The company that runs Aeroplan in Canada and other customer loyalty programs around the world says its third-quarter results were weaker than anticipated and it’s planning a second round of cost-cutting measures.
Montreal-based Aimia said it expected more than 200 people will exit the business by the end of 2015 and suggested more jobs may be on the line next year.
The company said it had already booked $3 million in severance expenses related to a $20-million cost-cutting plan announced in August and expects that number to reach between $10 million and $15 million by the end of December.
Aimia also said weak economic conditions in Canada and Europe during the summer quarter have spurred the company to seek a further $20 million in annualized costs savings by the end of 2016.
“Further to these actions and to accelerate the reallocation of capital to higher margin parts of the business, Aimia has also engaged advisors to consider and evaluate potential disposals of non-core assets,” Aimia said in its third-quarter report..
The company said it has been hit by a number of factors including lower billings from Aeroplan — which manages points that can be exchanged for Air Canada tickets and upgrades as well as other goods and services.
It said Aeroplan billings were weaker than expected due to more constrained spending on credit cards issued by its banking partners. It also found the Sainsbury’s grocery business in the United Kingdom issued fewer Nectar points than expected because of lower food prices and a change in strategy.
Aeroplan is also coping with a change in the way the credit card industry operates behind the scenes, a process that has resulted in less marketing by partners due to negotiations about interchange rates.
“We knew that 2015 would be challenging, due to, most significantly, the effects of interchange rate negotiations and the slowing economy,” Aeroplan chief executive Rupert Duchesne said in a statement.
“As the impact of some of those issues became clearer, we took decisive action and have identified $40 million of annualized cost savings to be delivered over the next two years, to counter the economic uncertainty we are experiencing.”
In the third quarter, Aimia’s gross billings wee down 8.4% from a year ago, falling to $580.3 million, and revenue was down 2.6% to $529.3 million. Those declines would have been even bigger if currency exchange rates were constant.
Net loss for the quarter ended Sept. 30 was $26.1 million, an increase from $24.1 million. Adjusted net earnings per common share dropped 22.2%.
Aimia said the weak quarter prompted it to lower some of its financial estimates for a second time this year, including a drop in gross billings to a range of $2.4 billion and $2.46 billion for 2015.
The company had already lowered the estimate on Aug. 14 to a range of between $2.46 billion and $2.51 billion, down from its Feb. 27 guidance of a range of $2.56 billion and $2.61 billion.
