Transat Posts Stronger Q3, Stays Focused On Operations

Bruce Parkinson, Open Jaw

Transat has posted improved results for its third fiscal quarter, with operating income of $21.8 million, a significant improvement compared with $2.4 million in 2018.

"We're very satisfied with the strong support received from our shareholders and the final approval of the arrangement plan. The planned transaction is good news for our shareholders, our employees, our clients and our community, and we're currently working to obtain the required regulatory approvals to complete it," stated Jean-Marc Eustache, President and Chief Executive Officer of Transat. 

"Meanwhile, we remain focused on our operations and note an improvement in our adjusted results for the quarter compared with last year."

Transat posted revenues of $698.9 million for the quarter, up $34.3 million (5.2%) compared with 2018. This increase was attributable to higher average selling prices and improved load factors across all markets. The number of travellers rose 4.3% in the transatlantic market, Transat’s main market for the period. 

Operations generated adjusted operating income1 of $21.8 million, compared with $2.4 million in 2018, an improvement of $19.5 million. This increase was mainly driven by the higher average selling prices and improved load factors across all markets. 

Net loss attributable to shareholders amounted to $11.0 million compared with $5.0 million  in 2018. The net loss attributable to shareholders included professional fees of $6.0 million and compensation expenses of $7.7 million recorded in connection with the potential acquisition transaction of Transat by Air Canada. 

Excluding non-operating items, Transat reported adjusted net income of $5.7 million  for the third quarter of 2019, compared with an adjusted net loss of $5.0 million in 2018.

Over the nine-month period of 2019, Transat earned revenues of $2.2 billion, up $63.8 million or 2.9% from 2018. The higher revenues recorded during the winter season is mainly attributable to the increase in average selling prices across all markets, combined with a 2.8% rise in the number of travellers in the sun destinations market, resulting from the decision to increase capacity in that market. 

For the nine-month period, operations generated an adjusted operating loss of $12.9 million compared with $14.3 million in 2018, an improvement of $1.4 million. 

Looking ahead to Q4, Transat’s August to October capacity – mostly transatlantic -- is similar to that deployed on the same date last year. To date, 83% of the capacity has been sold, the load factors are lower by 0.9% compared with summer 2018 and selling prices of bookings taken are 2.1% higher than those recorded at the same date in 2018. 

On the sun destinations market outbound from Canada, for which summer is low season, 83% of capacity is sold and the load factors are 5.6% higher compared with 2018. Unit margins are currently higher compared with those recorded on the same date last year.

If the current trends hold, Transat expects its results for the fourth quarter to be slightly higher than those of last year. 

For winter 2019-2020, Transat's capacity is 9% higher than that deployed on the same date last year. To date, 27% of the capacity has been sold and load factors are 1.8% higher compared with 2019. 

On 23AUG, a significant majority of Transat’s shareholders voted in favour of an acquisition offer by Air Canada. The arrangement remains subject to closing conditions, including regulatory approvals. Transat says that if the required regulatory approvals are obtained and conditions are met, it is now expected that the transaction will close by the second quarter of the 2020 calendar year.

In the meantime, the company says it is business as usual, with the exception that Transat 
has agreed to limit its undertakings and expenses related to the execution of its hotel strategy, including development of a property it purchased in Mexico last year.

Bruce Parkinson

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.