Transat remains on course for a “return to normalcy”

The effect of the Omicron variant was short-lived on demand, believes Transat AT, which continues to see a “return to normal”. But the tour operator wants more financial flexibility, while its annual report still shows “uncertainties casting doubt” on its ability to “continue to operate”.

Julien arsenault
Press

In order to support the revival of its activities, the parent company of Air Transat expects to draw up to 20 million monthly in its coffers for several more months.

At the same time, its debt continued to climb during the fourth quarter ended October 31, reaching $ 1 billion. The tour operator will have to finance what he borrowed as well as the loans obtained from Ottawa last April, which come with rising interest rates.

“We’re going to turn all the stones around,” CFO Patrick Bui said Thursday during a conference call with analysts to discuss fourth quarter results. “We want to be profitable on the one hand, and on the other hand, we also want to reduce risk. ”

The tour operator could, for example, turn to the stock markets or enter into new agreements with lenders.

Transat AT currently has 430 million in its coffers and also has access to 170 million. In the short term, the risks surrounding liquidity are limited, believes Cameron Doerksen of National Bank Financial.

But since the debt-to-equity ratio is expected to reach 5.1 times adjusted operating income in 2023, the analyst believes there is a significant risk of dilution for existing shareholders.

“To display what we believe to be a more suitable level [environ trois fois le bénéfice d’exploitation ajusté], we estimate that Transat should issue 400 million in shares, ”writes Mr. Doerksen, in a note.

During a telephone interview, the spokesperson for the tour operator, Christophe Hennebelle, stressed that the company was “confident” about the possibility of obtaining the necessary financing, since its activities have restarted and that it presented a clear plan to investors.

Planes in the sky

Transat AT, which relaunched its activities on July 30 after a hiatus of a few months due to the health crisis, expects to regain 60% of its pre-pandemic capacity during the winter.

It should reach 90% of the 2019 level during the summer season, according to the president and CEO of the tour operator, Annick Guérard. The company currently has some 200 employees – down from just 750 at the height of the crisis – and expects to recall 1,500 people in 2022.

The arrival of the Omicron variant has “unsurprisingly” had an effect on the rate of reservations, admitted Mr.^me Guérard, before adding that the fears of the customers already seemed to be dissipating.

“We were looking at the data this morning, and bookings were already showing an uptick over the past two days,” she said. These are mainly reservations in December and January [qui sont concernées]. ”

In the short term, while some travelers have decided to postpone their departure date, this was not the case for bookings scheduled for later in 2022, such as in March or April.

Without criticizing the way the Trudeau government reacted to the arrival of the new variant, Mr.^me Guérard said the federal guidelines were “difficult to understand” for consumers.

All travelers arriving in Canada by air from all countries except the United States must be screened before self-isolation while awaiting the result.

Always in the red

In the fourth quarter, Transat AT posted a net loss of 121 million, or $ 3.21 per share, compared to 238 million, or $ 6.31 per share, a year ago. The cash consumption was 15 million per month.

Its revenues were around 63 million, while analysts expected 100 million, according to the firm Refinitiv.

“Due to the unprecedented impacts of the pandemic, it is difficult to estimate short-term income and profits,” said analyst Tim James of TD Bank.

Excluding one-time items, the adjusted loss was 118 million, or $ 3.14 per share, compared to 156 million, or $ 4.14 per share, in the fourth quarter last year.

On the Toronto Stock Exchange, the title of Transat AT listed Thursday afternoon at $ 4.48, down 4 cents.