Aeroplan loyalty card expects to withstand economic slowdown

Ross Marowits, THE CANADIAN PRESS
MONTREAL - Loyalty card program operator Aeroplan Income Fund (TSX:AER.UN) says Canadian economic storm clouds shouldn't rain on its strengthening financial position.

While redemptions could fluctuate with the state of the economy, Aeroplan expects to resist the slow down as it did during previous challenging economic times in 2003 and the first quarter of 2002.

"I really don't expect to see a material change to what the business has looked like for the last few quarters," president and CEO Rupert Duchesne said Tuesday during a conference call to discuss fourth-quarter and year-end results.

With two-thirds of the fund's business in located in Canada, he said the outlook could change if economists revise their overall view about GDP growth and consumer spending in Canada.

"But at the moment we haven't seen any real leading indicators that would suggest there's a problem particularly with our kind of consumer which is essentially in the top two quartiles of household income," he told analysts.

Aeroplan said Tuesday net earnings for its fourth quarter were $51.7 million, 26 cents per unit, versus year-earlier net earnings of $38.5 million, 13 cents per unit.

Revenue grew to $221.6 million from $208.4 million. The trust calculated distributable cash at $59.4 million, up by 12 per cent from a year earlier.

The one analyst surveyed by Thomson Financial had expected earnings of 31 cents per unit on $236 million in revenue.

Units in the trust fell nearly nine per cent Tuesday, losing $1.78 to $18.07 on the Toronto Stock Exchange.

Air Canada parent ACE Aviation (TSX:ACE.B) holds about 20.1 per cent of Aeroplan's units, after selling 22 million units for $481.8 million in October.

Aeroplan said it will hire independent financial advisers to conduct an analysis about reorganizing into a corporate structure.

"We believe the benefits of remaining an income trust are rapidly diminishing," he told analysts.

Income trusts become taxable more like corporations under federal changes in 2011.

Duchesne noted the arguments in favour of converting to a corporation are compelling: a lower cost of capital, unrestricted access to capital markets and for investors and eligibility for federal and provincial research and development tax credits.

© The Canadian Press, 2008