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Mar 28, 2019

Aimia cuts jobs, announces share buybacks as it charts course after Aeroplan

Aimia cuts jobs as it prepares for life after Aeroplan

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 Aimia Inc. (AIM.TO) gave investors a glimpse into its future with a slew of announcements Thursday when it reported fourth-quarter results.  

The Montreal-based loyalty company, which reported a 22 per cent year-over-year decline in revenue for the quarter that ended Dec. 31, said it aims to reduce its headcount by 25 per cent by the end of the year as it looks to reduce its number of key hubs. The job cuts would reduce the company’s workforce to approximately 550 employees by the end of 2019, the company said.

“With the Aeroplan uncertainty that existed over the past year-and-a-half or so, there were some clients that we lost, and so naturally, we needed take out some of the employees that were serving those clients,” Aimia CEO Jeremy Rabe told BNN Bloomberg in an interview Thursday.  

Rabe added the company “de-layered” some of its management staff for efficiency purposes and that it’s aiming to get its existing business – outside of any potential M&A – to profitability in 2020.

The company announced Thursday that Robert Brown, who has served as the company’s chairman since 2008, is retiring and will be replaced by director Bill McEwan. Its chief financial officer, Mark Grafton, will also leave Aimia and will be replaced by Steven Leonard, who has been with the company since 2010, in May.

Aimia had already announced it would be shedding jobs when it finalized its sale of its Aeroplan program in January. The company said about half of its 1,500 employees would move to Air Canada as a result of the transaction.

After the sale of its Aeroplan program – a key part of Aimia’s business – Rabe said that besides cash, the company’s assets are mostly in its loyalty solutions business and travel loyalty investments.

The company's assets include Air Miles Middle East, a stake in the Club Premier program in Mexico that it jointly controls with Aeromexico, and an investment with Air Asia in a travel technology company that operates BIG Loyalty.

In addition to the workforce changes announced Thursday, the company revealed it’s planning a $150-million share buyback program.

“This is easy money for us,” Rabe said. “If you look at where our stock is trading today relative to the value of the assets we have, this is just a simple way to generate a great return for our shareholders.”

In an open letter to Aimia, activist investor Laughing Water Capital on Wednesday made the case for selling the company, but Rabe said after looking at that option in its strategic review process, it doesn’t make sense. The company instead plans to become a consolidator in what Rabe describes as a “fragmented” loyalty business.

Chris Mittleman, chief investment officer and managing partner of Aimia’s largest shareholder, Mittleman Brothers, told BNN Bloomberg in an email he’s encouraged by the share buyback plan and sees it being highly accretive to the company’s net asset value.    

“We respect the views of all our shareholders obviously no matter what their size is,” Rabe said. “Along with the special committee, we went through a really thorough process here. … There’s no strategic acquirers in this space with the balance sheet strength and the existing market presence that Aimia has.”

“We think that that’s a huge opportunity.”