Prolonged fuel cost pressures continue to affect profitability

Third-quarter highlights:

• Revenues of $792.7 million, up 3% from $766.3 million last year
• Negative adjusted EBITDA¹ of $0.9 million, compared to adjusted EBITDA¹ of $81.2 million last year
• Net loss of $106.6 million ($2.60 per share), versus net income of $399.8 million ($9.97 per share) last year, which included a one-time $345.1 million gain on long-term debt extinguishment
• Negative free cash flow¹ of $301.8 million, compared to negative $122.1 million last year
• Cash and cash equivalents of $243.0 million as at July 31, 2026
• $150.0 million Liquidity for Airline Sector Resilience Facility (LASR) now fully drawn, with $125.0 million drawn during the quarter and the $25.0 million balance in September
• Additional $250.0 million in financing secured from the Canada Enterprise Emergency Fund (CEEFC) under the existing LEEFF agreement subsequent to quarter-end

MONTREAL, Sept. 10, 2026 /CNW/ — Transat A.T. Inc. (TSX: TRZ) reported today its third quarter 2026 financial results ended on July 31.

“Our third-quarter results were significantly impacted by sustained higher fuel prices, which remained elevated well beyond expectations and were the primary driver of lower profitability. While revenues grew with added capacity, competitive market conditions limited our ability to pass these higher fuel costs on to customers, resulting in softer load factors and yields. We appreciate the support received from CEEFC, which provides additional liquidity and financial flexibility as we navigate this challenging environment,” said Annick Guérard, President and Chief Executive Officer of Transat.

“We remain focused on restoring Transat’s profitability. We continue to take concrete actions to reduce costs and improve productivity, while maintaining focus on two major strategic initiatives: the launch of our loyalty program by the end of 2026 and the modernization of our cabin interiors, which will significantly expand our Premium offering beginning in the second half of 2027,” added Annick Guérard.

“The increase in fuel prices was the primary driver of our results in the quarter. On a gross basis, fuel costs increased by $105 million year over year, reflecting a 56% increase in fuel prices, bringing the estimated cumulative impact since the beginning of the fuel crisis to approximately $175 million. We drew $125 million under the LASR facility upon closing and an economic benefit of $25 million related to the loan was accounted for as a reduction of the gross fuel cost increase. Subsequent to quarter-end, we drew the remaining balance to bring the facility to its full $150 million and secured an additional $250 million from CEEFC under our existing LEEFF agreement, further supporting our liquidity,” said Jean–François Pruneau, Chief Financial Officer of Transat.

Third-quarter results

For the quarter ended July 31, 2026, revenues reached $792.7 million, up 3% from $766.3 million in the corresponding period last year, despite a $35.0 million decline in revenue due to the constrained suspension of flights to Cuba. The increase in revenues was attributable to a 6% increase in traffic, expressed in revenue-passenger-miles, compared with the corresponding quarter of 2025. For the quarter, across the entire network, capacity increased by 6% compared with 2025, while the capacity for transatlantic routes, the main program during this period, increased by 8%. Airline unit revenues (yield) decreased by 1%. Persistent issues with Pratt & Whitney’s GTF² engines continued to weigh on revenue management, along with inefficiencies from the partial redeployment of capacity initially planned for Cuba. Revenue growth was also held back by competition that remains intense and by the broader economic environment. Across all markets, the Corporation reported a load factor of 84.7%, compared with 85.0% in 2025.

Adjusted EBITDA¹ amounted to negative $0.9 million, compared with positive $81.2 million in 2025. This variation resulted primarily from higher fuel prices, the increase in salaries resulting from the new collective bargaining agreement with pilots, and the revenue loss from Cuba, compared with fiscal 2025.

