Transat builds on its momentum and enters a
summer of robust activity
Adjusted operating income for the second quarter
of 2023 nearly 40% higher than in the second quarter of 2019
Transat raises its adjusted operating income margin target from
4-6% to 5.5-7% for the fiscal year
For the second quarter:
- Revenues of $870.1 million
- Adjusted operating income1 (adjusted EBITDA) of
$56.1 million
- Operating income (EBIT) of $18.7
million
Financial position:
- Unrestricted liquidity1 of $723.6 million as at April
30, following strong cash flow generation of $155.9 million
- Customer deposits for future travel of $867.1 million, a 38% increase compared with
April 30, 2019
- Maturities for secured loans totalling $198.0 million extended from April 2024 to April
2025
MONTREAL, June 8, 2023
/CNW/ - Transat A.T. Inc., a holiday travel reference worldwide,
particularly as an air carrier under the Air Transat brand,
announces its results for the second quarter ended April 30, 2023.
"For the second quarter of 2023, Transat reported a solid
performance, with an adjusted operating income of $56.1 million, nearly 40% higher than in the same
quarter of 2019. At mid-year, and based on current booking trends,
we are raising the target for the adjusted operating income margin
from the initially set range of 4% to 6% to a target of 5.5% to 7%
for the fiscal year."
"Several factors contributed to the Corporation's favourable
results. Firstly, the demand for leisure travel, which is Transat's
primary niche, is holding steady. This high volume of activity is
driving prices up, resulting in 15% increases at the beginning of
the quarter, and almost 24% at the end of the quarter, compared
with the same period in 2019. In addition, Transat actively
continued its fleet optimization plan, deploying in winter 2023 a
capacity comparable to winter 2019 with 20 fewer aircraft in
service. Better price management, thanks to improved practices and
new tools, has also helped to maximize revenues and seize market
opportunities. Transat also relied on continuous improvement in its
operational efficiency throughout the quarter."
"With more than 60% of our capacity sold, the stage is set for a
dynamic summer. Transat will deploy for the summer a capacity
representing 89% of its 2019 level, with Europe comprising 80% of the activity,
leveraging the most profitable routes for Transat," stated Annick
Guérard, President and Chief Executive Officer of Transat.
Second-quarter highlights
- For the second quarter, the Corporation generated $870.1 million in revenues, up $512.0 million from $358.2
million for the corresponding period of 2022. In 2022, the
Corporation had to cancel nearly 30% of flights scheduled as a
result of the sharp decline in demand and massive booking
cancellations following the emergence of the Omicron variant.
- Transat recorded operating income of $18.7 million, an improvement of $106.3 million compared with the $87.5 million loss in 2022.
- Adjusted operating income1 amounted to $56.1 million, an improvement of $107.2 million, compared with an adjusted
operating loss1 of $51.0
million in 2022.
- Net loss amounted to $29.2
million ($0.76 per share),
compared with $98.3 million
($2.60 per share) for the
corresponding quarter of last year.
- Excluding non-operating items, Transat reported an adjusted net
loss1 of $8.0 million
($0.21 per share) for the second
quarter of 2023, compared with $111.6
million ($2.95 per share) in
2022.
Financial position
As at April 30, 2023, cash and
cash equivalents amounted to $623.6
million, an increase of $112.4 million compared with $511.2 million at the same date in 2022. Cash and
cash equivalents in trust or otherwise reserved resulting from
travel package sales also increased; the balance stood at
$262.2 million as at April 30, 2023, compared with $191.9 million at the same date in 2022.
Customer deposits for future travel stood at $867.1 million, up 38% from pre-pandemic levels
as at April 30, 2019, reflecting the
rebound in demand and higher average selling prices.
During the second quarter, Transat renegotiated secured loans
totalling $198.0 million, extending
the maturity dates from April 2024 to
April 2025. "These amendments provide
us greater flexibility in repaying debt and attest to our financial
partners' trust in our recovery plan," stated Patrick Bui, Chief Financial Officer of
Transat.
In total, available financing amounted to a maximum of
$963.3 million, of which $863.2 million was drawn down ($858.6 million as at April
30, 2022), for unrestricted liquidity1 of
$723.6 million.
