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Transat A.T. inc., a holiday travel reference worldwide, particularly as an air carrier under the Air Transat brand, announces its results for the third quarter ended July 31, 2022.
“The recovery emerging at the end of the last quarter has been confirmed in recent months. With our prudent planning and our teams’ exceptionally high quality execution, we were able to deploy virtually all of our programs, with continuously improving load factors,” stated Annick Guérard, President and Chief Executive Officer of Transat.
“We are on track for a winter season that promises to match pre-pandemic levels. The pace of sales is currently very comparable to 2019. Although the quarterly results are still affected by the costs of resuming operations, July was our first profitable month in more than two years, setting the stage for improved results. The strong pricing this quarter also partially absorbed the increase in fuel costs, the adverse effect of which is likely to persist for some time.”
“Our current cash position, combined with new financing obtained during the quarter, gives us the required flexibility for the future. We also continued to implement our strategic plan during the quarter, particularly with respect to the fleet, with the receipt of two new A321LRs and the order of four A321XLRs. These new aircraft will bring us all the advantages of the LR, including cost and environmental benefits, with an even longer range”, concluded Ms. Guérard.
Third quarter highlights
Compared with 2021 (a quarter with virtually no operations), the Corporation’s revenues increased by $495.8 million for the quarter ended July 31, 2022. Compared with 2019, quarterly revenues were down $190.6 million or 27%. Capacity offered was 82% of that deployed in 2019 across all programs and 68% for Europe, the main program during this period. Overall, the number of travellers was down 24% for the third quarter compared with 2019. The gradual recovery of demand combined with higher fuel prices also contributed to the increase in average selling prices compared with 2019. The increase in average selling prices is approximately 8% for the Europe program and 26% for the sun destinations program.
Operations resulted in an operating loss of $93.2 million, an improvement of $5.2 million compared with the $98.4 million loss in 2021. The improvement was reined in by a 112% surge in fuel prices (or $103.3 million) during the quarter, compared with 2021. Transat reported an adjusted operating loss1 of $57.8 million, a deterioration of $6.9 million, compared with $50.9 million in 2021.
Net loss attributable to shareholders amounted to $106.5 million (or $2.82 per diluted share) compared with $138.1 million (or $3.66 per diluted share) for the corresponding quarter of last year. The net loss attributable to shareholders in 2022 was reduced by a $14.5 million gain on the revaluation of the liability related to warrants, partially offset by the $6.9 million loss related to the change in the fair value of fuel-related derivatives and other derivatives. The net loss attributable to shareholders in 2021 was increased by the $15.9 million foreign exchange loss, primarily attributable to the exchange effect on lease liabilities related to aircraft and the $9.4 million loss on the revaluation of the liability related to warrants. Excluding non-operating items, Transat reported an adjusted net loss1 of $120.9 million ($3.20 per diluted share) for the third quarter of 2022, compared with $115.6 million ($3.06 per diluted share) in 2021.
Financial position
As at July 31, 2022, cash and cash equivalents amounted to $411.3 million, compared with $429.4 million as at the same date in 2021. In total, the available financing amounted to a maximum of $963.3 million, of which $863.2 million was drawn down, for unrestricted liquidity1 of $511.3 million.
Customer deposits for future travel stood at $585.6 million, representing 96% of pre-pandemic levels (as at July 31, 2019) and up 19% from the last quarter, reflecting the recovery in demand.
Continued rebuilding of fleet
The Corporation took delivery of two A321LRs during the quarter and is expecting five more aircraft of this type in 2023 and 2024. In recent days, Transat also finalized its first order since 2018, for four A321XLRs, including three firm orders for delivery in 2025-2026 and an option for 2027. These aircraft have an even longer range than the A321LR and will eventually allow the Corporation to complete its fleet and serve more faraway destinations with an aircraft that has the same advantages as the LR, namely cost per passenger, reduced carbon footprint and exceptional on-board experience.
Agreement on asset-backed commercial paper (ABCP)
On August 23, 2022, the Corporation and the Canada Revenue Agency (“CRA”) came to an agreement concerning the tax treatment of ABCP-related tax losses. Under this agreement, the Corporation is expected to receive $11.8 million, of which $9.5 million had already been recognized. In addition, the Corporation could receive accrued interest in connection with this settlement agreement. The Corporation could also receive $6.0 million from provincial tax authorities, of which $4.9 million had already been recognized.
Outlook
Fourth quarter 2022 – The current situation is showing very encouraging signs in terms of bookings as the last-minute booking trend persists. After the low reached during the Omicron wave, load factors have largely improved in recent months. Selling prices of bookings for the summer season have been steadily increasing since the start of spring across all our programs.
Across all our markets, the planned capacity for summer 2022 represents 92% of the 2019 capacity. For the transatlantic program, the Corporation’s main market for the summer season, the planned capacity in 2022 is 81% of the 2019 level. In the sun destinations program, the Corporation’s planned capacity is slightly higher than in 2019. Lastly, the Corporation tripled its capacity in the transborder market and deployed a slightly higher capacity for its domestic program, compared with 2019.
Fuel prices, if they remain at the current level, are creating strong pressure on the Corporation’s operating costs and profitability.
It remains difficult at this time to forecast the evolution of the health and economic situations or their impact on bookings and future financial results with sufficient precision for the Corporation to present a more comprehensive outlook for the fourth quarter of 2022.
Winter 2023 – In the sun destinations program, the Corporation’s main program for the period, Transat’s capacity is the same as that deployed in 2019 and 75% higher compared with 2022. To date, and overall, the load factors are comparable to 2019 levels while prices are higher.
The Corporation believes it is still too early to draw any conclusions regarding winter season results.
Additional Information
The results were affected by non-operating items, as summarized in the following table: Highlights and Non-IFRS financial measures
As the Corporation has ceased to recognize deferred tax assets, the presentation of the adjusted loss before tax expense has been suspended, this result being similar to the adjusted net loss, which continues to be presented.
This press release was prepared and distributed by Transat A.T.
