Declining CAD Hurts Transat Q1 Results

Open Jaw

Transat A.T. Inc. is blaming the “significant" drop in the CAD for weaker Q1 results.

The integrated tourism company posted an adjusted net loss of $32.4 million, compared with $23.3 million in 2014. The adjusted operating loss was $35.8 million, compared with $23.9 million the year before. Revenues for the quarter were down by 6.9% or $58.6 million to $788.6 million, compared with $847.2 million in 2014.

"On the Sun destinations market, higher selling prices, our cost-control initiatives and our currency-hedging program were not sufficient to offset the increase in our operating expenses, which was mainly caused by the significant, recent drop in the value of the Canadian dollar against the U.S. currency," said Jean-Marc Eustache, President & Chief Executive Officer. “That, combined with a deterioration in results in France and reduced revenues from aircraft subleasing, kept us from posting improved results for the quarter compared with last year."

While announcing its results, Transat introduced a 3 yr. 2015–2017 strategic plan, aimed at continuing efforts to improve efficiency and margins as well as develop markets and foster growth.

The plan has 4 major components:

  • A program to reduce costs and improve margins totalling $100 million over 3 years, specifically $45 million in 2015 (including the impact of narrow-body aircraft), $30 million in 2016 and $25 million in 2017.

  • A program to improve the offering, focused on growth in existing source markets. The main efforts in this respect will be to introduce new destinations in Europe and to fine-tune Sun destinations offerings through exclusive partnerships with hotels and the continued improvement of collections, based on customer expectations.

  • A program to significantly transform the Corporation's distribution ecosystem in a fully integrated fashion. Among the actions in this area, Transat says it will: continue developing the Transat Travel brand, and in particular complete its implementation in its own agencies; develop a new distribution website as part of a strategy for transparently integrating customer relations centres and travel agencies.

  • A program to develop markets and continue the integration strategy, with the aim of ensuring growth, namely to penetrate new source markets through acquisitions, put more focus on its destination presence as an incoming tour operator and to develop and grow Ocean Hotels, increasing the number of rooms from the current 2,200 to potentially 5,000 over the duration of the plan.

"We are on the offensive," Eustache said.

As of 31JAN, Transat A.T.'s free cash totalled $393.6 million, compared with $359.6 million at the same date in 2014, putting it in a strong position to make acquisitions.

Looking ahead, Transat warned about “particularly slim and volatile margins" in the Sun destinations market outbound from Canada that makes up the lion's share of winter business. “Given the significant, recent decline in the value of the Canadian currency, the Corporation believes that its 2nd quarter results may be lower than those posted for the same quarter last winter," Transat said.

For summer 2015, Transat says it remains too soon to draw firm conclusions.

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