Outlook
To date, although load factors for this summer are 2.6
percentage points lower than in 2019, airline unit revenues,
expressed in yield, are 29% higher than four years ago. The
combination of strong demand and upward pricing will allow the
Corporation to cope with a cost environment that remains generally
higher and volatile.
In light of the mid-year indicators, the Corporation is raising
the target for adjusted operating income1 margin from
the initially set range of 4% to 6% to a target of 5.5% to 7% for
fiscal 2023. In making these forward-looking statements, the
Corporation adjusted its assumptions for the full year, including
moderate growth in Canada's GDP,
an exchange rate of C$1.35 to
US$1 and an average price per gallon
of jet fuel of C$4.25.
Additional Information
The results were affected by non-operating items, as summarized
in the following table:
Highlights and non-IFRS financial
measures
|
(In thousands of
Canadian dollars)
|
Second
quarter
|
First six-month
period
|
2023
|
2022
|
2023
|
2022
|
Revenues
|
870,111
|
358,157
|
1,537,568
|
560,595
|
|
|
|
|
|
Operating income
(loss)
|
18,740
|
(87,513)
|
(19,363)
|
(161,354)
|
Restructuring costs
(reversal)
|
(557)
|
—
|
2,343
|
—
|
Depreciation and
amortization
|
42,763
|
36,499
|
83,871
|
73,971
|
Premiums related to
derivatives that matured during
the period
|
(4,802)
|
—
|
(7,376)
|
—
|
Adjusted operating
income (loss)1
|
56,144
|
(51,014)
|
59,475
|
(87,383)
|
|
|
|
|
|
Net loss
|
(29,180)
|
(98,276)
|
(85,790)
|
(212,621)
|
Restructuring costs
(reversal)
|
(557)
|
—
|
2,343
|
—
|
Change in fair value
of derivatives
|
13,949
|
1,192
|
23,870
|
1,720
|
Revaluation of
liability related to warrants
|
(3,234)
|
353
|
6,905
|
809
|
Gain on long-term debt
modification
|
—
|
(22,191)
|
—
|
(22,191)
|
Gain on asset
disposals
|
—
|
(66)
|
(2,511)
|
(4,018)
|
Foreign exchange
(gain) loss
|
15,867
|
7,425
|
(6,962)
|
29,421
|
Premiums related to
derivatives that matured during
the period
|
(4,802)
|
—
|
(7,376)
|
—
|
Adjusted net
loss1
|
(7,957)
|
(111,563)
|
(69,521)
|
(206,880)
|
|
|
|
|
|
Diluted loss per
share
|
(0.76)
|
(2.60)
|
(2.25)
|
(5.63)
|
Restructuring costs
(reversal)
|
(0.01)
|
—
|
0.06
|
—
|
Change in fair value
of derivatives
|
0.36
|
0.03
|
0.63
|
0.05
|
Revaluation of
liability related to warrants
|
(0.08)
|
0.01
|
0.18
|
0.02
|
Gain on long-term debt
modification
|
—
|
(0.59)
|
—
|
(0.59)
|
Gain on asset
disposals
|
—
|
—
|
(0.07)
|
(0.11)
|
Foreign exchange
(gain) loss
|
0.41
|
0.20
|
(0.18)
|
0.78
|
Premiums related to
derivatives that matured during
the period
|
(0.13)
|
—
|
(0.19)
|
—
|
Adjusted net loss
per share1
|
(0.21)
|
(2.95)
|
(1.82)
|
(5.48)
|
|
|
|
|
|
|
|
|
As at
April 30, 2023
|
As at
October 31, 2022
|
Cash and cash
equivalents
|
|
|
623,562
|
322,535
|
Undrawn funds from
credit facilities
|
|
|
100,000
|
100,000
|
Unrestricted
liquidity1
|
|
|
723,562
|
422,535
|
About Transat
Founded in Montreal 35 years
ago, Transat has achieved worldwide recognition as a provider of
holiday travel particularly as an airline under the Air Transat
brand. Voted World's Best Leisure Airline in North America by passengers at the 2022
Skytrax World Airline Awards, it flies to international, U.S. and
Canadian destinations. By renewing its fleet with the most
energy-efficient aircraft in their category, it is committed to a
healthier environment, knowing that this is essential to its
operations and the destinations it serves. Transat has been
Travelife-certified since 2018. (TSX: TRZ) www.transat.com
(1) Non-IFRS financial measures
Transat prepares its financial statements in accordance with
International Financial Reporting Standards ["IFRS"]. We will
occasionally refer to non-IFRS financial measures in the news
release. These non-IFRS financial measures do not have any meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other issuers. They are intended to
provide additional information and should not be considered as a
substitute for measures of performance prepared in accordance with
IFRS. All dollar figures are in Canadian dollars unless otherwise
indicated.
