Hit by the Omicron variant, which has delayed the recovery of tourism, Transat needs to get more money from the federal government while the sudden increase in the price of oil represents another headwind blowing on the carrier air.
The Montreal-based company has entered into discussions with the federal government to obtain “additional” funding while it could continue to operate at a loss by summer, said the president and chief executive officer, Annick Guérard, during a call to discuss first quarter results. She says the government seemed “very attentive”.
Transat has already obtained certain relaxations from the federal government. Certain deadlines under the Emergency Credit for Large Employers (CUGE) have been postponed. The company also secured $43.3 million in additional financing.
As of January 31, the company had used $790 million of the $820 million maximum funding it could obtain from its creditors. It had $343.1 million in cash, still at the end of January.
The Omicron variant came to upset the forecasts of the management, which hoped for a gradual recovery in tourism, explained Patrick Bui, the chief financial officer. He pointed out that cancellations exceeded bookings at the end of December and through much of January.
The company thus unveiled financial results below analysts’ expectations for the first quarter of its 2022 fiscal year (ending January 31). It recorded an operating loss of $73.8 million, compared to a loss of $98 million during the comparable period.
Revenues, for their part, jumped 382.9% to reach $202.4 million, an increase of $160.5 million, compared to 2021. Compared to 2019, i.e. before the pandemic, revenues are lower by 68.7%.
The adjusted loss per share was $2.53, down from $2.89 a year ago. Prior to the earnings release, analysts had expected a loss of $2.38, according to data from the firm Refinitiv.
The horizon clears up a bit
Reservations, however, would have returned in a recovery cycle since February, notes Mme Guerard. So far, geopolitical uncertainty related to the Russian invasion of Ukraine does not appear to have derailed the industry’s gradual recovery, she reports.
“We have not seen any effect on our summer sales for Europe. Sales continue to grow week after week, thanks to the easing of health restrictions. »
Management expects the airline’s capacity to reach 91% of summer 2019 capacity. . The analyst predicted that Transat would post revenues equivalent to 74% of those recorded in 2019, for the second half of the year.
Rising fuel prices in the wake of the invasion in Ukraine are bringing another source of turbulence to an industry already hard hit by the pandemic. “Fortunately, we have the most fuel-efficient aircraft for transatlantic routes, the A321neoLR. This will allow us to mitigate some of the impacts for the coming summer,” said Ms.me Guerard.
Relations with WestJet
The leader also commented on the acquisition offer of Sunwing by WestJet. If it is accepted as is by the regulatory authorities, the transaction would increase the concentration of the market, particularly in Western Canada, according to her. “This is not good news for consumers. »
In November, Transat entered into an agreement with WestJet to share their codes for transatlantic travel. The agreement allows travelers to book flights to Europe involving both airlines on a single ticket, with checked baggage to their destination.
The alliance between Sunwing and WestJet would not jeopardize this agreement, assures the leader of Transat, who says she discussed it last week with the management of the company, which “has always been a competitor”. “They assured us that it was not going to affect our agreement. We will see what happens in the next few months, but we are confident that the agreement will remain in place. »
Earlier this week, Transat announced the signing of another codeshare agreement with Porter Airlines. The first phase of the agreement will link Porter’s bases at Billy Bishop Toronto City Airport and Halifax Airport with Air Transat’s hub in Montreal.
Around noon, Transat shares lost 15 cents, or 3.24%, to $4.48 on the Toronto Stock Exchange.