Karen Keyes - Senior Vice President, Investor Relations David Johnston - Group Chief Executive Tor Lønnum - Chief Financial Officer Steve Leonard - Vice President and Corporate Controller

Brian Morrison - TD Securities Drew McReynolds - RBC Capital Adam Shine - National Bank Financial Anthony Zicha - Scotiabank Stephanie Price - CIBC Tim Casey - BMO Drew McReynolds - RBC Capital Market

Thank you very much Denise. Good morning to all of you attending on the phone and the webcast this morning.

With me on the call today are David Johnston , our Chief Executive, Tor Lønnum, our Chief Financial Officer and Steve Leonard, our Vice President and Corporate Controller, and also joining us for the first time is Mark Grafton who we have announced today will become CFO on Tor’s departure in early September. Before we get underway, I would like to remind everyone to review our forward-looking statements and the cautions and risk factors pertaining to these statements.

For those of you following along on the webcast, you should see he is on the screen in front of you now and for those of you accessing the presentation, download it from the website. This can be found on Page 3 of the Q2 highlights presentation.

I’d also like to point out the presentation refers to a number of non-GAAP metrics to help you better understand the results of the business. The definitions to these metrics and the reconciliation to their most comparable GAAP metric can be found on pages four and five.

We have also included a full income statement which can be found on Page 6 and a reconciliation of our return on invested capital metric which can be found on page 7. Our reported Q2 numbers shown here on slide 8 includes results for the U.S.

channel and employee loyalty business. The sale of that business closed on May 1.

Today, we’ll be focussing our commentary on the core business excluding those results. Now to remind you that was also the basis on which we issued our 2017 guidance earlier this year.

As you know there are events which have transpired since last quarter have listed a lot of shareholder questions and as a result we’ve provided more detail about the Aeroplan business over the last six weeks of the quarter and into July than we normally do or may do going forward considering the current extraordinary situation. And with that, I’ll hand you over to David and Tor to take you through comments and answer questions.

Thanks Karen and thank you everyone for joining us this morning. Following on from the news in May, this has clearly been a very challenging period at Aimia.

So the first thing I’d like to do today is to thank all of our employees for their focus and resilience over the past three months and for delivering what I regard to be a solid set of results for the quarter. I also want to acknowledge that while it’s been a challenging quarter for the company, its employees it has also clearly been very difficult for our investors and we don’t take the drop in our share price and its impact on you lightly.

Turning to the quarter, on a core basis excluding the customer and employee loyalty and enhancements services disposals; we delivered gross billings at $509 million. Loyalty stable on a constant currency basis with growth in our core coalitions and a decline in the Global Loyalty Solutions business.

Adjusted EBITDA margin was up 180 basis points to more than 12% from 10.3% benefitting from lower share based compensation. Free cash flow was $54 million despite a higher interest in financing cost as a result of the early redemption of the 2018 bonds in the quarter.

Operationally, our daily trucking of Aeroplan member behaviour showed a short period of more elevated redemptions in May, so we have seen no material changes since and that extends beyond the metrics we are reporting for the period and into July. Member activity and a key relation has remained positive with Aeroplan accumulation in the quarter ending up 1%.

We continue to focus on maximizing the value of the business and delivering on our guidance for 2017 which we are maintaining today. But we recognize that this will not address the erosion in market value following the Air Canada announcement and the significant impact for our shareholders, again we don’t take this lightly, quite the opposite.

Change in the markets long term outlook requires to make more progress and as a result management is very focussed on what we need to do which I would group into these three areas. First, height and attention around preserving the strong cash and liquidity position of the company, the actions we’ve already taken to strengthen the balance sheet and preserve cash of being supplemented by our announcement that we’ll also spend common dividends for the foreseeable future to give us more financial flexibility in the coming years.

Second area of focus is the ongoing business simplification and acceleration of cost reduction plans. We’ve provided more color on the re-structuring plans that will streamline our operating model.

We’ll deliver $70 million of annualized cost savings by 2019, which will help counter the potential for increased redemptions or changes in Aeroplan economics post 2020 and will start to see savings in the fourth quarter of this year. Most importantly, the executive team and board are intensely focused on the identification, negotiation and execution of new long-term strategic and commercial partnerships.

These will lie at the heart of Aeroplan and our future redemption offering. Let me address some of this in a bit more detail.

Turning to slide 14, we’ve reduced our leverage to around two times over the last year and I have $0.5 billion in cash investment on the balance sheet at the end of June. However, we recognize the need to preserve even more flexibility.

