Category Archives: Air Transat

Air Transat’s parent reports adjusted 3Q net income of C$26.7 million

Air Transat‘s (Montreal) (website) parent, Transat A.T., Inc. issued this quarterly financial statement for the fiscal third quarter (all amounts in Canadian dollars):

Transat A.T. Inc., one of the largest integrated tourism companies in the world and Canada’s holiday travel leader, posted revenues of $941.7 million for the quarter ended July 31, 2014, compared with $927.0 million in 2013, an increase of $14.7 million, or 1.6%. The Corporation recorded adjusted operating income of $46.8 million, compared with $54.4 million in 2013, and net income of $25.8 million ($0.66 per share on a diluted basis), compared with $41.1 million ($1.07 per share on a diluted basis) in 2013. Before non-operating items, Transat reported adjusted net income of $26.7 million in 2014 ($0.69 per share on a diluted basis), compared with $30.8 million ($0.80 per share on a diluted basis) in 2013.

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Copyright Photo: TMK Photography/AirlinersGallery.com. Air Transat’s Boeing 737-8Q8 C-GTQB (msn 30696) in the Split Scimitar Wingslets is resting between flights at Toronto (Pearson).

Air Transat

Air Transat’s parent reduces its fiscal second quarter net loss to $7.9 million

Transat A.T. Inc., (parent of Air Transat) (website) (Montreal) posted revenues of $1.1 billion for the quarter ended April 30, 2014, an increase of 1% compared with the same period in 2013.

The Corporation recorded an adjusted operating loss of $4.0 million (all dollar figures are in Canadian dollars), compared with an adjusted operating profit of $2.7 million in 2013, and a net loss of $7.9 million ($0.20 per share on a diluted basis), compared with a net loss of $22.8 million ($0.59 per share on a diluted basis) in 2013. The decline in value of the Canadian dollar alone resulted in an increase in operating expenses of $22 million. Before non-operating items, Transat reported an adjusted net loss3 of $7.6 million in 2014 ($0.19 per share on a diluted basis), compared with an adjusted net loss of $1.4 million ($0.04 per share on a diluted basis) in 2013.

Here is the full report:

“Our results for the quarter and the winter are slightly better than what we anticipated in March,” commented Jean-Marc Eustache, President and Chief Executive Officer, before adding: “It was a peculiar winter. In December, margins were higher year over year and we were heading toward a performance improvement. The sudden drop in value of the Canadian dollar provoked a significant increase in operating expenses that reversed the situation, as it came early in the season, when the market resists increases in selling prices.”

Second-quarter highlights

The Corporation posted revenues of $1.1 billion, an increase of 1% compared with 2013, and an adjusted operating loss1 of $4.0 million, compared with an adjusted operating profit of $2.7 million in 2013. During the quarter, Transat had reduced capacity on its Sun destination routes by 3.5%, which contributed to a 5.3% overall decrease in the number of travellers. Average selling prices were up, and the euro and pound traded higher against the Canadian dollar. The adjusted operating loss is attributable entirely to the decline in value of the Canadian dollar against the U.S. dollar.

Revenues of North American business units, which are generated by sales in Canada and abroad, decreased by $4.0 million (0.4%) compared with the same period in 2013. The decline in revenues stemmed from the Corporation’s decision to reduce supply on its Sun destination routes by 3.5%, and on its transatlantic routes by 2.9%, leading to a decrease of 5.9% in the number of travellers, while average selling prices rose. North American business units recorded an operating loss of $15.7 million, compared with one of $7.3 million in 2013. The increase in operating loss is attributable entirely to the decline in value of the Canadian dollar versus the U.S. dollar, and the accompanying increase in operating expenses. The combined effect of increased selling prices plus cost-control initiatives was not sufficient to offset the effect of those expense increases. The operating loss for the quarter includes a $2.2-million restructuring charge, compared with $3.9 million in 2013.

Revenues of European business units, which are generated by sales in Europe and in Canada, increased by $15.8 million (9.7%) over 2013, owing to the strength of the euro and pound against the Canadian dollar. Measured in local currencies, the revenues of the France business unit increased, while those of the U.K. unit decreased following the Corporation’s decision to reduce capacity. European activities resulted in an operating loss of $1.4 million, compared with $2.8 million in 2013.

First six-month period highlights

For the first six months, the Corporation posted revenues of $2.0 billion in 2014, compared with $1.9 billion in 2013, and an adjusted operating loss1 of $27.8 million, compared with $18.3 million in 2013. During the six-month period, the Corporation reduced capacity on certain markets, resulting in a 3.6% overall decrease in the number of travellers. Capacity on Sun destination routes, meanwhile, was similar to that in 2013. Average selling prices were up, and the euro and pound traded higher against the Canadian dollar. The adjusted operating loss is attributable entirely to the decline in value of the Canadian dollar versus the U.S. dollar.

