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Aeroplan seeks to broaden loyalty boundaries

Aug. 11, 2011, Montreal - Groupe Aeroplan Inc. has paired with India's Tata Group to launch a new loyalty rewards program in that country, and chief executive Rupert Duchesne said Thursday that he's looking at starting up similar programs in other regions.


August 11, 2011
By The Canadian Press

"India will be an important market over time and it's critical to engage early and get it right, just as we've done with Nectar Italia,'' Duchesne told analysts, a day after Aeroplan reported stronger quarterly earnings.

Duchesne said Aeroplan is working on a recently announced joint venture with India's Tata to sign on "key partners'' to launch a coalition loyalty program to meet India's growing consumer class.

India's Tata comprises more than 90 companies in sectors such as communications and information technology, engineering, consumer products and chemicals. The group has operations in more than 80 countries across six continents.

The loyalty rewards program in India will be based on Nectar Italia, which unites a number of Italy's leading companies in the retail, service and financial sectors and allows customers to earn points for various rewards such as travel and consumer goods.

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"Of course, our success with Nectar Italia has us diligently pursuing other development opportunities around the world. With the high potential for reward, it's our plan to replicate the success we've had in Italy in other markets,'' Duchesne said.

In addition to the Aeroplan card, Groupe Aeroplan manages customer loyalty cards for a host of other clients.

After the close of markets on Wednesday, Aeroplan reported that earnings for three months ended June 30 were $15.3 million or seven cents per share, helped by strong results from Aeroplan Canada and Carlson Marketing Canada.

That compared with $9.7 million or four cents in the same 2010 quarter. Total revenue was $507.6 million, up from $467.9 million.

Aeroplan was expected to earn 31 cents per share on $530 million of revenues in the second quarter, according the analysts polled by Thomson Reuters.

"While the economic environment is more challenging than we had initially anticipated at the beginning of the year, particularly in the U.S. and Europe, our Canadian operations to date have
outperformed our initial expectations,'' Duchesne told analysts.

RBC Capital Markets analyst Drew McReynolds said Aeroplan's results were largely in line with expectations.

McReynolds noted that gross billings for the Europe-Middle East and Africa region have been revised downward to between nine and 11 per cent, from 12 per cent to 15 per cent, due to slower growth in the United Kingdom and Italy.

"Current 2011 guidance assumes: no further deterioration in the key Groupe Aeroplan markets and  the Canadian operations continue to exceed initial plan targets,'' McReynolds wrote in a research note.

More than two million airplane seats, mainly through Air Canada, are redeemed annually under Aeroplan Canada and about 20 per cent of seats are taken two weeks before travel.

Aeroplan recently made it costlier for its members who travel business class or in economy to exotic destinations to cash in on free flights.

The required amount of points increased by an average of just under five per cent starting July 15.

Economy flights within North America and to Europe, which accounts for the vast majority of its business, are unchanged.

The company has a subsidiary, LMG Insight & Communication data analytics firm in the United Kingdom, which analyses how consumers shop and reward them with special offers.