian carrier intends to deploy the capital toward retiring a billion-dollar bond obligation and reducing overall debt.
- Shares of Air Canada jumped roughly 6% to reach C$27.27, marking the highest closing price since July 2021.
- The airline also exceeded second-quarter earnings projections, delivering adjusted EPS of C$0.40 compared to analyst forecasts of C$0.15.
Shares of Air Canada concluded Tuesday’s trading session up 5.9% at C$27.27, reaching levels not seen since July 2021, following the announcement of a major transaction involving its Aeroplan loyalty division.
The purchasing group consists of investment giant Blackstone partnered with Quebec’s pension manager La Caisse. Additional participants include PSP Investment and the British Columbia Investment Management Corporation.
Under the terms of the agreement, Aeroplan receives a valuation of C$10 billion, equivalent to approximately US$7.2 billion. This figure surprised market observers. Konark Gupta, an analyst with Bank of Nova Scotia, described it as a “significantly higher value” than market consensus anticipated, prompting him to raise his rating on the carrier to sector outperform.
With Air Canada’s current market capitalization hovering around $7.6 billion, the Aeroplan valuation represents a substantial portion of the company’s overall worth.
John Di Bert, Air Canada’s Chief Financial Officer, characterized the transaction as one that “strengthens Air Canada’s financial position by unlocking value from Aeroplan while retaining full operational control.” He emphasized that the deal advances the airline’s objective of achieving an investment-grade credit rating.
Prioritizing Balance Sheet Improvement
Currently, Air Canada’s debt carries speculative-grade ratings from all three major credit agencies: Moody’s, S&P Global, and Fitch. The company’s balance sheet shows C$12.79 billion in long-term debt combined with lease liabilities.
Capital raised from the Aeroplan transaction will first be allocated toward settling an approaching billion-dollar bond maturity, with remaining funds directed toward additional debt reduction initiatives.
The Aeroplan program boasts more than 10 million active participants, representing approximately 25% of Canada’s total population. Participants accumulate points via Air Canada travel and partner credit cards, later exchanging them for flights or merchandise. The program recently received recognition as the Americas’ top loyalty travel program at the Freddie Awards.
Historically, Air Canada separated Aeroplan as an independent public entity during bankruptcy reorganization proceedings. The carrier reacquired the program in 2019 for C$497 million in cash, along with roughly C$2 billion in obligations related to outstanding points.
Second-Quarter Performance Exceeds Projections
Alongside the Aeroplan announcement, Air Canada disclosed its second-quarter financial results on Tuesday. Adjusted earnings reached C$0.40 per share, substantially outperforming the C$0.15 consensus estimate compiled by FactSet.
RBC Capital Markets analyst James McGarragle observed that even under a maximum dilution scenario where Air Canada divests up to 49% of Aeroplan, the program would still command a valuation near US$4 billion.
Blackstone managing director Mark Rutledge praised Aeroplan as “an industry-leading loyalty platform” and expressed that his firm remains “a long-term believer in Canada as a compelling place to invest.”
While Scotia analyst Gupta acknowledged that fuel price fluctuations pose a short-term risk factor, he indicated that the strategic benefits of the Aeroplan transaction should carry greater weight in investor considerations.
Air Canada stock finished Tuesday’s session at C$27.27.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