As I noted the board has elected not to pay dividends to common shareholders for the foreseeable future. That decision is not withstanding the current constraints around the declaration of payment of dividends under the CBCA rules.

With the $90 million we previously expected to pay out in common dividends this year, along with our $300 million Aeroplan redemption reserve for building added liquidity to fund the potential change in accumulation or increase in redemptions over the 2018 to [Indiscernible] period. But to be clear and total combat to yesterday’s remarks, we don’t expect to see redemption increases that would absorb anywhere near these kinds of funds based on what we are seeing so far in 2017.

Now flexibility we are building will also be helpful given discussions with Sainsbury’s ahead of 2019 as well as ahead of our 2019 and 2020 financing maturities. Stronger cash balances will make it possible to reduce our leverage in 2019 or 2020 if that seems more prudent or practical than rolling our financing in either of those points.

We may also consider further asset sales as we continue to simplify the business. Increased operating cash generation will also add to our cash balances.

Even before the Air Canada announcement, we knew, we needed to be linear beyond 2020 to be able to absorb the increasing cost of rewards in the Aeroplan program and possible changes as we negotiated major partner contracts across our coalitions. Since May, we’ve accelerated our cost savings.

Strategic reviews of our business structure completed over the last few months will see us further streamline the business into two operating units. Our coalitions in putting Aeroplan next year on ITC are being brought together with the corporate functions that support them.

The rest of the business will operate as a marketing services business, which will include our platform business currently managed under Global Loyalty solutions. This will result in a significant reduction in corporate cost and division overhead.

Vince Timpano will take on the leadership of the coalition’s business, while Shailesh Baidwan will lead the expanded marketing services business. These changes will also result in a smaller executive committee, which reduces to five members, including myself and Mark Grafton who as you have heard has been appointed CFO with effect from September.

Along with the changes that we make to the board in June, these will represent a meaningful reduction to the cost of running the business at a senior level. Finance, IT and Comps [ph] are all areas that will be slimmed down and substantively integrated into the new divisions as part of our reorganization, thereby reducing costs and simplifying operations.

We’ve also put a hold to our efforts to establish the nectar coalition model in new markets in the context of a more challenging global macro environment and with that have won down the global business development function. In total, around 10% of our current workforce missions will have been eliminated over the course of 2017.

This is in addition to the cost savings we already realized through 2016 and the divestitures we have already completed this year and last. These changes will be the main vehicle for the $70 million in cost savings, which we expect to be delivered by 2019.

The savings will run from 2017, with initial OpEx savings from the fourth quarter. Improving the profit trajectory of the Global Loyalty Solutions business to meet our own ROIC expectations is also key, we’ll continue to leverage strategic partners and be more selective in our product investment.

This ultimately will bring more speed to market while lowering delivery and IT costs. Capital expenditures are also coming down.

We expect these to be between $45 million and $50 million in 2017 and that will reduce further in 2018. A portion of our loyalty platform investment has ramped down or is now being expensed and the current phase of our SS [ph] investment program will be nearing completion as we exit 2018.

Our ongoing spend will be concentrated within the coalition business on new travel platforms and personalization. So let me turn to Aeroplan now.

Before I talk further about our plans, let me quickly remind you what’s unique about the asset we have. Today we have 5 million active members with the average member having been in the program for over 10 years.

But the core of that membership page isn’t engaged and mass affluent financial cardholder that accumulates miles travelled. If we were to exclude frequent flyers, that base would still represent around 9% of Canadian credit card purchase volume.

If I add only a quarter of the future redemption liability, is associated with frequent flyers. Our cars remain the most competitive in the premium travel reward card market today, and we are seeing good signs that members understand that.

Financial cards drove over two thirds of Aeroplan gross billings in Q2 and a one month active financial card base was up 5% on the same quarter last year. At the end of June, spend levels remain consistent with preannouncement levels.

That was through both CIBC and TD as well as across new and tenured members. Cards acquisitions were only slightly below the seasonal trend we had expected in Q2 given the phasing of TD spring campaign this year.

We also saw fewer people leaving the cards in the same quarter last year. Our priority with our Financial card partners at the moment is monitoring member behaviour, particularly after successful redemption, ensuring our members reengage and stay engaged, leveraging the robust data and analytics capabilities that we have enables us to target our members with specific campaigns and relevant offers, thereby building engagement with the program.

