Author Topic: AIM.TO - Aimia  (Read 89160 times)

Uccmal

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Re: AIM.TO - Aimia
« Reply #220 on: January 12, 2018, 04:39:05 AM »
SJ,

I dont know about people being blissfully unaware.  I was sitting in Starbucks and overheard a conversation between two guys about the pointlessness (no pun intended) of using aeroplan anymore.

Just some scuttlebut.  IMO, word has spread and the run on the bank has started. 

Now this could just be selective hearing on my part as I lost a little money on this deal and its human nature to want confirmation that the loss was the right thing to do.  So take it for what its worth... just Scuttlebut. 
GARP tending toward value


doc75

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Re: AIM.TO - Aimia
« Reply #221 on: January 12, 2018, 04:54:42 AM »
For what it's worth, I've mentioned what's happening to a number of friends and others (essentially whenever someone happens to mention using their points).  In most cases, the reaction is along the lines "yeah, I heard they changed the program somehow".  Either that or total surprise.  Nobody I've spoken with has known what's really going on.


Cigarbutt

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Re: AIM.TO - Aimia
« Reply #222 on: January 12, 2018, 06:02:25 AM »
On the value of scuttlebutt.
Often wondered about the value of this, especially the way Peter Lynch described it (more anecdotal).
Maybe better when done in a systematic way the way Philip Fisher described it?

When I built a position in MegaBrands some time ago, I used to visit stores and check the toy alleys. Not sure it added anything.
It may be helpful to try to obtain the opinion of competitors?

Anyways, for Aimia, I remember seeing posters (elsewhere) commenting on the volume of internet activity for certain sites that could potentially give an idea about the volume of redemptions. Useful?
Aimia is in the business of loyalty and reflecting on what happened to market share of US car manufacturers, the value of loyalty may be over-estimated. Easy to lose and hard to recover.
The "stickiness" of consumers is related to decision simplicity and trends.
It seems to me that players in the loyalty business should anticipate and react quickly to consumer preferences and business risks with key partners.
Of course, with Aimia, the trend can change but, in my opinion, what happened in the last year is not promising.

Like SJ, I'm "baffled" at how this was handled but when two people pull in two different directions, it is hard to see who will collect the prize. Not elegant.



zhengmit

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Re: AIM.TO - Aimia
« Reply #223 on: January 12, 2018, 06:46:17 AM »
Talked to a few people, and the risk of losing Sainsbury is real given the development.  Also people talked about discount and gating to protect Aimia.  Talked to some people and it seems the clause in the contract with credit card companies will prevent them doing this on a large scale.

Cigarbutt: what do you own these days and what do you like most?

petec

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Re: AIM.TO - Aimia
« Reply #224 on: January 12, 2018, 07:11:10 AM »
Irrespective of what AC does at this point, it is virtually certain that AC will totally piss off a great many of their customers by starting a new frequent flier program. 

They're not really starting a new one - they already have Altitude so what they are doing is preventing Altitude miles from going to Aeroplan, and allowing them to be redeemed in-house. They gave people 3.5 years to run down their points so they don't NEED to lose value - especially if AC offer to buy the few Aeroplan points remaining in 2020. And even if customers are pissed off, it may well be that they don't have much option other than to fly AC on many key routes.

Against that, these are incredible -ve WC businesses that require no capital and generate more cash the faster they grow. Bringing the NPV in-house is a smart move.

Just playing devil's advocate.




StubbleJumper

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Re: AIM.TO - Aimia
« Reply #225 on: January 12, 2018, 07:48:42 AM »
Irrespective of what AC does at this point, it is virtually certain that AC will totally piss off a great many of their customers by starting a new frequent flier program. 

They're not really starting a new one - they already have Altitude so what they are doing is preventing Altitude miles from going to Aeroplan, and allowing them to be redeemed in-house. They gave people 3.5 years to run down their points so they don't NEED to lose value - especially if AC offer to buy the few Aeroplan points remaining in 2020. And even if customers are pissed off, it may well be that they don't have much option other than to fly AC on many key routes.

Against that, these are incredible -ve WC businesses that require no capital and generate more cash the faster they grow. Bringing the NPV in-house is a smart move.

Just playing devil's advocate.



No, they are starting a new program.  All of your existing Aeroplan miles from previous flights appear as if they will be orphaned.  All of your existing credit cards appear as if they will be orphaned.  A current Aeroplan participant has the option of participating in both the old program and the new one, but collecting loyalty points works best for consumers when a consumer concentrates his efforts on a few programs.  Consumers will be able to recover some value from their existing miles, but every consumer who makes the switch will end up losing to some degree (ie, you might be able to redeem the lion's share of your points, but there will still be a remainder which is insufficient for a flight reward....this could be a few thousand miles for some consumers or it could be many thousand for others).  Unless the new program is sexy as hell and includes very attractive start-up bonuses, there will be some unhappy people.

