Transat Achieves Record Q3
Profitability
Solid operating performance driven by
sustained demand and higher yields
Transat raises once
again its adjusted EBITDA margin target from 5.5-7% to 7.5-8% for
the fiscal year
For the third quarter:
- Revenues of $746.3 million
- Adjusted EBITDA1 of $114.8
million
- Operating income of $64.4
million
- Net income of $57.3 million
Financial position:
- Unrestricted liquidity1 of $670.6 million as at July
31, 2023, up from $511.3
million at the same time last year due to a solid cash flow
generation in the last 12 months
- Customer deposits for future travel of $819.9 million, an all-time high for a
third-quarter, up 40% from July 31,
2022
- Land sale in Mexico completed
on August 31 and net proceeds of
C$50 million to be applied to debt
reduction
MONTREAL, Sept. 14,
2023 /CNW/ - Transat A.T. Inc., a leisure travel
reference worldwide, operating as an air carrier under the Air
Transat brand, announced today its results for the third quarter
ended July 31, 2023.
"Transat generated record adjusted EBITDA and net income for a
third quarter, and its first net profit since the end of 2019.
These results demonstrate strong overall execution and our ability
to meet sustained customer demand in a cost-efficient way.
Third-quarter revenues of $746.3 million were 6.8% above 2019 levels
despite capacity being 14% less, while our record adjusted EBITDA
of $114.8 million was nearly 85%
higher. Robust demand for leisure travel produced yields 29% above
those of 2019," said Annick Guérard, President and Chief Executive
Officer of Transat.
"Transat will conclude fiscal 2023 with solid momentum and, as a
result, we are raising our adjusted EBITDA margin target from
5.5-7% to 7.5-8% for the year. Looking ahead to the winter season,
the addition of three new A321LR and one A321ceo will contribute to
increasing available capacity by 23% to be deployed on our best
performing routes and promising new destinations. Early bookings
are ahead of last year which, combined with firm pricing, bode well
for the start of the new fiscal year," concluded Ms. Guérard.
"From a financial perspective, our focus remains on debt
reduction. In this regard, net proceeds from our recent land sale
in Mexico of approximately
C$50 million will be used to reduce
our secured facilities. Although the second half usually produces
negative free cash flows, our third-quarter performance improved by
$45 million compared to last year,
bringing our free cash flows generated by operations for the last
twelve months to $153 million. This
solid momentum raised unrestricted liquidity 31% above last year's
level, while record customer deposits for a third quarter are a
strong indicator of resilient demand, which should allow Transat to
further improve its financial position," added Patrick Bui, Chief Financial Officer of
Transat.
Third-quarter highlights
- For the third quarter, the Corporation generated $746.3 million in revenues, up $238.0 million from $508.3
million for the corresponding period of 2022. In 2022, the
Corporation's revenues were recovering from earlier sharp declines
in demand and massive booking cancellations following the emergence
of the Omicron variant.
- Transat recorded operating income of $64.4 million, an improvement of $157.6 million from a $93.2 million loss in 2022.
- Adjusted EBITDA1 amounted to $114.8 million, up $172.6
million from a loss of $57.8
million in 2022.
- Net income amounted to $57.3
million ($1.49 per share),
compared with a net loss of $106.5
million ($2.82 per share) for
the corresponding quarter of last year.
- Excluding non-operating items, Transat reported an adjusted net
income1 of $42.3 million
($1.10 per share) for the third
quarter of 2023, compared with an adjusted net loss1 of
$120.9 million ($3.20 per share) in 2022.
Financial position
As at July 31, 2023, cash and cash
equivalents amounted to $570.6
million, an increase of $159.2
million from $411.3 million at
the same date in 2022. Cash and cash equivalents in trust or
otherwise reserved resulting from travel package sales also
improved year-over-year reaching $263.6
million as at July 31, 2023,
compared with $213.5 million at the
same date in 2022.
Reflecting the rebound in demand and higher average selling
prices, customer deposits for future travel stood at $819.9 million, up 34% from pre-pandemic levels
as at July 31, 2019, and up 40% from
July 31, 2022.
In total, available financing amounted to a maximum of
$963.3 million, of which
$863.2 million was drawn down
($863.2 million as at
July 31, 2022), for unrestricted liquidity1 of
$670.6 million. The unused amount of
$100.0 million is available until
October 29, 2023.
Outlook
To date, load factors for the fourth quarter are 2.2 percentage
points lower than in 2019, while airline unit revenues, expressed
in yield, remain 26% higher. The combination of sustained demand
and firm pricing will allow the Corporation to cope with a cost
environment that remains generally higher and volatile.
Considering the solid results achieved in the first nine months
of fiscal 2023, the Corporation is raising the target for adjusted
EBITDA1 margin from a range of 5.5% to 7% to a
target of 7.5% to 8% for the year. 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.
For the upcoming winter season, the recent addition of four
aircraft (three A321LRs and one A321ceo) and enhanced fleet
utilization will contribute to increasing available capacity by
23%, as the Corporation continues to methodically expand its
offering. Current market trends regarding demand and pricing
continue to bode well for the early stages of the new fiscal
year.