The Marriott campaign that some of you may have seen in the second quarter drove strong results and is a good example of the kind of activity that we have underway. And of course our schedule partner campaigns as well as our normal marketing and PR channels are also reinforcing broader reassuring messages about the future of the program.

So let me turn now to where we want to take Aeroplan in the future. And we understand this is the most important question we need to resolve and we understand that you’d love to hear more details.

So let me tell you what I can at this stage. The evolution of the program will start with the core of what we offer to members today.

And the way members define value which is just broader than just value per mile. Our partnerships with two of the largest retail banks in Canada will continue to provide significant value and help keep financial card holders in the program while past 2020.

In choosing a card, members will always evaluate availability, value and flexibility and evaluate where and how Aeroplan will take them compared to other programs. That also considered where their [Indiscernible] will be fastest.

And at core, our members accumulate to travel, and more of our members want the option to fly to further fun destinations, the reality is that the four categories shown on the chart represent the routes flown most often, which is a mix of domestic transporter, and international destinations. Our current offering is competitive on all fronts.

And for another three years, members continue to have access to Air Canada capacity with both their sales in Canada focused on the great customer experience for our joint customers. We’re also engaged in active discussions with alternative partners to shape our future redemption offering.

You should expect a reinvented program which will continue to be multi airline that will continue to be competitive and continue to fulfil our commitments to our banking partners. We operate an important and profitable card portfolio for the banks on the strength of the program which keeps them competitive on value against their peers who can compete for that same client base .We’ll continue to look at ways to address the flexibility, simplicity and availability needs of members and will continue to keep front and center as we continue to keep that front and center as we look to what are the right changes to make.

That competitiveness will be important to keep members engaged and accumulating. But that won’t be everything.

We’ve seen changes in the program before and I have a history of improving our program based on member need and on flexibility, availability, convenience and velocity of earning. Innovations like the introduction of MSF foreign tiered benefits are just examples of meaningful drivers of higher net promoter scores since 2014.

Based on our insight in to how travellers plan their trips, we are expanding the travel proposition available to our members enabled by investments in a new platform. This will deliver more end to end leisure travel experience, leads [ph] your access to a broader selection of hotels, tours and experiential activities in addition to flight rewards, some of that to market already.

We added a 100 experiential rewards in June alone. Phase I of enhanced car rentals added in July with more user friendly searches, reduced restrictions, free cancellation and one way rentals.

In the first week of the new car rental program we saw a 40% increase in conversion of redemption. Our $200 billion outstanding mile liability represents purchasing power with new partners in an industry where volume, loyalty and an understanding of the leisure traveller matches.

We look forward to providing an update on the progress of our discussions with due course. And with that, let’s come back to the detail around the quarter as it’s important to understand that we are focussing on the long term in a context where the underlying business has continued to perform.

So now let me hand you over to Tor to take you through the Q2 results including some of the detail around redemption.

Thank you very much, David. So let me take you to slide 24.

Total gross billings were down around 2% on a core basis for the quarter mainly due to a gross to net impact in America’s coalitions and divestitures which moderated a 3% increase in loyalty unit’s gross billings. Gross billings were up 3% for the quarter at the Aeroplan where the growth and the active car base increased Air Canada on the back of higher capacity and our Marriott hotel conversion campaign being the main contributors.

International coalition’s gross fillings were down on a reported basis but up on a constant currency basis, with loyalty unit gross billings up 4%. Strong Sainsbury's bonusing campaigns were the main contributor despite what continues to be a challenging environment in the U.K.

with macro uncertainty driving lower growth and the exit of home based offsetting some of the Sainsbury’s increase. While although loyalty solutions was down mainly as a result of the divestiture of the New Zealand business which was completed in May.

Moving onto slide 25, adjusted EBITDA on a reported basis included restructuring cost and an on risk contract provision related to stranded costs following the exit of a U.S. channel and employee loyalty business.

Excluding those, the core business contributed $62 million representing a margin of around 12%. As you can see on the chart, we have some lumpiness of IT and marketing expense in the quarter with lower share based compensation and an increased Aeroplan contributor were the main positive factors here.

Moving onto free cash flow now, the elements of which are covered in the next few slides. We converted more than 85% of adjusted EBITDA into cash in the quarter with some increase in redemptions and higher interest expense related to the earlier redemption of the 2018 bonds.

The latter was partly offset by lower CapEx. Working capital was positive in the quarter too, driven by a sales tax payment delayed into Q3 due to the timing of the Canada Day holiday this year.

