Transat A.T. Inc. reported an adjusted 4Q net loss of $118.4 million

Air Transat’s parent issued this report for the fiscal fourth quarter:

Encouraging signs since the resumption on July 30

For the fourth quarter:

  • Revenues of $62.8 million
  • Adjusted operating loss1 of $58.4 million (operating loss of $118.3 million)
  • Adjusted net loss1 of $118.4 million (net loss attributable to shareholders of $121.3 million)

For the year:

  • Revenues of $124.8 million
  • Adjusted operating loss1 of $213.9 million (operating loss of $401.2 million)
  • Adjusted net loss1 of $446.4 million (net loss attributable to shareholders of $389.6 million)

Financial position and financing:

  • Cash and cash equivalents of $433.2 million as at October 31
  • In total, the available financing represents a maximum of $820.0 million, of which $650.0 million was drawn down as at October 31, 2021

Transat A.T. inc., a holiday travel reference worldwide, particularly as an air carrier under the Air Transat brand, announces its results for the fourth quarter and fiscal year ended October 31, 2021.

“Since we resumed operations on July 30, business has been growing steadily. We met and exceeded our targets for resumption of operations in the last quarter and reduced our use of cash. The winter season that is now beginning will see the continuation of our return to more significant volumes. While we remain cautious given the evolving variants, we remain optimistic that we’re on track to returning to normal. Meanwhile, we’re continuing our transformation. Following the extensive streamlining of our fleet that has been ongoing for several years, the codeshare agreement announced this quarter is the first step forward in our alliance strategy, with further advances to follow in the coming months,” stated Annick Guérard, President and Chief Executive Officer, Transat.

“For the winter, we plan to operate from eight Canadian airports to eight destinations in Europe, 22 in the South and five in the United States, including Miami and Fort Myers, where we’ll be flying for the first time. To do that, we will be deploying capacity that will grow from 50% to 75% of pre-pandemic capacity over the winter. We will then build volume further for the summer season, which will include two new routes to Europe and two new destinations in the United States.

“We started 2022 with over 2,000 employees, compared with only 750 at the height of the crisis, and the volume we project will allow us to recall about 1,500 more during the year. It’s heartwarming to see our employees gradually taking back up their positions with us. They are the reason that Transat is what it is today, and they are the ones who will build tomorrow’s growth and success,” Ms. Guérard concluded.

Fourth-quarter highlights

For the fourth quarter, the Corporation generated $62.8 million in revenues, up $34.4 million (120.9%) from $28.4 million for the corresponding period of 2020. This increase results from the partial resumption of operations at a higher level in 2021 compared with 2020. The Corporation continues to closely monitor demand in order to adjust capacity, which remains below 2019 levels since the resumption of airline operations on July 30.

Operations generated an operating loss of $118.3 million, compared with $239.3 million in 2020, an improvement of $121.0 million. In 2021, the operating loss was aggravated by special items of $20.3 million, including an aircraft impairment charge of $9.1 million, termination benefits of $6.7 million and impairment of contract balances of $4.5 million, comprising mainly prepaid expenses related to commissions paid to travel agents and credit card fees. In 2020, the operating loss was aggravated by special items totaling $96.7 million and unfavorable settlements of fuel-related derivative contracts. Transat reported an adjusted operating loss1 of $58.4 million compared with $90.7 million in 2020, an improvement of $32.4 million. This improvement is related to higher load factors across all of our markets based on increased capacity and unfavorable settlements of fuel-related derivative contracts in 2020.

Net loss attributable to shareholders amounted to $121.3 million or $3.21 per share (diluted) compared with $238.1 million or $6.31 per share (diluted) for the corresponding quarter of last year. In 2020, the net loss attributable to shareholders was aggravated by special items totaling $96.7 million and unfavorable settlements of fuel-related derivative contracts. Excluding non-operating items, Transat reported an adjusted net loss1 of $118.4 million or $3.14 per share for the fourth quarter of 2021, compared with $156.4 million or $4.14 per share in 2020.

Fiscal year highlights

For the fiscal year as a whole, the Corporation recognized revenues of $124.8 million, a decrease of $1.2 billion (90.4%) compared with 2020. Since mid-March of 2020, restrictions on international travel and government-imposed quarantine measures have made travel sales very difficult. Due to the global  COVID-19 pandemic, the Corporation suspended its airline operations on January 29, 2021 for the second time since March 2020, until their partial resumption on July 30, 2021. For the first half of winter, demand was very weak and the Corporation’s capacity represented a fraction of the 2020 level. These factors caused the fall in revenues. Conversely, for the summer season, since the partial resumption of airline operations, demand has been growing steadily and load factors have been higher compared with 2020. However, the Corporation’s capacity remained lower than in 2019.

In 2021, operations generated an adjusted operating loss of $401.2 million compared with $426.0 million in 2020, an improvement of $24.7 million. Transat reported an adjusted operating loss1 of $213.9 million compared with $122.2 million in 2020, a deterioration of $91.7 million.

