RE: Is Aeroplan willing to loose $432 000.... By my calculation Futura charges 5 cent/mile, but must pay Aeroplan 3 cents.
Aeroplan revenue 2011 $1,637,963 Almost all cost of sales is for Aeroplan miles. $991,047
Cost of Sales is 60% of Aeroplan revenue. Gross Margin = 2 cents/mile.
Aeroplan makes about $1 million from Futura. Will the contract be terminated, transferred or kept by Futura?
If transferred, the buyer should pay a premium as there is about a $700K net cash flow each year. How much is someone willing to pay for this easy cash flow? Also the question whether any potential buyer be satisfied with a 2 cent/mile margin? Plus need to provide Aeroplan evidence that the miles issued will increase and not only sit on what Futura had done so far. For that any buyer wilkl require access to good financing to expand its Aeroplan base.
If the contract is terminated, all accounts revert to Aeroplan with no compensation to Futura? Any loss by Aeroplan incurred with Futura will be made up in around about sort of way. I assume.
If kept, then Futura better have a game plan ready and the debt issue resolved. Also get financed properly. A tall order. Don't know if they can pull it off. I don't think Futura Rewards will continue to exist and who would want it anyway. The value exists only in future breakage revenues.
Noticed in 2011, that only 2 merchants accounted for 49% of Futura's gross revenues. Is OK Tire (213 franchises) one of them? This proves Aeroplan can be a success. But these are few to pick from. Most national chains are already under the umbrella of the big loyalty players.
Aeroplan won't care what happens. I don't know details of the contract with Aeroplan. Maybe they will simply take all the accounts under their umbrella for free, without any compensation to Futura. This would hurt Futura, moreso than Aeroplan losing $432,000.
Therefore the more incentive in arriving at an agreement with Aeroplan, for the sake of both. But then Futura needs to get their house in order. If not, then it will look bleak for any contract renewal.
It seems like dark clouds are all around. May work out or not, but at least give it a best effort.