MONTREAL -- The operator of Aeroplan and other customer-loyalty programs expects challenging economic conditions in Canada will curtail consumer spending and its gross billings through the beginning of 2016.
Aimia Inc. (TSX:AIM) lowered some expectations for 2015 Friday after gross billings slipped in its most recent quarter.
"The rest of this year will be tough for anybody in the consumer businesses, particularly in Canada," CEO Rupert Duchesne said in an interview.
Duchesne said consumer spending has deteriorated rapidly, especially in Alberta, and will likely come in at around two per cent for the year and maybe less in 2016 as bad economic news, talk of recession and an uncertain federal election accelerate consumer anxiety.
"You're naturally going to spend less and splurge less and that's exactly what we think is going to go on, and frankly it could go on well into the first half of next year," he added.
The Montreal-based company, which estimated in February that it would have gross billings of between $2.56 billion and $2.61 billion in 2015, lowered both the high and low end of the range by $100 million on Friday to below the 2014 level of $2.57 billion.
Duchesne said an accounting change was responsible for about half of the reduction in gross billings and "the rest, frankly, is due to a slowing economy in both of our major markets (Canada and Europe.)"
Meanwhile, he said the transition to TD Bank (TSX:TD) as its main Aeroplan Visa issuer that began in January 2014 has gone well, with a "really huge" seven per cent increase in the active card base and "a big increase in purchase volumes as well."
Aimia would normally be cutting back on promotional activity at this point -- with stability returning after TD replaced CIBC (TSX:CM) as its main Visa partner -- but a change in government rules on credit cards will require a continued push, he said.
Consumers should expect the promotional pause will end as they are once again enticed to sign up for credit cards through the waiver of annual fees and the offer of bonus Aeroplan miles over the next six to nine months.
Duchesne also expects partner Air Canada will offer incentives including extra Aeroplan miles to fill seats on new international routes as they receive delivery of more Boeing 787s.
While he doesn't forecast deals being offered to offset consumer weakness, Duchesne said efforts will try to convince members to consolidate spending on their Aeroplan credit card to accumulate rewards faster.
Meanwhile, Duchesne said job losses will be "relatively minor" as a result of an internal reorganization at Aimia, which will now report its business on a product-line basis rather than a geographic basis. Most of the $20 million of annual savings will come from streamlining computer systems and management processes.
The lower gross billings estimate was announced in Aimia's second quarter financial report, which showed its gross billings dropped by 6.6 per cent to $605.3 million and total revenue declined by 3.3 per cent to $436.9 million.
Net earnings improved to $32.6 million, or 17 cents per share, from the year-earlier loss of $18.8 million or 14 cents per share. Adjusted net earnings per common share improved to 54 cents from 17 cents.
Aimia said Canada accounted for more than half its gross billings during the quarter, but they fell to $343 million from $365.2 million in the comparable period of 2014.