Revenues of North American business units increased by $27.5 million (1.7%) compared with the same period in 2013. For the six-month period, capacity on Sun destination routes was similar to that of 2013, while transatlantic market capacity was reduced by 6.2%. North American business units recorded an adjusted operating loss1 of $40.7 million, compared with $23.6 million in 2013. The operating loss is attributable entirely to the Corporation’s increased costs following the depreciation of the Canadian dollar against its U.S. counterpart. The operating loss for the six-month period includes a $2.2-million restructuring charge, compared with $3.9 million in 2013.

Revenues of the European business units increased by $25.8 million (9.3%) from 2013, owing to the strength of the euro and pound against the Canadian dollar. Measured in local currencies, these business units’ revenues declined slightly, following the decision to reduce capacity. European activities resulted in an operating loss of $9.9 million, compared with one of $16.5 million for the first six months of 2013.

Financial position

As at April 30, 2014, the Corporation’s free cash totalled $404.6 million, compared with $336.1 million at the same date in 2013. The working capital ratio was 1.04, against 0.98, and deposits from customers for future travel amounted to $540.3 million, compared with $514.7 million a year earlier. Off-balance-sheet agreements stood at $648.6 million as at April 30, 2014, compared with $655.8 million as at October 31, 2013,4 the decrease being attributable to payments made during the period, offset by the increase resulting from the depreciation of the Canadian dollar against the U.S. dollar.

Outlook

The transatlantic market outbound from Canada and Europe accounts for a very significant portion of Transat’s business in the summer. For the period May to October 2014, Transat’s capacity on that market is lower by 1% than that for summer 2013. To date, 65% of that capacity has been sold. Load factors are 2.4% lower and selling prices of bookings taken are approximately 4.3% higher, compared with the same date in 2013. If the Canadian dollar remains at its current value against the U.S. dollar, the euro and the pound, this will result in an increase in operating expenses of 4.4%.

On the Sun destinations market outbound from Canada, Transat’s capacity is higher by 9% than that for the previous year. To date, 49% of that capacity has been sold, load factors are 1% lower, and selling prices are higher.

In France, compared with last year at the same date, medium-haul bookings are ahead by 24%, while long-haul bookings are at a similar level. Variations in the product mix have resulted in a lower average selling price, with no negative impact on the average margin.

To the extent the aforementioned trends hold, the Corporation expects to record satisfying results in the second half, though lower than the record results posted last year.

Cost-reduction and margin-improvement initiatives

The Corporation continues implementing its initiatives to reduce operating costs, improve margins, and make changes to its systems and processes. In April 2013, Transat announced its decision to internalize narrow-body medium-haul aircraft (Boeing 737-800s) for travel outbound from Canada, starting in May 2014. These measures had, as expected, a favorable impact of $20 million on the margin in 2012 and one of $15 million in 2013. The Corporation expects another $20 million in 2014, as well as in 2015, when internalization of the narrow-body fleet will produce its full benefits.

Copyright Photo: TMK Photography/AirlinersGallery.com. In April 2013, Transat announced its decision to internalize narrow-body medium-haul aircraft (Boeing 737-800s) for travel outbound from Canada, starting in May 2014. Formerly operated by Ryanair as EI-CSH, CanJet Airlines’ Boeing 737-8AS C-FTCZ (msn 29923) is pictured operating as Air Transat in their new 2011 colors.

Air Transat:

Air Transat to operate Montreal-Las Vegas Boeing 737-800 flights

Air Transat (Montreal) (website) will introduce seasonal twice-weekly flights from Montreal (Trudeau) to Las Vegas with its newly-acquired Boeing 737-800s starting on August 31 per Airline Route.

Copyright Photo: Gilbert Hechema/AirlinersGallery.com. Leased from Transavia France, Boeing 737-8K2 F-GZHD (msn 29650) in full colors arrives back at the Montreal (Trudeau) home.

Air Transat:

Air Transat becomes even more “green”

Air Transat (Montreal) (website), world’s first certified green airline in 2011, has reached another milestone. The airline is the first in the world to have achieved the second level Minimization award in the Fly-360-Green Certification Program, a benchmark for high performing airlines / aircraft operators.

“We are especially proud to have obtained this certification because it recognizes the efforts that we have made to improve our environmental performance in every area of our airline through initiatives such as greenhouse gas reduction, energy and water conservation, recycling and social responsibility” said Jean-Francois Lemay , General Manager of Air Transat. “It was the hard work and dedication of our employees that enabled us to attain this high standard and we will continue to improve so that we maintain our role as an industry leader.”