Net loss attributable to shareholders amounted to $389.6 million or $10.32 per share (diluted) compared with $496.5 million or $13.15 per share (diluted) for the previous year. Excluding non-operating items, Transat reported an adjusted net loss1 of $446.4 million or $11.83 per share for the year ended October 31, 2021, compared with $355.3 million or $9.41 per share in 2020.

Financial position

As at October 31, 2021, cash and cash equivalents amounted to $433.2 million, compared with $426.4 million on the same date in 2020.

In total, the available financing represents a maximum of $820.0 million, of which $650.0 million was drawn down as at October 31, 2021. Of the drawn down amount, a total of $310.0 million was used to repay travelers who were scheduled to leave after February 1, 2020, for which a travel credit had been issued due to  COVID-19 and who had requested to be reimbursed.

Deposits from customers for future travel amounted to $292.2 million, compared with $608.9 million as at October 31, 2020, a decrease of $316.7 million. This change was due to refunds of travel credits made during the summer of 2021.

On April 29, 2021, the Corporation entered into an agreement with the Government of Canada that allows it to borrow, among others, an amount of $310.0 million to issue refunds to eligible travelers. Customers had until August 26, 2021 to submit their refund requests. The Corporation received requests for about $460.0 million and made refunds for approximately 99% of amounts claimed as of late November 2021.

The working-capital ratio was 1.14, compared with 0.84 as at October 31, 2020. The improvement in working capital resulted mainly from the travel credits refunded during the year and financed partly by the drawdowns on credit facilities.

Off-balance-sheet arrangements, excluding contracts with service providers, stood at $549.8 million as at October 31, 2021. This amount mainly consists in commitments to take delivery of the seven A321neo LRs undelivered as at that date.

Outlook

Across all of our markets, average capacity for winter 2022 is 60% of 2019 capacity, increasing from 50% to 75% over the course of the season. On the sun destinations program, the Corporation’s main program for winter season, Transat’s capacity in 2022 represents 55% of 2019 capacity. On the transatlantic program, where it is the low season, Transat’s capacity represents 65% of 2019 capacity. In addition, the Corporation is increasing its presence in the cross-border market with capacity growth of 45% compared to 2019 winter season capacity.

The Corporation continues to apply a series of operational, commercial and financial measures, including cost reduction, aimed at preserving its cash. The Corporation continues to monitor the situation daily to adjust these measures as it evolves.

Despite recent uncertainty related to the emergence of a new variant, the current situation shows encouraging signs such as the level of bookings observed and the increase in the vaccination rate. However, it remains impossible for the moment to predict the impact of the COVID-19 pandemic on future bookings, and on financial results. Consequently, for now the Corporation is not providing an outlook for winter 2022.

Changes to the Board of Directors

Messrs. Jean-Yves Leblanc and Louis-Marie Beaulieu informed the Corporation that they will cease to act as directors effective December 31, 2021. At the meeting of December 8, 2021, in order to fill these vacancies, the Board appointed Mr. Daniel Desjardins and Ms. Julie Tremblay to the Board, effective January 1, 2022. Further, Mr. Desjardins was also appointed to the Audit Committee and Ms. Tremblay was appointed to the Human Resources and Compensation Committee effective January 1, 2022.

Due to Mr. Leblanc’s departure, at its meeting of December 8, 2021, the Board of Directors appointed Ms. Lucie Chabot as Chair of the Audit Committee effective January 1, 2022.

Daniel Desjardins, Ad.E, is an independent director. Mr. Desjardins is an accomplished business lawyer and executive with extensive experience in business law, compliance and risk management, as well as decades of experience in financing and complex mergers and acquisitions.For more than 20 years, until December 2019, Mr. Desjardins was Senior Vice-President, General Counsel and Corporate Secretary at Bombardier Inc. From 2018 to January 2021, he served as Chair of the Board of Directors of Bombardier Transportation. Mr. Desjardins has been Chair of the Board of the Legal Leaders for Diversity Trust since 2014 and is Chair of the Board of Directors of the Pointe-à-Callière museum. Mr. Desjardins has received numerous professional recognitions and has twice been named one of Canada’s 25 most influential lawyers. In 2017, the Barreau du Québec awarded him the Advocatus Emeritus distinction in recognition of his exceptional professional career. Mr. Desjardins holds a law degree from the Université de Montréal and a Master of Laws degree from McGill University.

Ms. Julie Tremblay served as President and CEO of TVA Group and CEO of Quebecor Media Group and as a member of the TVA Group Board of Directors from July 2014 until her retirement in October 2017. Between 1989 and 2014, she held various senior positions within Quebecor Inc., notably as Vice President, Human Resources of Quebecor Inc. and Quebecor Media Inc. for more than eight years, as well as Chief Operating Officer and then President and Chief Executive Officer of Sun Media Corporation. Prior to joining Quebecor Inc., Ms. Tremblay practiced labour law and employment law with a prominent Montreal law firm. She has also been a director of Fondation Montreal, the Society for the Celebrations of Montréal’s 375th Anniversary and the Chamber of Commerce of Metropolitan Montréal. Ms. Tremblay holds a Bachelor’s degree in Political Science from McGill University and a Bachelor’s degree in Civil Law from Université de Sherbrooke.