Air Miles, one of Canada’s largest loyalty programs, has a new owner, but needs new business partnerships.

BMO Financial Group (Bank of Montreal) agreed to purchase Air Miles from LoyaltyOne Co for US$160 million. LoyaltyOne and its U.S. parent Loyalty Ventures Incl., filed for court protection from creditors in the United States and Canada. In U.S. court filings, the parent company said it had assets of about $10 million and liabilities of up to $1 billion.

BMO was a founding partner of Air Miles since 1992. In news releases announcing the transaction, Air Miles staff indicated the transaction would have no impact on the accumulated points held in the 10 million Air Miles accounts, or in customers ability to redeem points to purchase rewards.

A section in the bankruptcy filing titled ‘Operational Challenges’ discusses Air Miles’ problems arising from the loss of a significant customer and declining revenues from other customers. It notes Sobey’s decision to cut ties with Air Miles in the summer of 2022 had a broader impact on revenue beside the loss of its second-largest client. “Sobeys was critical to the Air Miles Reward Program because consumers tend to visit grocery stores on a weekly basis, creating regular and frequent opportunities for collectors to earn and redeem reward miles.” It likened Sobey’s to an anchor store in a mall. Sobey’s switched from Air Miles to Scene+, founded by Scotiabank and Cineplex.

The court filings also noted that Air Miles’ other two largest customers, BMO and Shell Canada had demanded “substantial price concessions” in contract renewals.

Loyalty program watchers also cited the recent departures of other merchants, such as Old Navy, Staples, Rona and Lowe’s.

In its news release, BMO said the acquisition would allow for a “made-in-Canada” effort to reinvigorate the loyalty program, and that it was interested in long-term success, and not just short-term.

Without replacement merchants willing to help consumers accumulate points on purchases, the risk is that consumers will no longer value the program and abandon it. A second risk to consumers is that Air Miles will be pressed to “devalue” its points so that existing points can be exchanged for lower levels of rewards.

In addition, Canadian merchants have consistently complained that credit card acceptance fees, which broadly fund loyalty programs, are unfairly high in Canada. The government has frequently stressed the need for those fees to be reduced either by market participants voluntarily or by government intervention.

The relationship between credit card loyalty programs, merchant acceptance fees and consumer attitudes is the focus of the Consumers Council of Canada’s report Stuck in the Middle: Consumers, Transaction Fees and Loyalty Programs, available in the council’s online store.