The midnight deadline has passed for the Canadian Imperial Bank of Commerce to continue its decades-long ties with Aeroplan, which could clear the way for TD Bank to pick up a partnership with the rewards program.

TD Bank has been vying to replace CIBC's Aerogold Visa card with its own loyalty-point-accruing credit card.

Aeroplan started out in 1984 as a frequent flyer program for Air Canada's business travellers and over time expanded into a broader loyalty program that offers a range of travel and consumer rewards not just to Air Canada customers but to those who shop at certain businesses or use certain credit cards to make purchases, including the Aerogold Visa card and the American Express Aeroplan Plus card.

CIBC has been the main credit card partner for Aeroplan for 22 years, purchasing air miles from Aimia, the Montreal-based company that operates the reward program, that it then awards to customers who use its Aerogold credit card.

But Aimia opened up the Aeroplan contract to competing bids from other financial institutions earlier this year after it failed to reach an agreement with CIBC on renewing its contract, which is up at the end of 2013.

TD has offered to pay Aimia $100 million up front and to increase by 15 per cent the amount the company receives per air mile sold. The 10-year contract with TD would go into effect in 2014.

Aimia gave CIBC until midnight Friday to match TD's offer and remain Aeroplan's partner. Analysts predicted that the bank would likely walk away and start its own loyalty credit card.

"We do not believe that it is probable [that CIBC will match the offer] as the relationship between the two organizations has likely become tarnished through these developments," wrote Barclays analyst John Aiken when the TD offer was announced in June.

CIBC could potentially seek damages in court over the way Aimia handled the contract negotiations, Aiken said.

TD to get $80M if deal falls through

If CIBC does choose to stay with Aeroplan, Aimia has agreed it would pay TD an $80 million fee for breaking the agreement, which analysts say indicates it is confident that the TD offer will go through.

If CIBC and Aeroplan part ways, Aerogold card holders will retain their existing Aeroplan points but won't be able to collect new points unless they switch to the new TD card.

Aimia CEO Rupert Duchesne has been quoted as saying that the bulk of Aerogold customers do not bank with CIBC and thus won't have a problem switching to the new card.

But competition in the loyalty program sector is becoming increasingly fierce, which, according to Aimia is partly what drove the company to seek other partners. TD already has its own Travel Visa point-collecting card, and RBC's Visa Avion card has a leg up on Aeroplan in that it allows customers to redeem points on all airlines.

Industry watchers expect that if CIBC does defect from the Aeroplan program, other financial institutions will work hard to lure defecting Aerogold cardholders over to their own loyalty programs.

CIBC earnings will take a hit

BMO Capital Markets estimates that the Aerogold card, which is CIBC's most popular credit card, accounts for half of the bank's credit card business and about seven or eight per cent of its total earnings, according to the Bloomberg news agency.

For Aimia, the Aerogold contract represents about 25 per cent of gross billings, which is the amount the company gets for its miles before deductions.

The defection of existing Aerogold cardholders — and the cost of setting up a new loyalty program, which CIBC has said could be as much as $50 million in the first year — is likely to impact CIBC's revenues, although analysts vary in their estimates of how significant that impact will be.

"In a worst-case scenario, we view the pressure on earnings to be less than 10 per cent of our current 2014 earnings per share estimate of $8.91," Aiken said in his initial assessment.

The recent shakeup to the Aeroplan program came around the same time that Aimia announced that it would eliminate the unpopular seven-year time limit it had imposed on unused miles and allow customers to keep accruing miles indefinitely on condition that they make at least one transaction — either earning or redeeming points — every 12 months.

The company also made improvements to the rules for collecting and redeeming points, reducing the amount of points needed for certain kinds of rewards.