The loyalty business itself is certainly attractive, for all of the reasons you mentioned.  I don't at all doubt that AC wanted a bigger piece of the action from AIM, and when that didn't happen AC walked.  But, there will be start-up costs, and these shouldn't be ignored.  I do not know the size of the army of employees at AIM or the significance of AIM's information systems, but they will be costly to re-build (the information systems are the most important because much of the value is in the data).  After having been snake-bitten by the abandonment of Aeroplan, it will be interesting to see how quickly Canadian financial institutions will sign agreements to issue new credit cards (that's where much of the money is earned).  In particular, if I were TD, I'd be pissed about having spent a pile of money on an Aeroplan contract and having invested a pile of money in promoting those cards on television only to have had the rug ripped out from underneath me.  It might take a while to sign up loyalty partners, like the banks, to profitable contracts.  Finally, as I suggested earlier, a new program would be best launched with some sort of smoke and noise, preferably with attractive sign-up bonuses to get clients on board.  It could be a few years before AC makes any money of the new program, but presumably it will ultimately be profitable.

So, will there be any behavioural change from AC's existing client base?  With Aeroplan abandoned and a new program launched will AC retain all of its existing business, or will some of the flying public move their business to WestJet?  A good loyalty program does what its name implies, it builds loyalty.  When you abandon the program, do you effectively reduce your clients' switching costs?  This remains to be seen, but I personally have always considered the value of $20 of Aeroplan miles when doing price comparisons between AC and WJ.  Will this make WJ more attractive for the flying public?

Still baffled that an agreement wasn't reached...

SJ

bizaro86

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Re: AIM.TO - Aimia
« Reply #226 on: January 12, 2018, 09:11:16 AM »
I don't have a position here so haven't done this, but if you want scuttlebutt, I would read this:
https://www.flyertalk.com/forum/air-canada-aeroplan/1841934-air-canada-launch-its-own-loyalty-program-2020-a-68.html

It's the 1000+ post thread on the change on Flyertalk, the forum for people who really, really care about frequent flier programs and airline status. These are the customers both AC and Aeroplan will need to keep, so what they are saying is pretty important, imo.

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #227 on: January 12, 2018, 10:32:20 AM »
Hi zhengmit,

Leaving Aimia for a minute.

Sorry, wrong person to ask at this point.
If you are looking for investable ideas, there are out there on this Board superior participants who likely continue to identify and benefit from profitable opportunities.

I came to this Board about a year ago in the context of my disappearing ability to find targets with a sufficient margin of safety in my investment circle. Since I started to participate, my investment IQ has moved from 78 to 82. Little progress, not because of the absence of quality on this Board but because of mental slowness/resistance.

I have long positions in cash (which I donít like, but can tolerate) and long-term USA government bonds, (TLT), a relatively large position that I have trimmed down to less than 10% of portfolio since 2011.

This year, I invested in Aimia as I felt there was potential value realization in the preferreds associated with a rapid reconnection with Air Canada.
I see you are new to the Board and would like to read your answer to your question.

Back to Aimia.


petec

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Re: AIM.TO - Aimia
« Reply #228 on: January 22, 2018, 12:43:23 AM »
FWIW I am out of the prefs with a 20-30% profit in 18 months depending on the account. Oddly, I consider this to have been a highly successful investment. My assessment when I bought was that Aimia would probably not lose the AC contract, but that if they did the prefs would likely still be worth the price I paid and might even be worth par in a breakup. I also thought they'd be a great security to hold if rates rose. To have witnessed the loss of the AC contract and still made money feels like it proves my thesis. Sitting here today though, it's much harder to assess the probability of real upside, which hinges on getting another partner or breaking up the business in such a way that the pref holders receive par value. Also, the probability of the worst case outcome (the loss of AC and a run on the bank per my SOTP above) has risen markedly because the first part of it has already happened.

If I am making a mistake here it is because I am anchoring to my purchase price - when AC cut the cord I decided to have faith in my original thesis and not realise the loss; now that I can realise a profit, I am doing so. If I had bought at 9 I'd probably have sold earlier, but I bought between 10 and 12. That's probably an emotional red flag.

Thanks to everyone on here for a) flagging the opportunity and b) helping me understand it!

StubbleJumper

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Re: AIM.TO - Aimia
« Reply #229 on: February 01, 2018, 05:16:47 AM »
Looks like AIM has raised CAD$105m by selling one of its British loyalty programs:

https://www.theglobeandmail.com/report-on-business/aimia-sells-nectar-loyalty-card-business-to-uks-sainsburys-for-105-million/article37814207/


First they cut the dividend to staunch the cash outflows and now they are selling assets to raise cash.  Will it be enough?


SJ