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)
|
Third
quarter
|
Nine-month
period
|
2023
|
2022
|
2023
|
2022
|
Revenues
|
746,317
|
508,304
|
2,283,885
|
1,068,899
|
|
|
|
|
|
Operating income
(loss)
|
64,375
|
(93,218)
|
45,012
|
(254,572)
|
Restructuring
costs
|
1,007
|
—
|
3,350
|
—
|
Depreciation and
amortization
|
53,752
|
38,173
|
137,623
|
112,144
|
Premiums related to
derivatives that matured during
the period
|
(4,352)
|
(2,779)
|
(11,728)
|
(2,779)
|
Adjusted operating
income (loss)1
|
114,782
|
(57,824)
|
174,257
|
(145,207)
|
|
|
|
|
|
Net income
(loss)
|
57,303
|
(106,472)
|
(28,487)
|
(319,093)
|
Asset
impairment
|
4,592
|
—
|
4,592
|
—
|
Restructuring
costs
|
1,007
|
—
|
3,350
|
—
|
Change in fair value
of derivatives
|
(12,168)
|
6,908
|
11,702
|
8,628
|
Revaluation of
liability related to warrants
|
24,972
|
(14,506)
|
31,877
|
(13,697)
|
Foreign exchange
(gain) loss
|
(29,052)
|
(1,706)
|
(36,014)
|
27,715
|
Loss (gain) on asset
disposals
|
—
|
13
|
(2,511)
|
(4,005)
|
Gain on long-term debt
modification
|
—
|
—
|
—
|
(22,191)
|
Premiums related to
derivatives that matured during
the period
|
(4,352)
|
(2,779)
|
(11,728)
|
(2,779)
|
Tax recovery on ABCP
losses
|
—
|
(2,359)
|
—
|
(2,359)
|
Adjusted net income
(loss)1
|
42,302
|
(120,901)
|
(27,219)
|
(327,781)
|
|
|
|
|
|
Diluted earnings (loss)
per share
|
1.49
|
(2.82)
|
(0.75)
|
(8.44)
|
Asset
impairment
|
0.12
|
—
|
0.12
|
—
|
Restructuring
costs
|
0.03
|
—
|
0.09
|
—
|
Change in fair value
of derivatives
|
(0.32)
|
0.18
|
0.31
|
0.23
|
Revaluation of
liability related to warrants
|
0.65
|
(0.38)
|
0.83
|
(0.36)
|
Foreign exchange
(gain) loss
|
(0.76)
|
(0.05)
|
(0.93)
|
0.73
|
Loss (gain) on asset
disposals
|
—
|
—
|
(0.07)
|
(0.11)
|
Gain on long-term debt
modification
|
—
|
—
|
—
|
(0.59)
|
Premiums related to
derivatives that matured during
the period
|
(0.11)
|
(0.07)
|
(0.31)
|
(0.07)
|
Tax recovery on ABCP
losses
|
—
|
(0.06)
|
—
|
(0.06)
|
Adjusted net
earnings (loss) per share1
|
1.10
|
(3.20)
|
(0.71)
|
(8.67)
|
|
|
|
|
|
|
|
|
As at
July 31, 2023
|
As at
October 31, 2022
|
Cash and cash
equivalents
|
|
|
570,592
|
322,535
|
Undrawn funds from
credit facilities
|
|
|
100,000
|
100,000
|
Unrestricted
liquidity1
|
|
|
670,592
|
422,535
|
|
Third
quarter
|
Nine-month
period
|
(In thousands of
Canadian dollars)
|
2023
|
2022
|
Difference
|
2023
|
2022
|
Difference
|
$
|
$
|
$
|
$
|
$
|
$
|
Cash flows related
to operating activities
|
(7,534)
|
(62,724)
|
55,190
|
378,113
|
(117,793)
|
495,906
|
Cash flows related to
investing activities
|
(4,136)
|
(9,992)
|
5,856
|
(21,896)
|
(25,001)
|
3,105
|
Repayment of lease
liabilities
|
(40,407)
|
(24,191)
|
(16,216)
|
(109,947)
|
(83,600)
|
(26,347)
|
Free cash
flow1
|
(52,077)
|
(96,907)
|
44,830
|
246,270
|
(226,394)
|
472,664
|
About Transat
Founded in Montreal 35 years
ago, Transat has achieved worldwide recognition as a provider of
leisure travel, operating as an air carrier under the Air Transat
brand. Voted World's Best Leisure Airline by passengers at the 2023
Skytrax World Airline Awards, it flies to international
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 earnings (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.
Free cash flow: Cash flows related
to operating activities less cash flows related to investing
activities and repayment of lease liabilities. The Corporation uses
this measures to assess the cash that's available to be distributed
in a discretionary way such as repayment of long-term debt or
deferred government grant or distribution of dividend to
shareholders.
Conference call
Third-quarter 2023 conference call: Thursday, September 14, 10:00 a.m. To join
the conference call without operator assistance, you may register
and enter your phone number here to receive an instant automated
call back.
You can also dial direct to be entered into the call by an
operator:
Montreal: 514 225-7344
North America (toll-free): 1 888
390-0620
Name of conference: Transat
The conference will also be accessible live via webcast: click here
to register.
An audio replay will be available until September 20, 2023, by dialling 1 888 390-0541
(toll-free in North America),
access code 569905 followed by the pound key (#). The webcast will
remain available for three months following the call.
The fourth-quarter results will be announced on December 14, 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 and its outlook for the future.
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.
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 and the
lingering effects of the COVID-19 pandemic, 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, cybersecurity risks, 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, 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 sustained demand and
firm 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 EBITDA1 margin from a range of 5.5% to 7%
to a target of 7.5% to 8% for the year.
- The outlook whereby, for the upcoming winter season, the
recent addition of four aircraft (three A321LRs and one A321ceo)
and enhanced fleet utilization will contribute to increasing
available capacity by 23%.
In making these statements, the Corporation assumes, among
other things, 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 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 July 31, 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.