Our reported number is $4.3 million of severance payments. On a year-to-date basis excluding severance we have now delivered $38 million of free cash flow.

Let’s skip a few slides now to slide 34. We know that many of you are interested in better understanding how redemption is trending, so let me share some additional disclosure to help take you through what we saw in the quarter.

The increase in miles redeemed in the weeks post the Air Canada non-renewal announcements was between 3% and 6%. It was really composed of an increased in mid-May as the media covered the Air Canada non-renewal announcements.

It has since moderated. Overall, miles redeemed in the second quarter of 2017 were up 2%.

And just to put this into context, it compares to a 4% increase in Q1 this year and a 5% increase in the second quarter last year. Looking at member behaviour, the number of rewards issued has increased modestly with members redeeming more miles per reward and as you might expect some increases in non-air rewards from members with lower balances.

Since May, the cumulative increase in expense is immaterial in the context of an $800 million annual redemption expense last year with the total increase since May being less than $9 million above last year, a lower unit cost reflected a shift in the mix of rewards. So, taking you to slide 36 now, as you to try and think through what could happen over the next few years.

It is important to remember that on average Aeroplan members redeem one every two years. With the daily tracking we have significant insight into redemption behavior allowing us to better adjust for any changes we see.

This provides us some basis for considering what redemption trends could look like as we go out over the next few years. We know that there are natural limits to the number of flights that will be booked in a year.

On the supply side the best value fixed-price fares are already well utilized and often booked well in advanced especially in business class. Market fare seats are more available but there are still limits to Air Canada's available capacity.

There are only so many flights per day to sort out destinations flight Florida and Vancouver. On the demand side, vacation time and disposable income constrain how many trips our members will want to book in a year especially for those who already redeem [Indiscernible].

Taking your whole family to Europe will use up a significant miles balance and may require you to be more flexible on timing or require you to use more miles if you want to travel in July and August, something our members have told us they want. An individuals with lower mileage balances will be more constrained to fewer options if tends to favor non-air redemption which can significantly reduce the cost for us.

And using lower miles balances will often result in a remaining small balance of miles after a redemption requiring members to rebuild balances before they can redeem again. And while the path can never predict the future, we have never seen an in-year double-digit increase in redemption expense in a single year when faced with changes in prior periods.

Taking a realistic view of the potential for elevated redemptions is important and concluding that our balance sheet puts us in a strong position to cover the cash requirements we could phase into. So, let’s jump to slide 41 now.

At the end of June as we entered into the second half of the year on our two most cash generative quarters we had cash and investments of around $570 million. Most of this is held as reserves against our coalition programs.

With an increase in the next reserve during the quarter we have significant coverage of the liability in that program as well as $300 million against the Aeroplan redemption liability. We also had long-term investment of around $195 million, all significant assets being our investments in PLM and Cardlytics, the latter of which we would intend to exit in any potential liquidity amount.

With the exit of the Channel & Employee Loyalty business our working capital needs have come down somewhat. The main exceptional cash item in the second half will be restructuring.

We have already incurred expense of $8 million and expected between $15 million and $20 million more in 2017. The savings we will achieve will of course strengthen our cash generation.

With savings expected to increase to $70 million annually by 2019. We drew down $200 million on our revolver in May.

We still have $90 million undrawn under that facility. Importantly, the drawdown on the facility has shifted our financing maturity to 2020.

It will result in [Indiscernible] $10 million of interest expense on financing cost, which was not included in our guidance for the year. But it will reduce our effective interest rate through 2020.

Finally, as David has already covered we do not expect to be paying dividends. The suspension of the preferred share dividend was outside of the company's control as we were legally required to do so under the CBCA rules.

Those preferred dividends will continue to do approve. The decision to suspend the common dividend for foreseeable future however irrespective of where we might land on the CBCA test over the next few years is a conscious one, allowing us to retain more of the cash being generated.

That too will add to the cash balances at year-end. And with that, let me hand you back to David to cover guidance and conclude our comments today.

Thanks, Tor. We’re maintaining guidance for the year.

The phasing of gross billings will continue to be driven by the shape of bonus in campaigns and seasonality with the second half always driving the bulk of growth to Aeroplan and Nectar notwithstanding that we’ll have tough comps in Nectar in the third and fourth quarter this year. The seasonal patterns will drive significant cash inflow in the second half of the year.

