MONTREAL - Loyalty rewards program Aeroplan is looking ahead to smaller acquisitions and minority investments in frequent flyer programs after announcing a fourth-quarter profit of $20.5 million.

Aeroplan (TSX:AER) also said Thursday it will invest in its core businesses and will complete the integration of U.S.-based loyalty marketer Carlson Marketing.

"We will continue to look at greenfield projects similar to Nectar Italia, the expansion of LMG Insight and Communication, small tuck-in acquisitions and minority investments in frequent flyer programs," president and CEO Rupert Duchesne said in a release.

"These initiatives give us the opportunity to earn significant returns for our shareholders for a relatively small investment."

The Montreal-based Aeroplan, spun off from Air Canada, runs the Aeroplan points program for Air Canada and also runs loyalty reward programs for Imperial Oil and other businesses.

Nectar Italia is a new coalition loyalty program just launched by Aeroplan in Italy bringing together a number of high-end commercial partners in the retail, service and financial sectors.

Aeroplan's LMG Insight and Communication is a data analytics business that gives companies insight into consumers' shopping trends.

"Over the last 12 months, we have successfully transformed the business to become a global leader in loyalty management with a substantially diversified revenue base and geographical reach into many G20 countries," Duchesne said.

The $20.5 million profit compares with a $1.07-billion loss in the fourth quarter of 2008 when Groupe Aeroplan Inc. (TSX:AER) recorded an accounting charge to reflect the impaired value of its assets amid a downturn in the global economy.

Groupe Aeroplan's net income equalled 10 cents per share in the fourth quarter of 2009, compared with a loss of $5.39 per share a year before including the writedowns. The earnings were below analyst expectations.

Its revenue in the fourth quarter was relatively stable. It fell to $424.9 million, down 1.3 per cent from $430.3 million in the comparable period of 2008.

Duchesne also said the fourth-quarter results demonstrate the company's resiliency in a tough economy.

"In addition to navigating through the recession, we continued to focus on strategic and operation execution and enhance our position for future growth."

Excluding the effect of currency fluctuations, Aeroplan said it anticipates "modest" organic growth in 2010 in gross billings in its legacy businesses and with the acquisition of Carlson Marketing.

But Aeroplan said its free cash flow levels are expected to be reduced as a result of investments required to support future growth and the effect of non-recurring favourable items which occurred in 2009.

RBC capital Markets analyst Drew McReynolds wrote in a note that Aeroplan has indicated the main reason for a weaker growth outlook in 2010 is due to higher marketing costs year-over-year and an increase in internal investments.

"From a valuation standpoint, the key question is to what extent these additional costs are recurring and carry into 2011 estimates?" he said.

But he said the fourth-quarter results were largely in line with expectations.

In Aeroplan Canada, the average cost of rewards per Aeroplan mile redeemed isn't expected to exceed 95 cents on an annual basis in 2010.

Shares in Aeroplan were down 73 cents, or about six per cent, to $11.16 in Thursday trading on the Toronto Stock Exchange.