TD and Air Canada Reach Long-Term Agreement for Card Loyalty Programme

The Toronto-Dominion Bank (TD) and Air Canada have announced the finalisation of a long-term loyalty programme agreement. Under the terms of the loyalty agreement, TD will become the primary credit card issuer for Air Canada’s new loyalty programme when it launches in 2020 through to 2030. The loyalty agreement was finalised in conjunction with Air Canada entering into a definitive share purchase agreement with Aimia for the acquisition of Aimia Canada, which operates the Aeroplan loyalty business (the transaction). The closing of the transaction is subject to the satisfaction of certain conditions, including receipt of Aimia shareholder approval and customary regulatory approvals. The loyalty agreement will become effective upon the closing of the transaction.

If the proposed transaction is completed, TD will pay $622m plus applicable sales tax to Air Canada, of which $547m ($446m after sales and income taxes) will be recognised as an expense during the first quarter of 2019, and $75m will be recognised as an intangible asset amortised over the loyalty agreement term, both of which are expected to be reported as items of note. In addition, TD will prepay $308m plus applicable sales tax for the future purchase of loyalty points over a ten-year period. TD also expects to incur additional pre-tax costs of approximately $100m over two years to build the functionality required to facilitate the programme. The proposed transaction is expected to reduce TD’s CET 1 ratio on close by approximately 13 basis points.

If the proposed transaction is completed, TD Aeroplan cardholders will become members of Air Canada’s new loyalty programme and their miles will be transitioned. In the interim, TD Aeroplan customers can continue to earn and redeem miles as they do today.