Transat Q2 Shows Improvement, But Rising Fuel Costs Loom
Open Jaw, Bruce Parkinson
Transat adjusted operating income improved by $7.8 million for Q2 and $16.7 million for the six-month winter season, despite the impact of last fall’s hurricanes. But sharply rising fuel costs are putting a damper on full-year prospects.
“We're satisfied with the improvement in our results, particularly in our sun destination market, while the transformation of our fleet will only take effect starting in summer 2019," stated Jean-Marc Eustache, President and Chief Executive Officer, Transat.
"Our hotel project is also moving forward satisfactorily. We've identified the first opportunities and we're setting up the structures of our division."
Transat posted revenues of $902.0 million in Q2, compared with $884.3 million in 2017, an increase of $17.7 million or 2.0%. The increase was driven by a 4.8% rise in the number of travellers in the sun destination market, the company’s main market for the period, and of 10.7% in the transatlantic market.
Average selling prices were slightly higher in the transatlantic market and remained relatively unchanged in the sun destinations market.
Excluding non-operating items, Transat reported an adjusted net loss of $4.5 million for the second quarter of 2018, compared with $8.1 million in 2017. For the six-month winter season, operations generated an adjusted operating loss of $24.5 million compared with $35.6 million in 2017, an improvement of $11.1 million.
As of 30APR, 2018, Transat’s cash and cash equivalents amounted to $903.3 million, compared with $566.3 million on the same date in 2017. The big jump was primarily due to proceeds from the disposal of Ocean Hotels and Jonview as well as to positive cash flows generated by operations.
Summer 2018 Outlook
The transatlantic market outbound from Canada and Europe accounts for a substantial portion of Transat's business during the summer season. For the period from May to October 2018, capacity is higher by 15%. To date, 64% of the capacity has been sold, load factors are similar to those of summer 2017, and selling prices of bookings taken are down 1.0% from those recorded at the same date in 2017.
Higher fuel costs, combined with currency variations, will result in an increase in operating costs of 7.2% if jet fuel prices remain stable and the dollar remains at its current level against the U.S. dollar, the euro and the pound.
On the sun destinations market outbound from Canada, for which summer is low season, Transat's capacity is higher by 5% than the previous year. To date, 53% of that capacity has been sold and load factors are ahead by 1%, when compared to 2017.
“If current trends hold, and considering the recent significant increase in jet fuel costs, Transat expects that its global results for the second six-month period will be lower than last year,” the company says in a statement.
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.