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Are CIBC and Aeroplan preparing for divorce?

On Thursday, May 30, CIBC President and CEO Gerry McCaughey said during a conference call that CIBC is preparing for  alternative options in case it decides not to renew its Aeroplan credit card agreement with Aimia, which is set to expire at the end of the year.

“While the launch of the alternative card would result in short-term costs for CIBC, we believe it would generate benefit over the longer term for our clients and shareholders,” McCaughy said.

McCaughey said the bank is investing $50 million over the next four quarters, including $30 million before the end of fiscal 2013, to build these alternatives.

But he also didn’t rule out the possibility of renewing the existing contract with Aimia, a loyalty rewards company that has partnered with the bank for more than two decades to create the popular CIBC Aerogold Visa.

CIBC’s comments regarding the renewal of the Aerogold program, seem to corroborate hints from CEO Rupert Duschene the other week, in which he intimated Aimia has narrowed down their negotiations for an alternative to CIBC to one other financial institution.

While many analysts believe both parties have too much to lose, none know what renewal terms CIBC has proposed, what Aimia is asking for, or what terms the alternative financial institution have offered. Regardless,lines have been drawn, the dirty laundry is out and now we’ll have to see who wins.

My bet is the consumer comes out on top if CIBC walks away from the portfolio. CIBC will have to offer significant customer retention incentives, like annual fee waivers, welcome bonuses, purchase offer incentives, etc. Also, any new issuer will have to do the same and Aimia will likely have to sweeten the pot as well to compete against CIBC new offer which will be designed to retain Aerogold’s best customers. Existing and new customers alike, will be able to benefit from the competition for their business. That alone makes a break-up worth it.

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