Transat posted a loss of $54 million in the second quarter of its fiscal year, up from a $29.1 million loss in the same period last year. The disappointing result came despite double-digit revenue growth, with the loss blamed on challenges including aircraft engine issues, employee strike threats and a highly competitive marketplace.
Transat’s revenue increased nearly 12% year on year to $973 million, but expenses rose by 16% to $988 million. Prospects for the summer season are less than favourable, with the airline predicting a two percentage point decline in load factor from 2023, while yields are predicted to drop by 8% year-over-year
“It’s clear that this year is a challenging one for Transat,” said CEO Annick Guérard during the company’s earnings call.
"Transat delivered double-digit revenue growth for a second consecutive quarter on the strength of increased customer traffic. On the profitability side, adjusted EBITDA declined to $38 million in the second quarter due to well-documented industry-wide and company-specific issues," Guérard added.
The CEO anticipates better times ahead.
Transat President and CEO Annick Guerard. (Photo Credit: Transat)
"With the launch of phase one of our commercial joint venture with Porter announced yesterday, we will benefit from additional leverage to optimize our partnership. In the coming weeks, we will complete the reception of seven aircraft, including four A321LRs that represent the cornerstone of Transat's fleet and growth strategy."
Guérard said the company continues to deleverage its balance sheet through debt repayment, with $36 million in Q2 reimbursements raising total loan repayments to approximately $110 million in the last three quarters.
However, the company says its results were dampened by intensified competition, inefficiencies resulting from Pratt & Whitney GTF2 engine issue affecting revenue management, consequences of union strike threats, and the economic slowdown, which put downward pressure on airline unit revenues (yield), resulting in a 7.5% decline. Company-wide capacity was up 13% from last year.
Transat has sold land in Mexico that was planned to be the anchor of a hotel subsidiary. The company is focusing on its airline operations. (Photo Credit: Transat)
For the six-month period ended April 30, 2024, revenues reached $1,758.7 million, up 14.4% from $1,537.6 million in the corresponding period a year ago. For the six-month period, across the entire network, the capacity offered increased by 19% compared with 2023, while the capacity for south destinations, the main program during this period, increased by 20%. Overall, traffic was 16% higher than for the corresponding period of 2023.
Transat has slightly reduced its 2024 capacity expansion plans to reflect market conditions and aircraft availability. Previously announced at 13%, it is now estimated to be 11%.
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