Developed by the World Green Aviation Council (WorldGAC), Fly-360-Green is a point based performance rating system where points are earned for business attributes considered environmentally beneficial in 8 key areas: Engineering, Ground Operations, Flight Planning/Dispatch, Flight Operations, Greening on Board, Corporate Environmental Practices, Corporate Policies, Strategic Planning. Airlines and aircraft operators can qualify for one of the four certification levels: Participation, Minimization, Efficiency, and Neutrality.

Fly-360-Green differs from other rating systems in that it has quantified most of the “green credits”. This ensures airlines are environmentally compatible, retain high quality standards, and are financially sound. The World Green Aviation Council, apart from fostering the international standard for sustainable aviation by addressing aviation’s absolute emissions, is the third-party administrator of the Fly-360-Green certification program.

WorldGAC performs technical reviews and verification of Fly-360-Green registered projects to determine if they meet the standards set forth in the Fly-360-Green rating system. Dedicated technical experts ensure Fly-360-Green certification meets the highest levels of quality and integrity.

Copyright Photo: Jacques Guillem/AirlinersGallery.com. Air Transat’s Airbus A330-342 C-GCTS (msn 177) taxies at Paris (CDG).

Air Transat:

Air Transat’s parent reports a fiscal year net profit of $54.7 million

Transat A.T. Inc., the parent of Air Transat (Montreal) (website), posted revenues of $808.6 million (all amounts in Canadian dollars) for the quarter ended October 31, 2013, compared with $763.4 million in 2012, an increase of $45.2 million, or 5.9%. The Corporation recorded a margin before amortization and depreciation1 of $80.1 million , compared with $52.9 million in 2012, and net income of $54.7 million ( $1.40 per share on a diluted basis), compared with a net profit of $16.6 million ($0.43 per share on a diluted basis) in 2012. Before non-operating items, amortization and depreciation, and restructuring charges, Transat reported a margin of $80.6 million , compared with $52.9 million in 2012, and adjusted after-tax income3 of $54.8 million in 2013 ( $1.40 per share on a diluted basis), compared with $28.7 million ( $0.75 per share on a diluted basis) in 2012.

For the fiscal year ended October 31, 2013, Transat posted revenues of $3.6 billion, versus $3.7 billion in 2012, a decrease of $66.1 million, or 1.8%. The Corporation recorded a margin before amortization and depreciation1 of $110.9 million, versus $17.0 million in 2012, and a net profit of $58.0 million ( $1.51 per share on a diluted basis) compared with a net loss of $16.7 million ( $0.44 per share on a diluted basis) in 2012. Before non-operating items, amortization and depreciation, and restructuring charges, Transat reported a margin of $116.6 million, compared with one of $17.0 million in 2012, and net adjusted after-tax income of $62.6 million in 2013 ( $1.63 per share on a diluted basis), versus an adjusted after-tax loss of $15.3 million ( $0.40 per share on a diluted basis) in 2012.

“We achieved very good results on the trans-Atlantic market and posted profits on the Sun destinations market as well as in France ,” said Jean-Marc Eustache , President and Chief Executive Officer of Transat. “As a result, we had our best fourth quarter ever as well as the best summer in our history. And for the year, we are back to profitability, with a margin improvement of $100 million . Our efforts on all fronts, including costs, product, marketing, revenue management, and so on delivered the expected results. Our cost-reduction and margin-improvement program is tracking to plan.”

Fourth quarter highlights

The Corporation posted revenues of $808.6 million, compared with $763.4 million in 2012, and a margin before amortization and depreciation1 of $80.1 million ( $80.6 million before amortization and depreciation and restructuring charges), compared with $52.9 million ( $52.9 million before restructuring charges) in 2012. The increase in revenues was attributable mainly to higher average selling prices, which more than offset the impact of the Corporation’s decision to reduce capacity on its markets (transatlantic and France ), which accounts for the 5.0% reduction in the number of travellers. Across all markets, average selling prices and margins were higher.

Revenues of North American business units, which are generated by sales in Canada and abroad, rose by $55.9 million (10.9%) compared with the same period in 2012. The increase stemmed in part from the decision to account for all sales of flights between Canada and United Kingdom in North America , whereas a significant portion of said sales was previously accounted for in Europe . For the quarter, capacity on the transatlantic market decreased by 9% compared with 2012; capacity on Sun destinations was similar. North American business units generated a margin before amortization and depreciation1 of $68.6 million, compared with $55.9 million in 2012. Before restructuring charges, Transat posted a margin before amortization and depreciation of $69.1 million , versus $55.9 million in 2012. The improvement in margin is mainly attributable to higher selling prices as well as the Corporation’s cost-reduction initiatives.