The following are non-IFRS financial measures used by management
as indicators to evaluate ongoing and recurring operational
performance.
Adjusted operating income (loss) or adjusted
EBITDA: Operating income (loss) before depreciation,
amortization and asset impairment expense, restructuring costs and
other significant unusual items, and including premiums related to
derivatives that matured during the period. The Corporation uses
this measure to assess the operational performance of its
activities before the aforementioned items to ensure better
comparability of financial results.
Adjusted pre-tax income (loss) or adjusted
EBT: Income (loss) before income tax expense before change in
fair value of derivatives, revaluation of liability related to
warrants, gain (loss) on long-term debt modification,
gain (loss) on business disposals, gain (loss) on asset
disposals, restructuring charge, asset impairment, foreign exchange
gain (loss) and other significant unusual items, and including
premiums related to derivatives that matured during the period. The
Corporation uses this measure to assess the financial performance
of its activities before the aforementioned items to ensure better
comparability of financial results.
Adjusted net income (loss): Net
income (loss) before net income (loss) from discontinued
operations, change in fair value of derivatives, revaluation of
liability related to warrants, gain (loss) on long-term debt
modification, gain (loss) on business disposals,
gain (loss) on asset disposals, restructuring costs, asset
impairment, foreign exchange gain (loss), reduction in the
carrying amount of deferred tax assets and other significant
unusual items, and including premiums related to derivatives that
matured during the period, net of related taxes. The Corporation
uses this measure to assess the financial performance of its
activities before the aforementioned items to ensure better
comparability of financial results. Adjusted net income (loss)
is also used in calculating the variable compensation of employees
and senior executives.
Adjusted net income (loss) per share:
Adjusted net income (loss) divided by the adjusted weighted
average number of outstanding shares used in computing diluted
earnings (loss) per share.
Unrestricted liquidity: The sum of
cash and cash equivalents and available undrawn funds from credit
facilities. The Corporation uses this measure to assess the total
potential cash available in the short term.
Conference call
Second-quarter 2023 conference call: Thursday, June 8, 10:00 a.m. Dial
1 800 926-9795.. Name of conference: Transat. Webcast:
follow this link. The archived call will be available at
1 800 558-5253, access code 22025962, until July 7, 2023.
The third-quarter results will be announced on September 7, 2023.
Caution regarding forward-looking statements
This news release contains certain forward-looking statements
with respect to the Corporation, including those regarding its
results, its financial position, the impacts of the
coronavirus ["COVID-19"] pandemic, its outlook for the future
and planned measures, including in particular the resumption of
operations and actions to improve its cash flows. These
forward-looking statements are identified by the use of terms and
phrases such as "anticipate" "believe" "could" "estimate" "expect"
"intend" "may" "plan" "potential" "predict" "project" "will"
"would", the negative of these terms and similar terminology,
including references to assumptions. All such statements are made
pursuant to applicable Canadian securities legislation. Such
statements may involve but are not limited to comments with respect
to strategies, expectations, planned operations or future actions.
Forward-looking statements, by their nature, involve risks and
uncertainties that could cause actual results to differ materially
from those contemplated by these forward-looking
statements.
As at April 30, 2023, a material uncertainty exists
that may cast significant doubt on the Corporation's ability to
continue as a going concern. The MD&A's Section 7. Financial
position, liquidity and capital resources and Note 2 to the interim
condensed consolidated financial statements contain more detail on
this issue.
