Aeroplan To Buy Stake In AeroMexico's Club Premier

April 27, 2010

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Canada's Groupe Aeroplan, which operates Air Canada's frequent flyer programme, said it will buy a minority position in AeroMexico's frequent flyer, Club Premier, to expand into the Latin American market.

Groupe Aeroplan will initially invest USD$22 million in Club Premier, with an additional USD$12 million to be invested if certain performance milestones are achieved within 18 months of closing.

"On the basis of our current projection, we would expect to recover our initial investment within 3 to 4 years," chief executive Rupert Duchesne said.

The deal, which will be financed with cash on hand, is expected to close in the third quarter of 2010, said Groupe Aeroplan, which owns interests in loyalty programmes in the United Kingdom, Middle East, and Italy.

Raymond James analyst Kenric Tyghe expects the deal to boost earnings only after 2011.

"The growth here will come from their (Aeroplan's) participation in the accelerated miles growth of their partner," said Tyghe, who has an "outperform" rating on the company's stock.

"There is significantly better growth from the emerging market airlines and emerging market loyalty programme, than more mature or developed market programmes, and that is what Aeroplan is going after."