We expect to deliver around $180 million in the coming months. Current trends will suggest Aeroplan redemption expense will remain modestly elevated and we built that into our outlook.

Countering that will be the early benefit of the actions we’ve taken on cost and CapEx. That lease free cash flow guidance of more than $220 million this year before Air Canada for the additional interest expense, financing costs incurred and restructuring cash cost that Tor have spoke to.

Adjusted EBITDA will continue to be underpinned by cost savings and changes in redemptions mix at above 12% excluding impact of restructuring expense in the provision recorded this quarter. So, to wrap up, we had a solid financial performance in the quarter and we’re seeing Aeroplan members to take a measured reaction to our main use with no material change in redemption levels and accumulation.

Actions to cut costs and preserve cash put us in a stronger position. Having said that, we know what we have to do.

Progress in Aeroplan travel partnerships, which supplement our long-term bank partnerships which [Indiscernible] availability and flexibility to members and returns to shareholders is what we need to solve for. At this point, I'd like to thank Tor for everything that he has brought to Aimia.

Tor, you will be missed and we wish you well as you return to Denmark with your family. Thank you for all your support.

However, I’m delighted to have Mark Crafton coming on board as CFO. I have worked with Mark for some time.

Many of you will get to know Mark more over the coming months and we’ll see the breadth and depth of his knowledge about our business and a strong operational and commercial finance focus. He will be a key player in helping us deliver our priorities to the business and we look forward to be able share more with you in due course.

And with that, we’ll handover for questions.

Hi. Good morning.

Some positives in the quarter there, David, but I'm just wondering if you might build or share the internal goalposts. Or is there a sense of urgency with respect to bringing the new reward offering to market just so that members are reassured about the value proposition as a credit card fees get renewed and the velocity [Indiscernible] miles only 30 months?

Yes, Brian. There is clearly a huge sense of urgency.

I am glad you ask it because it gives me the opportunity just to reinforce the point that we’re trying to make today, which is why we see members take a measured approach to the news and we see relatively stable trends in redemption and accumulation, that in no way is indicating to us and the management team that we can take time to solve the challenge. We have a huge sense of urgency to secure the new strategic partnerships, as I talked about is one of our three priorities alongside and taking further cost out of the business and protecting cash and liquidity.

So sense of urgency is quite the buzzword around here.

And – sorry, the question was internal goalposts. You have a timing range?

I mean, as you said in the question, there are internal goalposts, but I don't think it would make sense at this point to sort of declare externally where we see those. And clearly they’re tied – we’re in conversations with a number of potential partners at this point.

And clearly they’re tied to their commercial objectives as well as ours.

Okay. Thank you.

Second question, just wondering if you might be able to provide some color on the decline in April redemptions and more importantly post the May jump, I'm just curious if you use any levers to mitigate redemptions. I noticed that there were some mileage requirement changes for fees and surcharges and it appeared like the frequency was more available than direct.

Were there any levers pulled?

No. Beyond the sort of normal day-to-day management of the program, no, so I mean, obviously we’re always making some adjustments to the program and some adjustments to the offering both on the redemption and accumulation side as we work through the year.

But no, we’ve not pulled significant levers within the quarter to manage redemption. We’re obviously watching it very, very closely, but no, nothing beyond the normal operation of the business.

That’s helpful. Thank you.

Thanks very much. Good morning.

Two questions. First, can you provide an update in terms of any kind of high-level conversations or recent conversations with financial partners post Air Canada's decision.

Just want to get a sense of their commitment just outside of contractual commitments in writing? And then secondly, can you just remind us, I think David in your opening remarks you talked about Sainsbury, I think renewal in 2019.

Just remind us kind of the timeframe for Sainsbury's as well as American Express in Aeroplan? Thank you.

Sure. So on the banking partner question, first, I mean, I think it's fair to say that our partners obviously have similar questions to give as investors.

And we’ve clearly being meeting with our partners very frequently since May. And we are working hard with them to understand the patterns of member behavior and redemption, and we continue to work with them to execute the joint campaigns that we have in place.

And so, those relationships continue, but clearly they’ve – as you want to hear what the future is in terms of redemption offerings post 2020. Clearly that's a question that our banking and other partners have and is one that we’re working on with great urgency.

On your second, the Sainsbury contract runs through March, 2019. We are in discussions at this point on 2019 and post 2019.

As I said before I’m not going to negotiate in public, so I’m not – you’ll forgive me if I’m not going to give you any color on those discussions. What I would say is that clearly the UK is a tough microenvironment at this point as the impact of Brexit really begins to hit inflation and household expenditure.

