Revenues were strong but profit elusive at Transat A.T. Inc. during the company’s First Quarter ended January 31. Fears of a flight attendant strike and problems with Pratt & Whitney engines led to a loss of $61 million, worse than the $56.6-million loss in Q1 2023.
Transat enjoyed a 20% increase in traffic, but with a 25% capacity increase, seats were left unfilled. Annick Guérard, President and CEO, said flight attendant strike threats throughout the quarter had a direct impact on bookings.
Transat President and CEO Annick Guerard. (Photo Credit: Transat)
"Transat's first-quarter results reflect sustained demand for leisure travel,” said Guérard. Revenues grew 17.7% year-over-year, driven by a solid traffic increase. However, the persisting speculation of a strike by flight attendants starting last November clearly affected bookings and yield for the winter season, and we are pleased that the adoption of a new collective agreement in late February removed this uncertainty.”
Transat faced unexpected operating challenges during the quarter after the recall of Pratt & Whitney turbofan jet engines for inspection and repair. The safety issue has forced TS to ground four planes so far, and while it has compensated with the lease of three Airbus A330 widebody aircraft, the cost is impacting profitability.
Given the restrictions on the fleet, Transat has revised its fiscal 2024 capacity expansion plans to 13%, versus 19% previously. "We have cancelled routes because of lack of aircraft," Guérard told financial analysts on an earnings call. "We want to be cautious and make sure that we don't take too much risk for the upcoming year."
Guérard says demand remains strong – reflected by a record $1,026.9 million in customer deposits for future travel as of January 31 – but warns that “softer yields indicate heightened consumer price sensitivity in the current macro-economic environment, as well as fierce price competition, especially in the Toronto market."
Transat says early trends for the summer season indicate bookings and pricing conditions largely in line with the same period last year. But it says it doesn’t expect “the same uplift in yields that was exhibited throughout the summer season last year.” As a result, the company is pledging to closely watch costs and attempt to mitigate structural cost increases affecting the industry.
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