Aeroplan, owned by Aimia, a leading strategic loyalty program, was partnered exclusively with CIBC for nearly two decades prior to 2013. However, negotiations to renew an agreement between the two parties were obstructed earlier this year, and CIBC publicly declared its intentions to launch a travel reward credit card of its own.
In response, Aimia agreed to an offer from TD Bank for a 10-year agreement that paid the Aeroplan owners more money than CIBC. The agreement put CIBC into a corner as the bank recognized the Aeroplan credit card business accounts for nearly 11 percent of its earnings per share paid to investors. Losing Aeroplan would cost CIBC hundreds of millions in revenue, and likely see its stock value plummet.
CIBC threatened a lawsuit against TD and Aimia to avoid losing Aeroplan, but the threat of litigation helped cooler heads prevail. Representatives from all three companies met and agreed to a three-way plan in which TD and CIBC are equal partners, and can both issue Aeroplan credit cards. The terms of the agreement require TD to pay $200 million upfront to CIBC for the 50-50 stake in Aeroplan, as well as an extra $37.5 million per year over the next three years.
The agreement reduced the losses to CIBC, which plans to make up for the losses by moving ahead with its own travel credit card. The new card will reportedly allow travellers to redeem their travel points on any airline, as opposed to the Aeroplan card where travellers must primarily use Air Canada flights.