So it's a tough microenvironment and it's a tough environment for the grocery industry. So discussions take place in that context.

But beyond that I wouldn’t offer any further color. And on your final point on American Express, that contract runs through 2018 and I guess, all we can say is, we’ll give you a further update on those discussions as and when appropriate.

Okay, David. And just a quick follow, just around Nectar.

The increase in reserve that was contractually required in the quarter, can you just quickly comment on that one?

Yes. Yes.

Tor, if you could handle that, please?.

Yes. Hi, Drew.

So the reason for the increase cash that is being held behind the reserve is basically because there is as you said a contractual commitment and it’s a result of the down grade from S&P.

Thank you.

Thanks a lot. Just with respect to the -- I guess the contract outsourcing, does that go back to the HP mandate that was signed a few years ago?

And is that ultimately then terminated with this particular charge or is there something else that play here?

Yes. So, hi, Adam.

So, you're absolutely right. The onerous contract provision is related to the HP contract that was entered into a few years ago.

That contract consists of both fixed and variable charges. The variable charges have been reduced to zero for the businesses we have exited, but the fixed part is a commitment that we could not get out of and was related to the U.S.

business that we have. So, unfortunately we were not able to transfer the rights and obligations under the contract to the buyer and that's why we have taken that charge.

Okay. So effectively and appreciate the color Tor, I mean effectively there's still some costs related to the fix side of the equation going forward?

Or I might misreading you that the contract is..

Yes.

Okay, perfect. And then…

On the reminder of the business that continue as business as usual.

Thank you. And maybe just as a one B part to equation, do we continue to see some of the anticipated savings as a result of that effort?

Yes. We continue to see savings, and as David alluded to in terms of the cost savings going forward for sure IT will be one of the areas where we will continue to see cost savings going forward.

Okay. And then my second question just relates to some of the sale proceeds or maybe lack thereof amidst some of the divestitures that closed in the Q2.

I would've thought we would seen a little bit of intake in terms of receipt on your part, but I guess ultimately a lot of the cash and/or working capital related adjustments on closing ultimately accrued to the buyers. Is that the best way to read it?

Yes. I know it's a good question I'm for sure I understand the question.

I just start by saying that keep in mind that this was a loss making business, so, in terms of expecting a lot of proceeds that would be to expect too much. What was really important for us is that we were able to divest the business without any significant liabilities that you alluded to and you will have seen that working capital requirements have come down.

And then I’d highlight again the fact that this meant that we reduce the number FTEs by more than 500 and we also reduce the operating expense by more than $120 million a year. So, this was really about being able to simplify the business and enhance the margin.

And that basically what you see this quarter to write when you look at the adjusted EBITDA margin coming up to 12%.

Okay, great. Thank you very much, Tor.

I just wanted to clarify the Aeroplan redemption reserve accounts, 300 million that’s held, are you able to use that cash if need be to retire the credit facility? Or are there debt in the capital structure?

Yes. Hi, Anna [ph], it’s a good question.

So, basically as you know this $300 million redemption reserve is something that was set up to cover for the redemption liability. Now as a part of our agreement with the banking syndicate on the revolver, we are obliged to hold $250 million, all that reserve in cash or to be able to replenish if we need to draw down.

So basically there is $50 million of free cash available and then the $250 million of liquidity, its obviously available, but then it would need to be restated.

Great. So I guess this scenario, if you're able to retire the credit facility and extinguish it, the contractual obligation to hold that collateral is no longer there and you have three unencumbered use of $300 million if the credit facility [Indiscernible]?

Yes. You're absolutely right.

Okay. Thank you.

Good morning. David, I have two questions.

First, we saw there Canada and Star Alliance is a strategic redemption partners in 2020. How will Aeroplan differentiate itself when compared to air miles?

Well, the first think I would say is both Air Canada and ourselves has said that Aeroplan members will have the – or Aeroplan will have the opportunity to buy seats on Air Canada after 2020. So I wouldn't take it as a given, the Air Canada seats couldn’t be part of that program.

More broadly here's how I think about Aeroplan and post 2020. First of all, top line will be supported by a strong brand, long-standing member engagement and good support from retail and other partners, and credit card partners which remember run through 2024.

We’re making good progress on what I talked about is one of our major priorities in terms of establishing new strategic and commercial partnerships, and these will be on both accumulation and redemption side. Redemption will continue to be multiyear line, and as of that said, that could include Air Canada as opposed to the offerings.

