Frequent flyers chart promising financial path

Delta Air Lines

18/08/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Sebastian  Pellejero
NEW YORK, Aug 17 (Reuters Breakingviews) - Air Canada AC.TO is charting a new course for frequent flyers. The $6 billion carrier agreed to sell a 25% equity stake in its loyalty program to buyout shop Blackstone BX.N and three domestic pension fund managers for about $1.8 billion, in a deal that values Aeroplan at more than $7 billion. Its crafty structure also could hold broader appeal.
Boss Michael Rousseau is raising capital for Canada's flagship airline to pay off debt and buy back shares without ceding control of the crown jewel. It retains strategic oversight and day-to-day management of Aeroplan, which counts 10 million active members across the planet. Moreover, Air Canada can repurchase the stake between years five and eight at a price that caps the return for investors at an annualized 6.5%. 
Airlines have monetized rewards before, but not quite like this. In 2005, Air Canada's then-parent sold a minority stake in Aeroplan and then exited entirely three years later, before the airline bought it back in 2019. During the pandemic, Delta Air Lines DAL.N, United Airlines UAL.O and American Airlines AAL.O borrowed some $26 billion against their mileage plans, secured by the co-branding contracts.
Conditions seem to have improved. Air Canada pledged no collateral and recorded no debt. At 6.5%, Blackstone and friends would barely earn more than the S&P Canada high-yield index, despite ranking behind bondholders. Partially financing the purchase with debt, however, should enable investors to push their fund-level returns beyond 10%.
The timing is no accident. Air Canada's fuel bill has grown because of the war in Iran while it awaits delivery on some 70 aircraft, an awkward combination for a company that has promised to slash leverage. Selling a piece of Aeroplan provides cash, without adding debt, at a price roughly in line with subordinated borrowing costs, a comparison the airline says is inappropriate.
Some peers may be intrigued. Although Delta and American are in hock to bondholders, United finished paying off secured debt last year on its MileagePlus business, worth $25 billion, according to consultancy On Point Loyalty. It is now pursuing an investment-grade credit rating. IAG, which operates British Airways and others, owns the biggest unencumbered loyalty program outside the United States, but also funds aircraft from cash flow. 
Plenty of other companies, from hoteliers to eateries, also have valuable repositories of repeat customers. If they can break open those piggy banks without loosening their grips much or bloating their balance sheets, Air Canada's financial engineering could take off.
     
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CONTEXT NEWS
Air Canada said on August 11 that it had agreed to sell a 25% stake in its loyalty program operator, Aeroplan, to fund managers Blackstone, La Caisse, PSP Investments and British Columbia Investment Management for C$2.5 billion ($1.8 billion). The carrier will retain a 75% stake, maintain full operational control and use the proceeds to repay a $1.2 billion bond.
BofA is advising Air Canada and Aeroplan while Scotiabank is advising Blackstone.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))