Second-quarter profit at Groupe Aeroplan fell 36 percent as its cost of rewards and other expenses rose, the consumer loyalty operator said on Thursday.
Aeroplan, best known as Air Canada's frequent flier program operator, earned CAD$31.5 million (USD$29.7 million), down from year-earlier CAD$49.5 million.
Despite the drop in earnings, shares of the Montreal-based company rose 10 Canadian cents to CAD$13.30, on volume of 6.4 million shares, making it the third most heavily traded issue on the Toronto Stock Exchange.
Neil Linsdell, analyst at Versant Partners, attributed the gain to optimism over Aeroplan's new partnerships.
Aeroplan said it has signed up supermarket chain Sobeys as a reward partner, allowing customers to earn Aeroplan miles on their grocery purchases.
And, earlier this month, it joined Expedia in Britain, to allow some members to earn points when booking flights, hotels, car rentals and full travel packages.
However, Aeroplan won't likely see the benefits of the partnerships in the next 18 to 24 months, said Linsdell.
Aeroplan chief executive Rupert Duchesne said air travel didn't weaken in the quarter, but the company is cautious given record fuel prices and the turbulence affecting the airline industry worldwide.
"We're impacted only to the extent that the demand for travel is affected by fuel inflation or to the extent that capacity is reduced on popular redemption routes," Duchesne said.
In June, Air Canada said it plans to cut its capacity by 7 percent this autumn, with the largest reductions hitting US flights.
Revenues rose 53 percent to CAD$336.7 million from CAD$220.3 million, the company said. Gross billings from the sale of its miles and points rose to CAD$357.9 million from CAD$238.9 million.
Reward costs climbed 49 percent to CAD$192.6 million from CAD$128.5 million in the same period last year.
In May, ACE Aviation, Air Canada's parent company, sold its remaining 20 percent interest in Aeroplan, which subsequently abandoned its structure as an income trust and converted into a corporation.
It has expanded beyond its Canadian home base with the acquisition of Loyalty Management Group, which runs the Nectar rewards program in Britain.