And remember also our members have significant purchasing power which is very attractive to other potential partners, and because we can drive significant volume of leisure traveler into other partners. And as flight rewards, we’ve on this journey for some time already invested to broaden our travel offering which means that some of these changes can happen well ahead of 2020 and members are beginning to see this changes now.

So all up, I think we have a strong brand, a great heritage with our members, strong partners and we’ve been investing – we’re investing already and to build a program beyond 2020 continues to be a very strong value proposition within the market. I understand that the market will be keen to hear more detail on the travel redemption partnership component of that and we’re clearly working hard to do that.

I’ve given you my answer much more broadly than just Air Miles because I would actually think about the competitive environment much more broadly than that. Remember Air Miles really is a bit of a different program and Air Miles is really a retail coalition.

Aeroplan is more of a frequent spender program with premium cardholders.

Okay. My second question is how confident are you that in 2020, your financial partners would not experience a significant decline in the in the branded Aeroplan credit card usage when Air Canada launches their own loyalty program and branded financial credit cards?

Thank you.

Yes. Well, look, I’ll start my answer by referring back to something in the scripted which is that even without frequent flyers this portfolio represents some of that 9% of the Canadian credit card market.

So, this is still a very strong portfolio. And I think I'm confident that we will continue to see accumulation and redemption before and after 2020, because of the strength of the assets I’ve already talked about.

Specifically into Air Canada, I mean, I don't know what their programs is going to be based on. It seems clear from their public announcement that they are going to be much more focused on a much smaller segment than us which is frequent flyer.

And -- but I wouldn't speculate on their value propositions until we see more about it.

Okay. Well, thank you, David.

Just want to focus on the quarter for a second, can you talk about any one time items I the free cash flow this quarter?

Yes. Hi, Stephanie, I can do that.

You’re right. There are a few one-offs in the free cash flow.

I’ll just start by saying that keep in mind that the free cash flow was boosted by the fact that obviously you have the earnings, but also the fact that CapEx came down with slightly less than $10 million. But as you will have seen there was a working capital movement in the quarter as well and the most notable moment in working capital was actually related to a tax payment that normally would have happened in Q2, but due to Canada Day Holiday it ended up in Q3.

So that’s a much notable one-off in free cash flow in the quarter. As I talked about in the script, we do have severance in the quarter, as well as the same way we had severance in the first half.

But that would be sort of the significant one-off. Keep in mind that when you look at sort of the comparison between EBITDA and free cash flow the onerous provision related to the IT contract that we just described does not have an impact on cash flow this quarter, but will have a cash flow impact going forward.

Okay.

Its also – we also have the impact of the financing this quarter which I talk about in the script and it’s really related to extending the maturity to 2020.

Thanks. And how large is that tax payment?

We haven’t disclosed the number, but you can assume that it's around $10 million.

Okay, great. Thank you.

And then, just looking forward on post 2020, can you talk about your thoughts on EBITDA, do you think this $70 million in cost savings by 2019 is going to offset the expected impact from the end of the Air Canada contract?

Thank you. It’s a very good question.

I mean, as we have said, and as we talked about in the May quarter announcement, if you do the math on the basis of the information that we gave you, you could get to a $200 million impact on adjusted EBITDA. And as you mentioned the impact here of the cost savings will be $70 million annually from 2019 and onwards.

So that basically means that you will have margin improvement than cash savings prior to the non-renewal in July 2020 with Air Canada. Keep in mind that we are also looking at significant reductions in CapEx and as I mentioned already you saw that CapEx has been coming down this year and we took down the guidance for the full year even further.

So, all up, you should expect that the cost savings and the CapEx savings will be able to cushion quite a bit of the potential impact of gross margin related to the Air Canada contract.

Okay. Thank you very much.

Thanks. Could you talk a little bit about what remedies your financial card partners have if and when you enter a new flight rewards partnership, because presume they sign this contract obviously knowing the Air Canada could – would expire in 2020, but that’s kind of the partnership they bought.

I’m jus wondering if you talk about what options they have? And secondly with respect to divestitures could you give us an update on Premier -- at one point, its couple years ago, but there was contemplation of a potential IPO there, where does that stand and any update on cardlytics would be helpful?

Thank you.

Yes. Sure.

Look, first part of that question I’ll ask Tor, to talk on Club Premier. It’s difficult to give too much obviously commercial detail about contracts that we have with our banking partners.

