Transat Improves In Q2, Says Winter Comparable To Last Year

Bruce Parkinson, Open Jaw

Transat A.T. Inc. recorded adjusted operating income of $1.5 million for the quarter ended 30APR, an improvement over the operating loss of $5.0 million in the same period in 2016.

The integrated tourism operator posted revenues of $884.3 million for the quarter, compared with $888.2 million for the same period in 2016, a decrease of $3.9 million, or 0.4%.

"As we had expected, our second quarter was better than last year's, contributing to an overall winter result that is comparable to that posted for the winter of 2016," commented President and CEO Jean-Marc Eustache.

"We continued to absorb strong negative pressure from exchange rates and fuel prices, which had an impact of more than $39 million on our costs during the season. If the current trends continue, the results for the second six-month period should also be similar to those of last year," he added.

Transat says the small revenue decline was due to a higher proportion of flights sold without a land portion versus all-inclusive packages compared with 2016. The number of travellers on the Sun destinations market, Transat’s primary market for the period, increased by 0.3%. But the decline in revenues was mitigated by an increase of 8.2% in the number of travellers on the transatlantic market. In addition, average selling prices were higher on all markets. 

Ocean Hotels, which is 35% owned by Transat, contributed $5.9 million to the Corporation's net results for the quarter, compared with $6.2 million in 2016.

Transat also revealed that it has purchased a stake in a hotel near Puerto Vallarta on the Pacific coast of Mexico, operating under the name Rancho Banderas All Suites Resort, acquiring a 50% equity interest in the company Desarrollo Transimar, S.A. de C.V., its owner and operator, for $13.4 million. The hotel currently has 49 rooms, and will be expanded between now and 2018 to a capacity of 263 rooms.

This transaction represents a further step in hotel management for Transat, as it continues to assess the opportunity, as previously announced, of either acquiring the entirety of Ocean Hotels or selling the 35% stake that it currently owns with a view to reinvesting in another hotel project. 

For the winter season, Transat posted an adjusted operating loss1 of $35.6 million, compared with $36.7 million in 2016, an improvement of $1.1 million. It says the increase in average selling prices on the Sun destinations market was, for all practical purposes, offset by an unfavourable exchange-rate impact — which, combined with an increase in fuel prices, resulted in an increase in operating costs of $39.3 million for the period—as well as by higher air costs. 

Looking ahead, the transatlantic market outbound from Canada and Europe accounts for a substantial portion of Transat's business during the summer season.

For the period May to October 2017, total industry capacity is higher by 4%, while Transat capacity is up 7%. To date, load factors on that market are higher by 1.4% than those of summer 2016, 64% of the capacity has been sold, and selling prices of bookings taken are similar to those recorded at the same date in 2016.

On the Sun destinations market outbound from Canada, for which summer is low season, Transat's capacity is similar to last year. To date, 53% of that capacity has been sold, load factors are higher by 8.0%, and selling prices are up by 5.9%.

Bruce Parkinson

Bruce Parkinson Editor-in-Chief

An observer and analyst of the Canadian and international travel industries for over 25 years.

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