Aimia works on a New Plan

      On August  9 Aimia released it's second quarter results.Investors waited patiently for the report after Air Canada announced their intention of non-renewal for the upcoming new contract in June 2020.After the announcement Aimia's share price dropped to a low of $1.40.Most investors realized that this announcement would not have a large impact on 2017 earnings but there would likely be some redemptions.In fact there were only about 2% redemptions.But Aimia did not make any major announcement on the forthcoming Air Canada non-renewal in the Q2 report.That aside Aimia did make some changes. 
                                    

Second Quarter Highlights

Aimia recorded gross billings of $20 million which is down 2% from 2016.But their 2017 guidance has been maintained.They expect gross billings of $520 million and adjusted EBITDA of $40 to $45 million.And they expect an annual free cash flow of about $54 million.They continue to make operational cuts and expect substantial savings from them by 2019.And they have suspended dividends for the forseeable future.

Other Changes

Aimia will have a new CFO in September.They have recently sold a small loyalty program with a gain of $5.4 million.And they are in discussions for new partners in their Aeroplan loyalty program.Here is where they must obtain progress and keep their shareholders aware of it.

Non-Renewal of Aeroplan

It is in this quarter that Air Canada gave notice of it's intention of non-renewal of the Aeroplan program with Aimia.This caused the stock to drop from the $9 level to $1.40 per share.But it is the position of this blog that Air Canada cannot cancel the contract with Aimia.There have been no  performance issues to cause a breach of contract.And it is hard to cancel a long term contract unless both sides agree.Doubtless Aimia did not agree.So in effect there is no "real cancellation".But Aimia cannot continue without an agreement.Soon irritations and performance issues would start to appear.It is better for Aimia to take a not as profitable amended agreement but continue on.

Recommendations

Aimia needs to hire a contract expert until the Aeroplan problems have been completely remedied.Secondly this blog strongly suggests that Canada Pension Plan take a small position here (5 to 10%)to shore up and get future capital gains on Aimia.A secondary and smaller position by Caisse Populaire would strengthen the stock price almost immediately.This blog sees Aimia's share price at the $3.25 to $3.50 level by Christmas.

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