Revenues of European business units, which are generated by sales in Europe and in Canada , decreased by $10.7 million (4.3%) over 2012, mainly due to the aforementioned change in the accounting of certain sales in different geographic areas. European operations resulted in a margin before amortization and depreciation1 of $11.5 million , compared with an operating loss before amortization and depreciation of $3.0 millions in 2012. The improvement in the margin is mainly attributable to higher selling prices and cost-reduction initiatives.

Fiscal year highlights

For the fiscal year, the Corporation’s revenues stood at $3.6 billion, compared with $3.7 billion in 2012. Transat recorded a margin before amortization and depreciation1 of $110.9 million ( $116.6 million before amortization and depreciation and restructuring charges), compared with $17.0 million in 2012 ( $17.0 million before restructuring charges). Revenues were similar to those posted in 2012. The higher average selling prices offset the Corporation’s decision to reduce capacity on all its markets (Sun, transatlantic and France ). The improvement in margin is mainly due to higher selling prices as well as to the cost-reduction initiatives.

For the winter season, Transat posted revenues of $1.9 billion , versus $2.0 billion in 2012, and an operating loss before amortization and depreciation1 of $22.2 million ( $18.3 million before amortization and depreciation and before restructuring charges), compared with one of $58.1 million in 2012 ( $58.1 million before restructuring charges). The decrease in revenues mainly stemmed from the Corporation’s decision to reduce capacity on its markets (Sun, transatlantic and France ), which resulted in a 12.0% decrease in traveller numbers. Across all markets, average selling prices and margins were higher than in 2012.

For the summer season, the Corporation recorded revenues of $1.7 billion , compared with $1.7 billion in 2012, and a margin before amortization and depreciation of $133.1 million ($134.9 million before amortization and depreciation and before restructuring charges), versus $75.1 million in 2012 ($75.1 million before restructuring charges). The higher average selling prices offset the Corporation’s decision to reduce capacity on its markets (transatlantic and France ), which had resulted in a 12.0% decrease in traveller numbers. Across all markets, average selling prices and margins were higher than in 2012.

Financial position

As at October 31, 2013, the Corporation’s free cash totalled $265.8 million, compared with $198.5 million at the same date in 2012 (including the November 2012 sale of the Corporation’s ABCP). The working capital ratio was 1.1, against 1.0, and deposits from customers for future travel amounted to $410.3 million , compared with $382.8 million a year earlier. Off-balance-sheet agreements stood at $768.3 million as at October 31, 2013 , compared with $557.1 million as at October 31, 2012 , the increase being attributable to the leasing of four Boeing 737-800 aircraft and the renewal of the leases on six Airbus A330s, offset by payments made during the 12-month period.

Outlook for the first six months

On the sun destinations market, Transat’s capacity is approximately 3% higher than that marketed last year. To date, 41% of that capacity has been sold, load factors are lower by 2%, and selling prices are higher by 5% compared to those recorded last year at the same date.

In France , where winter is low season, compared with last year at this time medium-haul bookings are higher by 10%, long-haul bookings are down by 2% and selling prices are down by 2%.

On the transatlantic, also the low season, Transat’s capacity is 8% lower than that marketed last winter. To date, 53% of that capacity has been sold, load factors are lower by 6%, and selling prices are higher by 8%

The Sun destinations market in Canada accounts for a substantial portion of Transat’s business during the winter season, and margins are both thin and volatile. At this early stage in the season, forecasting is difficult because of the following factors: a significant portion of capacity remains to be sold, bookings are last minute, and the Canadian dollar has weakened relative to the U.S. currency. However, to the extent that the conditions do not deteriorate, the Corporation expects to record better results than period last year for the winter.

It is extremely early to comment on the trans-Atlantic market for the summer 2014, as only 9% of the seats have been sold. Transat’s capacity is 2% higher than in 2013, load factors are similar, and prices are superior.

Cost-reduction and margin-improvement Initiatives

Transat is continuing with implementation of the initiatives in its return-to-profitability plan, including measures to reduce operating costs and changes to its systems and processes. In April 2013, the Corporation also announced its decision to internalize narrow-body medium-haul aircraft (Boeing 737-800s) for its Sun destination routes outbound from Canada, starting in May 2014 . The various measures (cost-reduction initiatives, additional revenues and efficiency gains) had a favorable impact of $20 million on the margin in 2012 and of $15 million in 2013. The Corporation expects another $20 million in 2014, as well as in 2015, when internalization of the narrow-body fleet will produce its full benefits.

Copyright Photo: Stefan Sjogren/AirlinersGallery.com. Air Transat will start operating four Boeing 737-800s in May 2014. The pictured nine Airbus A310-300s will gradually exit the fleet by 2015. Airbus A310-304 C-GTSY (msn 447) arrives at Malaga, Spain.

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