Transat says soaring aviation fuel prices and the ongoing suspension of flights to Cuba took a significant toll on its second-quarter financial results, contributing to what the company estimates was a $95 million hit to adjusted EBITDA.
The Montreal-based travel company reported revenue of $1.03 billion for the quarter ended April 30, down slightly from $1.03 billion a year earlier. Traffic increased 3.9% year-over-year and overall capacity grew 4.8%, but those gains were largely offset by lost Cuba revenue, higher operating costs and continued issues involving Pratt & Whitney GTF engines.
Adjusted EBITDA fell to a loss of $20.7 million, compared with a positive $98.4 million during the same period in 2025.
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"Following a solid first quarter that continued the positive momentum of fiscal 2025 and reflected the tangible benefits of our strategic initiatives, second-quarter results were disappointing as factors largely beyond our control severely impacted profitability. The suspension of flights to Cuba and the material increase in aviation fuel prices, an industry-wide crisis, resulted in an estimated negative impact of $95 million on adjusted EBITDA, of which approximately $70 million is attributable to higher fuel costs in March and April," said Annick Guérard, President and Chief Executive Officer of Transat.
Guérard added that the impact of higher fuel prices continued into May, prompting Transat to introduce fuel surcharges on new bookings and make selective adjustments to capacity across its network.
While the surcharges were initially absorbed by consumers, she noted that recent market volatility has made it harder for airlines to pass those costs along.
The company also welcomed Ottawa's recently announced Liquidity for Airline Sector Resilience (LASR) program, which offers loans to airlines facing elevated fuel costs.
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"We welcome the introduction by the Government of Canada of the Liquidity for Airline Sector Resilience (LASR) facility, which acknowledges the significant fuel cost pressures currently facing airlines. This initiative reflects the essential role aviation plays in the Canadian economy. Transat intends to apply to the LASR facility, which would provide meaningful support as we continue to navigate the current environment with discipline while maintaining our focus on customers and stakeholders," said Guérard.
Revenue was affected by an $81 million shortfall tied to the suspension of Cuba flights, as well as a reduction in compensation received from Pratt & Whitney related to ongoing engine issues. Transat said those engine problems continue to create operational inefficiencies and complicate revenue management.
Chief Financial Officer Jean-François Pruneau said profitability was further pressured by higher labour costs following a new pilot agreement.
"Second-quarter adjusted EBITDA declined significantly year-over-year, driven primarily by the surge in aviation fuel costs and the prolonged suspension of flights to Cuba. Profitability was further affected by lower financial compensation from Pratt & Whitney related to the ongoing engine issue, as well as higher salaries and benefits resulting from the new collective agreement with our pilots," said Pruneau.
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For the first six months of fiscal 2026, revenue reached $1.9 billion, up 2% from the same period last year. However, adjusted EBITDA dropped to $12.9 million from $118.4 million in 2025 as fuel costs, labour expenses and operational disruptions weighed on results.
Despite the challenging quarter, Transat's liquidity position improved. Cash and cash equivalents stood at $390.1 million at the end of April, compared with $164.9 million at the end of October. Customer deposits for future travel rose to $955.1 million, while the company reduced its long-term debt and government-backed financing obligations.
Looking ahead, Transat said bookings for the summer travel season remain encouraging. Load factors are currently 0.6 percentage points ahead of where they were at the same point last year, while yields are also up 0.6%. The company continues to forecast a 4% to 5% increase in capacity for fiscal 2026.
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