Transat A.T. Inc. releases Q4 2022 results

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 ended October 31, 2022.

“The recovery in travel, already very real in the third quarter, accelerated in the fourth. This shows that people still want to travel and travel spending is a priority for them, even amid an economic slowdown and rising inflation. During the past quarter, Transat responded to the demand and deployed a program based on its traditional strengths of combining European and sun destinations, which were very popular and allowed us to continuously improve our load factors.

“Several indicators show that we’re also well set for the winter season. The pace of reservations is currently equivalent to that of 2019. Strong demand is driving up prices, which is helping us to deal with higher costs. As a result, Transat ended fiscal 2022 with solid momentum and a significant decrease in its adjusted operating loss. If the trend continues, the outlook for 2023 is encouraging,” stated Annick Guérard, President and Chief Executive Officer of Transat.

The Corporation also continued to implement its strategic plan during the quarter. In October 2022, it launched a new codeshare partnership with Porter Airlines for flights available since November 2022. This agreement, which is part of Air Transat’s network development strategy, is in addition to the one entered into with WestJet and the 10 active virtual interlining partnerships, bringing the total number of destinations now available via the Corporation’s bookings to more than 300.

Transat placed a new order at the end of November for two more A321LRs, as part of its ongoing fleet renewal. This order, plus that for four A321XLRs announced in the third quarter, demonstrates the Corporation’s confidence in the future and will bring to 23 the number of next-generation aircraft received or ordered. These new aircraft offer advantageous performance with reduced fuel consumption and greater range.

Lastly, as activity intensifies, the Corporation is pleased to have entered into a new five-year collective agreement last month with aircraft maintenance personnel, in addition to the agreement ratified with pilots in the second quarter.

Fourth-quarter highlights

• The Corporation generated $573.1 million in revenues, up $510.4 million from $62.8 million for the corresponding period of 2021. Capacity offered was 91% of that deployed in 2019 across all programs. Demand recovery combined with higher fuel prices, contributed to the increase in average selling prices compared with 2019.
• Operations resulted in an operating loss of $48.8 million, an improvement of $69.5 million compared with the $118.3 million loss in 2021. The improvement was restrained by a significant increase in fuel prices as well as the deterioration of the value of the dollar against its U.S. counterpart, as fuel prices were up by 61% (or $72.6 million) and the dollar weakened by 6% against the U.S. currency during the quarter, compared with 2021.
• The adjusted operating loss¹ amounted to $11.5 million, an improvement of $46.8 million, compared with $58.4 million in 2021. 
• The net loss attributable to shareholders amounted to $126.2 million, or $3.32 per share (diluted), compared with $123.1 million, or $3.21 per share (diluted), for the corresponding quarter of last year.
• Excluding non-operating items, Transat reported an adjusted net loss¹ of $75.9 million, or $2.00 per share, for the fourth quarter of 2022, compared with $118.4 million, or $3.14 per share, in 2021.

Fiscal year highlights

• The Corporation posted revenues of $1,642.0 million for the year, an increase of $1,517.2 million, compared with 2021. Revenue growth in winter 2022 was dampened by the sharp decline in demand and massive booking cancellations following the emergence of the COVID-19 Omicron variant during the first quarter and the new restrictive measures put in place by the federal government on December 15, 2021. For the 2022 summer season, the Corporation also deployed a reduced program although much more similar to pre-pandemic levels, at 87% of the capacity deployed in 2019.
• The Corporation recorded an operating loss of $303.4 million, an improvement of $97.8 million compared with $401.2 million in 2021.
• Transat reported an adjusted operating loss¹ of $156.8 million, an improvement of $57.1 million compared with $213.9 million in 2021.
• The net loss amounted to $445.3 million, or $11.77 per share (diluted), compared with $389.6 million, or $10.32 per share (diluted), for the previous year.
• Excluding non-operating items, Transat reported an adjusted net loss¹ of $403.7 million, or $10.67 per share, for the year ended October 31, 2022, compared with $446.4 million, or $11.83 per share, in 2021.

Financial position

As at October 31, 2022, cash and cash equivalents amounted to $322.5 million, compared with $433.2 million on the same date in 2021. This available cash corresponds to a seasonal low. Cash and cash equivalents in trust or otherwise reserved resulting from travel package sales increased to $344.3 million as at October 31, 2022, compared with $139.6 million as at October 31, 2021.

Customer deposits for future travel stood at $602.5 million, up 7% from pre-pandemic levels (as at October 31, 2019), reflecting the recovery in demand and higher average selling prices.

In total, available financing amounted to a maximum of $963.3 million, of which $863.2 million was drawn down ($650.0 million as at October 31, 2021), for unrestricted liquidity¹ of $422.5 million.

As announced last quarter, the Corporation selected Nuvei as its new credit card processor and this partnership is now operational. The Corporation expects working capital improvements through faster cash collection. Also, since the end of the quarter, the Corporation collected $75.0 million of its accounts receivable as at October 31, 2022, from its credit card processor ecosystem.

Outlook

For 2023 as a whole, the Corporation expects to deploy capacity equivalent to 90% of the 2019 level. This level is consistent with International Air Transport Association (IATA) projections for the Corporation’s main markets.

To date, for winter 2023, load factors are comparable to 2019 levels and are already over 55% across the network. Airline unit revenues, expressed in revenue per passenger-mile (or yield), are approximately 15% higher than in winter 2019. The combination of demand and higher prices will allow the Corporation to deal with higher costs.

For 2023 as a whole, the Corporation expects an adjusted operating income¹ margin of approximately 4% to 6%. In making forward-looking statements, the Corporation has relied on a number of assumptions, including moderate growth in Canada’s GDP taking into account the risk of a short recession, an exchange rate of C$1.34 to US$1 and an average price per gallon of aviation fuel of C$4.50.

This press release was prepared and distributed by Transat A.T. Inc.