Air Canada seeks credit card partners to boost loyalty program

By Nivedita Bhattacharjee

(Reuters) - Air Canada (Toronto:AC.TO - News) said on Tuesday it is looking for financial institutions to partner on its new co-branded credit card, as it prepares to launch its own rewards program in 2020.

In May, the airline said it would not renew its agreement with Aimia Inc, which is the operator of the Aeroplan loyalty program that expires in June 2020.

The credit cards, which will offer loyalty perks, are in turn expected to help revenue at a time when airlines are competing to get more market share.

The Montreal-based carrier said it expects its large fleet and a push to add more international destinations to make the loyalty program successful.

"International travel is the most popular reward a credit card loyalty program can offer," Chief Executive Calin Rovinescu said at its annual investor day meeting. "This makes us a highly desirable partner as Canada's largest carrier."

Air Canada's revenue increased around 6 percent in the fiscal year ending 2016 and is expected to rise almost 10 percent in fiscal 2017.

Airlines have been trying to maintain leaner operations, even as they invest in upgrading backend technologies and providing better customer service.

Air Canada will focus more on its low-cost carrier range, Rouge, a company executive said.

Rouge is popular for its "sun destinations" - places like Florida and the Caribbean that people tend to visit for vacations.

"We can ... optimize Rouge to fight any new low-cost threats we see in the market," said Benjamin Smith, president of Air Canada's passenger airlines division.

The company also set new near-term financial targets and said it expected earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent margin to range from 17 percent to 20 percent for the period 2018-2020.

For the 2015-2018 period, it had forecast margins of 15-18 percent.

Free cash flow targets for 2018 - 2020 are expected to be between $2 billion and $3 billion.

Air Canada's shares were down 1.1 percent at C$23.39 on the Toronto Stock Exchange on Tuesday.

(Reporting by Nivedita Bhattacharjee and Anirban Paul in Bengaluru; Editing by Anil D'Silva, Bernard Orr)