The newest:
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BMO Financial Group wants to buy airline miles.
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Air Miles’ US parent company seeks bankruptcy protection.
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Offer does not affect customers’ points balances.
BMO Financial Group has signed an agreement to acquire the Air Miles rewards program from LoyaltyOne Co., which has filed for bankruptcy protection.
In a press release, Air Miles President Shawn Stewart says the deal will not impact the point balances of the program’s 10 million customers or their ability to use their miles to pay for items.
BMO, a founding partner of Air Miles since 1992, said the proposed US$160 million deal would accelerate the loyalty program’s future growth.
“If our acquisition of the Air Miles business is successful, we will bring ownership of Air Miles to Canada and together strengthen its offering to Canadian consumers and businesses,” said Ernie Johannson, BMO’s Group Head of North American Personal and Business Banking in an opinion.
The bank is approaching Air Miles with a “long-term perspective, not a short-term tactical” approach that a holding company based in another country might take, she said.
At a holding company, “there’s not necessarily the same belief in the program,” said Johannson, who happened to start her career at Air Miles 30 years ago. “We want to run it as one and be able to fund it, grow it and inspire it.”
Parent company seeking protection
The transaction comes as Air Miles’ US parent company, LoyaltyVentures, is seeking legal protection from its creditors in the US and Canada.
In US court filings, LoyaltyVentures states that it has approximately $10 million in assets against up to $1 billion in liabilities. At the end of 2021, the company’s shares were worth more than $700 million, but by the end of its most recent completed quarter, that had fallen to just $29 million.
As part of the bankruptcy proceedings, Loyalty’s shares, currently trading under the symbol LYLT, will be delisted from the Nasdaq.
Air Miles’ parent company’s share price has plummeted
Air Miles was once one of the biggest names in loyalty, but the company’s popularity has slowly waned in recent years.
The company’s troubles first began in 2016 when it ostracized members by announcing that unused points would expire. This was extremely unpopular with members who had diligently saved their points for years, and led to a rush of people redeeming points for merchandise for fear of losing them for nothing. Then the company reversed that decision, which caused even more excitement.
Like many loyalty programs, it has also devalued the value of its points by charging more of them to buy something.
Since then, more trading partners have abandoned the program, further eroding its value in the minds of many consumers.
Air Miles’ latest big hit came last year when the Empire Company, which owns grocery chains Sobey’s and Safeway, joined the Scene+ rewards program founded by Scotiabank and Cineplex.
Patrick Sojka, founder of loyalty program portal Rewards Canada, says Air Miles has been in trouble for some time.
“They lost partners left, right and center, not just Sobey’s group … they lost Staples, they lost Old Navy, they lost Rona, Lowe’s,” he told CBC News in an interview.
While the Bank of Montreal is calling the deal a “made-in-Canada opportunity” to provide a revitalization for one of Canada’s largest loyalty programs, there’s a chance another prospect for Air Miles is emerging.
As part of Canada’s Chapter 11 Bankruptcy Code and Company Creditors’ Arrangement Act bankruptcy proceedings, LoyaltyOne is undergoing a sale process that could result in a buyer other than BMO emerging with a better offer.
But Sojka says that’s unlikely. “There are no longer any major partners outside of Bank of Montreal itself in this program. And without many options for additional revenue… it’s becoming less and less surprising that this is happening.”