Despite the resumption of operations and the recovery in
demand, the economic impacts of the pandemic, combined with the
uncertainty of a possible economic downturn, ongoing inflation in
many countries, including Canada,
and the military conflict between Russia and Ukraine continued to create demand
uncertainty. While the situation considerably improved since the
second quarter of 2022, the Corporation cannot yet predict with
certainty all the impacts of this situation on its operations and
results. Since the second quarter of 2020, the Corporation
implemented a series of operational, commercial and financial
measures, including new financing and cost reduction measures,
aimed at preserving its cash. The Corporation is monitoring the
situation daily to adjust these measures as it evolves. However,
until the Corporation is able to resume operations at a sufficient
level, demand uncertainty will have significant negative impacts on
its cash flows from operations and operating results. Although the
Corporation is currently experiencing a significant resumption of
operations, it does not expect to reach the pre-pandemic level
before 2024.
The forward-looking statements may differ materially from
actual results for a number of reasons, including without
limitation, economic conditions, changes in demand due to the
seasonal nature of the business, extreme weather conditions,
climatic or geological disasters, war, political instability, real
or perceived terrorism, outbreaks of epidemics or disease, consumer
preferences and consumer habits, consumers' perceptions of the
safety of destination services and aviation safety, demographic
trends, disruptions to the air traffic control system, the cost of
protective, safety and environmental measures, competition, the
Corporation's ability to maintain and grow its reputation and
brand, the availability of funding in the future, fluctuations in
fuel prices and exchange rates and interest rates, the
Corporation's dependence on key suppliers, the availability and
fluctuation of costs related to our aircraft, information
technology and telecommunications, changes in legislation,
unfavourable regulatory developments or procedures, pending
litigation and third party lawsuits, the ability to reduce
operating costs, the Corporation's ability to attract and retain
skilled resources, labour relations, collective bargaining and
labour disputes, pension issues, maintaining insurance coverage at
favourable levels and conditions and at an acceptable cost, and
other risks detailed in the Risks and Uncertainties section of the
MD&A included in our 2022 Annual Report.
The reader is cautioned that the foregoing list of factors is
not exhaustive of the factors that may affect any of the
Corporation's forward-looking statements. The reader is also
cautioned to consider these and other factors carefully and not to
place undue reliance on forward-looking statements.
The forward-looking statements in this news release are based
on a number of assumptions relating to economic and market
conditions as well as the Corporation's operations, financial
position and transactions. Examples of such forward-looking
statements include, but are not limited to, statements
concerning:
- The outlook whereby until the Corporation is able to resume
operations at a sufficient level, demand uncertainty will have
significant negative impacts on its cash flows from operations and
operating results.
- The outlook whereby, subject to going concern uncertainty as
discussed in Section 7. Financial position, liquidity and capital
resources of the MD&A and Note 2 to the interim condensed
consolidated financial statements, we believe that the Corporation
will be able to meet its obligations with cash on hand, cash flows
from operations and drawdowns under existing credit facilities.
- The outlook whereby, the combination of strong demand and
upward pricing will allow the Corporation to cope with a cost
environment that remains generally higher and volatile.
- The outlook whereby, the Corporation is raising the target
for adjusted operating income1 margin from
the initially set range of 4% to 6% to a target of 5.5% to 7% for
fiscal 2023.
In making these statements, the Corporation assumes, among
other things, that no travel or border restrictions will be imposed
by government authorities, that the standards and measures for the
health and safety of personnel and travellers imposed by government
and airport authorities will be consistent with those currently in
effect, that travellers will continue to travel despite the health
measures and other constraints imposed as a result of the pandemic,
that workers will continue to be available to the Corporation, its
suppliers and the companies providing passenger services at the
airports, that credit facilities and other terms of credit extended
by its business partners will continue to be made available as in
the past, that management will continue to manage changes in cash
flows to fund working capital requirements for the full fiscal year
and that fuel prices, exchange rates, selling prices, and hotel and
other costs remain stable. If these assumptions prove
incorrect, actual results and developments may differ materially
from those contemplated by the forward-looking statements contained
in this press release.
The Corporation considers that the assumptions on which these
forward-looking statements are based are reasonable.
These statements reflect current expectations regarding
future events and operating performance, speak only as of the
date this news release is issued, and represent the
Corporation's expectations as of that date. For additional
information with respect to these and other factors, see the
MD&A for the quarter ended April 30, 2023 filed with
the Canadian securities commissions and available on SEDAR at
www.sedar.com. The Corporation disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
other than as required by applicable securities
legislation.
Media Site: transat.com/en-CA/corporate/media
SOURCE Transat A.T. Inc.