So what I would say is this first of all, with those contracts running to 2024 as your question implies, both parties had to consider when those contracts were signed, a scenario where the Air Canada contract was not renewed, and that was anticipated by the terms of the contract and I'm very comfortable with those relationships will continue through 2024. Beyond that, it’s not really appropriate to talk about [Indiscernible] contract terms.

What I would focus though and I talk about this summer somewhat earlier, is we’re clearly working very closely with our banking partners both to understand current member behavior and trends, to continue to execute that marketing and promotional campaigns that we have in place and keep them abreast of the work that we’re doing against our three priorities; to take cost out of the business, to protect cash in the balance sheet and to bring the new redemption post 2020 partners on board. Tor, on Club Premier.

Yes. So, general on divestitures I would go back to David's point from earlier and basically we’ll say that obviously we are very focused on preserving cash and bolstering the balance sheet.

And we will be focusing on meeting the ROIC target and make sure that we create shareholder value going forward. In terms of the stake in Cardlytics, we’ve clearly sort of said that that’s a non-core stake and you know we would be willing to sell that stake.

In terms of you know progress on any liquidity event, I can’t really make any – I can’t really make any comments on that, but as I said it is something that we considered to be a non-core, something that we would like to be able to sell. There it’s probably nothing imminent, but the stake that I make around Cardlytics when it comes to PLM it’s slightly different, because PLM is clearly a coalition program and as David talked about its various similar to Aeroplan in the sense of being a travel coalition program.

So from that perspective its very interesting stake for us in terms of a potential liquidity event as you asked whether it’s a listing or similar there is nothing imminent around that stake.

Thank you;

Yes, thanks. Tor, just following up on the last question in terms of the liquidity events or potential liquidity events around Cardlytics and PLM is it safe to assume that those are required to divest those stakes just trying to get a sense of how liquid these stakes are.

Yes, it’s fair to say that it’s not necessarily required, but as you can imagine, I mean both of them are minority stakes, right which basically means that you know in any shape or form Aimia won’t be in the driver’s seat.

Okay. And on the $70 million in cost savings run rate by 2019, can you just help us understand exactly where all of this shows up in the numbers in terms of corporate at the segmented margin level clearly you are revamping disclosure I believe for next year, just wondering how that kind of model all of the same and more importantly how to track it all.

Yes, so Drew I – you know it’s important to kind of start by saying and you’ve highlighted that yourself. That you know from Q4 and onwards, clearly sort of the reporting related to the two divisions will be the way that you will be able to track and see disclosure going forward.

And as David talked about in his script a very significant part of that $70 million in savings will basically come from collapsing the corpus structure into the two divisions. And as we mentioned you do have some regional overhead as well so that will be a part of the savings going forward.

Now clearly with the business like ours, you know that FTEs is an important part of the cost base so that means that FTEs will be a significant driver of the cost savings. Our plan will be to give you updates on progress on cost savings going forward so you will be able to see how it flows into the numbers on an ongoing basis.

Okay, thanks. Tor, for that maybe one final one if I can squeeze it in, having chatted about it for a while but with everything that’s happening in at Aeroplan, when you revamp a program you had a 11% assumed breakage rates in that program just wondering you know as the auditors come in and look at kind of what could or potentially couldn’t happen at Aeroplan as we get to 2020 what happens to this assumed 11% breakage rate?

Thank you.

Yes, it’s a good very understandable question. So I basically just start by saying you know if you look at sort of the burner in which you find in the deck, right you see that’s down sort of 84%.

It’s safe to say and I think we mentioned this on one of our previous calls that you know we try to take a long term view when it comes to breakage. So you know the 11% that were using us at this point in time is something that we feel, feel very comfortable with.

And it’s also fair to say that and David has made this point already, when you look at sort of redemption behavior, you know that’s not only the data that we have from May and until now, but also redemption behavior from previous events in the company’s history there is nothing that suggest that you know this should be any change to the breakage rate.

Okay, thank you. So to wrap up, we had a solid financial performance in the quarter and we are seeing Aeroplan members taking a measured reaction to our main use with no material change in redemption levels and accumulation up.

That said, as a management team we have to move with a great sense of urgency against three priorities. Taking cost out of the business, protecting cash and a strong balance sheet and working hard to bring alternative redemption partners on board.

And doing all of that while continuing to deliver strong execution and solid financial performance. Thanks very much for your time today and we look forward to talking to you again soon.