Transat Improves Q1 Results, Hoards Cash For Hotels
Bruce Parkinson, Open Jaw
Transat says it improved Q1 results by $9.1 million year-over-year, while also socking away money for its long-promised push into the hotel business.
"During this quarter, we continued the repositioning started last year by announcing the disposal of Jonview for $48.4 million and the appointment of Jordi Solé as President of our new hotels division. The disposals made during the past 18 months generated $327 million in total for our hotel investments. We're also continuing our work on revenue management and the fleet," stated president and CEO Jean-Marc Eustache.
"Our results improved by $9.1 million from last year, on a comparable basis, and if the trends continue, we expect to maintain these gains at the end of winter."
Transat posted revenues of $725.8 million for the quarter ended 31JAN 2018, compared with $689.3 million in 2017, an increase of $36.5 million (5.3%). The company says this improvement was driven by 6.2% growth in the number of travellers in the sun destination market, and of 20.3% in the transatlantic market. Average selling prices rose slightly across all markets.
Operations resulted in an adjusted operating loss of $31.0 million, compared with $37.1 million in 2017. Transat says the $6.1 million improvement resulted primarily from an increase in the number of travellers combined with higher average selling prices and a favourable foreign exchange effect (net of the impact of higher fuel prices), which led to a $13.3 million decrease in operating expenses. However, this improvement in operating results was mitigated by $9.0 million in maintenance costs related to one-time events.
As of 31JAN, Transat’s cash and cash equivalents amounted to $749.3 million, compared with $454.8 million on the same date in 2017. The increase was primarily due to the proceeds from the disposal of Ocean Hotels and Jonview as well as to positive cash flows generated by operations.
In the sun destination market outbound from Canada, Transat's capacity is up 5.5% compared with last year. To date, 77% has been sold, bookings are ahead by 4% and load factors down 1.4%. Due to the strengthening of the Canadian dollar, offset by rising fuel costs, operating expenses are currently down 3.3%. Unit margins are up 0.8% compared with last year.
The hurricanes of SEPT 2017 significantly impacted results in the sun destination market outbound from Canada, Transat says. The results from Cuba destinations, which represent 25% of its sun destination capacity in Q2, were negatively impacted by these hurricanes. Transat also notes that bookings taken until DEC 2017 presented higher margins than last year's. “This is less the case since January,” Transat says in a press release.
In the transatlantic market, where it is low season, Transat's capacity is up 19% compared to that offered last winter. To date, 68% of that capacity has been sold, bookings are ahead by 15% and the load factors are down 4.9%. Unit margins are down 1.2% from the same date last year.
In the transatlantic market, Transat’s main summer market, capacity is up 17% compared with 2017. To date, 30% of seats have been sold, load factors are similar and selling prices are up 1.7%. Higher fuel costs, net of fluctuations in the Canadian dollar against the U.S. dollar, the euro and the pound, have currently led to a 3.3% increase in operating costs. Unit margins are similar to those recorded at the same date last year.
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.