Implementation of a Comprehensive Optimization Plan to Accelerate Corporate Strategy Execution
Third-quarter highlights:
- Revenues of $736.2 million, down 1.4% from $746.3 million last year
- Adjusted EBITDA1 of $41.3 million, compared to $114.8 million last year
- Net loss of $39.9 million ($1.03 per share), versus net income of $57.3 million ($1.49 per share) last year
- Negative free cash flow1 of $168.7 million, compared to $52.1 million last year
- Customer deposits for future travel of $825.8 million, up 1% from July 31, 2023
- Named the World’s Best Leisure Airline for the sixth time at the 2024 Skytrax World Airline Awards
MONTREAL, Sept. 12, 2024 /CNW/ – Transat A.T. Inc., a leisure travel reference worldwide, operating as an air carrier under the Air Transat brand, announced today its results for the third quarter ended July 31, 2024.
“Transat’s third-quarter results reflect evolving market conditions and industry-wide pressure as recently indicated by other carriers. Demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty. Capacity increases throughout the industry also added to competitive pressure and negatively impacted yields,” said Annick Guérard, President and Chief Executive Officer of Transat.
“We have launched a comprehensive plan, referred to as our Elevation Program, which is designed to accelerate our corporate strategy execution and drive long-term profitable growth. The program, initiated this summer, aims for a complete review of operations and business practices. Its objective is to accelerate the implementation of enhanced tools and processes for our teams, in order to optimize overall execution and efficiency. The program will be spearheaded by the newly created Elevation Management Office, which will strengthen governance and accountability for the initiatives undertaken. Our target is to achieve a $100 million improvement in annual adjusted EBITDA1 over the next 18 months,” added Ms. Guérard.
“Profitability remains affected by costs related to capacity deployment and by the Pratt & Whitney GTF2 engine issue. We have agreed to a financial compensation from Pratt & Whitney relating to operational disruptions during the 2023-2024 period. Such financial compensation, which is mostly in the form of credits, will be applied to the purchase of additional spare engines, which we intend to monetize through a sale and leaseback transaction. Looking ahead, we are confident that the initiatives from our Elevation Program will gradually place us on the path to sustaining an improved financial performance. Nevertheless, it remains our top priority to complete a refinancing plan and strengthen our balance sheet. To that end, we are continuing our discussions with stakeholders and are reviewing a number of alternatives,” added Jean-François Pruneau, Chief Financial Officer of Transat. 2Geared turbofan (“GTF”).
Third-quarter results
For the three-month period ended July 31, 2024, revenues reached $736.2 million, down 1.4% from $746.3 million in the corresponding period a year ago. The decrease in revenues is attributable to lower airline unit revenues (yield), which were down 9.7% compared with 2023, partially offset by a 2.8% increase in traffic expressed in revenue-passenger-miles (RPM). The intensified competition, industry wide overcapacity, inefficiencies resulting from the Pratt & Whitney GTF2 engine issue affecting revenue management and the economic uncertainty put downward pressure on airline unit revenues. Company-wide capacity was up 5.6% from last year.
Adjusted EBITDA stood at $41.3 million, compared with $114.8 million a year ago. In addition to lower yields, the variation is mainly due to higher operating expenses associated with capacity expansion, expenses caused by the Pratt & Whitney GTF2 engine issue, and by higher fuel expenses reflecting a 6% increase in fuel prices compared with the corresponding period in 2023.
Nine-month results
For the nine-month period ended July 31, 2024, revenues reached $2,494.9 million, up 9.2% from $2,283.9 million in the corresponding period a year ago. For the nine-month period, across the entire network, offered capacity increased by 12.9% compared with 2023. Overall, traffic was 10.0% higher than for the corresponding period in 2023. Revenue growth was impacted by the same factors provided for the three-month period, along with strike threats during the winter season.
For the nine-month period, adjusted EBITDAs tood at $70.3 million, compared with $174.3 million a year ago. The decline is mainly attributable to the same factors provided for the three-month period.
Cash flow and financial position
Cash flow used in operating activities amounted to $91.1 million during the third quarter of 2024, compared with $7.5 million for the same period last year, due to lower liquidity generated by net change in non-cash working capital balances as well as other assets and liabilities and to a decrease in operating income this year. These factors were partially offset by an increase in the net change in the provision for return conditions. After accounting for investing activities and repayment of lease liabilities, negative free cash flow1 reached $168.7 million during the quarter, versus $52.1 million a year earlier.
As at July 31, 2024, cash and cash equivalents amounted to $361.9 million, compared to $570.6 million at the same date in 2023 and $435.6 million as at October 31, 2023. Cash and cash equivalents in trust or otherwise reserved mainly resulting from travel package bookings increased year-over-year reaching $274.7 million as at July 31, 2024, compared with $263.6 million at the same date in 2023.
During the nine-month period ended July 31, 2024, the Corporation early repaid its subordinated credit facility for its operations that was due to mature on April 29, 2025. The repayment totalled $46.0 million. The Corporation also reduced its LEEFF secured facility by repaying an amount of $11.0 million. Following these repayments, long-term debt and deferred government grant, net of cash, amounted to $430.0 million as at July 31, 2024, up from $380.1 million as at October 31, 2023.
Key indicators
To date, load factors for the fourth quarter are slightly higher compared to the same date in fiscal 2023, while airline unit revenues, expressed as yield, are 9.7% lower than they were at this time last year.
For fiscal 2024, the capacity increase now stands at 9.9%, a decrease of 1.1% since the second quarter.
About Transat
Founded in Montreal 36 years ago, Transat has achieved worldwide recognition as a provider of leisure travel particularly as an airline under the Air Transat brand. Voted World’s Best Leisure Airline by passengers at the 2024 Skytrax World Airline Awards, it flies to international destinations. By renewing its fleet with the most energy-efficient aircraft in their category, it is committed to a healthier environment, knowing that this is essential to its operations and the destinations it serves. (TSX: TRZ) www.transat.com