Nine-month results

For the nine-month period ended July 31, 2026, revenues reached $2,691.0 million, up 2% from $2,626.9 million, compared with 2025, despite a $116.0 million decline in revenue due to the suspension of flights to Cuba since February 9, 2026. The variation is attributable to a 4% increase in traffic. Network-wide capacity increased by 4% compared with the same period in 2025. However, the increase in revenue was reined in by persistent issues with the Pratt & Whitney GTF¹ engines, which continued to result in less effective revenue management and increased competition and economic conditions. Airline unit revenues (yield) decreased by 0.4%.

For the nine-month period, adjusted EBITDA¹ totaled $11.9 million, compared with $199.6 million for fiscal 2025. The decrease was mainly attributable to a marked increase in fuel prices, higher salaries resulting from the new collective bargaining agreement with pilots and a $9.6 million decrease in financial compensation from the original equipment manufacturer of the GTF² engines, compared with fiscal 2025. The disruptions caused by Hurricane Melissa during the first quarter of 2026, combined with those resulting from the repositioning of capacity following the suspension of flights to Cuba, also contributed to the operating loss. Across all markets, the Corporation reported a load factor of 83.6%, which was comparable to the 2025 level.

Cash flow and financial position

Cash flows related to operating activities generated negative $220.5 million during the third quarter of 2026, compared with negative $104.9 million for the same period last year, mainly due to lower profitability this year versus last. After accounting for investing activities and repayment of lease liabilities, free cash flow¹ was negative $301.8 million during the quarter, compared with negative $122.1 million for the corresponding period last year.

As at July 31, 2026, cash and cash equivalents stood at $243.0 million, compared to $164.9 million as at October 31, 2025. Cash and cash equivalents in trust or otherwise reserved mainly resulting from travel package bookings totaled $207.7 million as at July 31, 2026, compared with $430.0 million as at October 31, 2025, reflecting the seasonal nature of operations.

Customer deposits for future travel totaled $847.4 million as at July 31, 2026, compared to $823.3 million as at October 31, 2025 and $821.5 million as at July 31, 2025.

Long-term debt and deferred government grant totaled $447.7 million as at July 31, 2026, compared to $400.0 million as at October 31, 2025. During the nine-month period, the Corporation drew $125.0 million under the new Liquidity for Airline Sector Resilience facility (LASR) and repaid $50.0 million under the revolving term credit facility agreement.

Long–term debt and deferred government grant, net of cash and cash equivalents, stood at a net debt position of $204.6 million as at July 31, 2026, compared to $235.1 million as at October 31, 2025.

Government financial support

Subsequent to quarter-end, the Corporation drew the remaining $25.0 million under the Liquidity for Airline Sector Resilience facility, bringing total drawings to the full amount of $150.0 million. On September 9, 2026, the new multi-draw $250.0 million government loan was made available under the Large Employer Emergency Financing Facility (LEEFF). Pursuant to this agreement, the Corporation committed to complying with certain conditions, including the implementation of various measures aimed at continuing the optimization of operations and reduce costs beyond the Elevation Program. This financing will mature in 2035 and will bear interest at a rate of 1.22% for the first three years, and 3.00% thereafter.

Given that CEEFC currently holds 3,691,591 convertible preferred shares as well as share purchase warrants exercisable for up to 9,436,772 Class B voting shares, representing approximately 24.2% of the Corporation’s outstanding voting shares after giving effect to such exercise or conversion, provided that at no time will the exercise of warrants or conversion of preferred shares result in CEEFC beneficially owning or controlling in excess of 19.9% of the Corporation’s voting shares, CEEFC may be considered a related party for the purposes of Regulation 61-101 respecting Protection of Minority Security Holders in Special Transactions (“Regulation 61-101“). The additional $250.0 million in financing secured from CEEFC under the existing LEEFF agreement can therefore constitute a related party transaction, as that term is defined in section 1.1 of Regulation 61-101. Pursuant to section 5.4(1) of Regulation 61-101, Transat is not required to obtain a formal valuation for the additional financing. Furthermore, pursuant to section 5.7(1)(f) of Regulation 61-101, Transat is exempted from seeking minority approval as the additional financing is on reasonable commercial terms that are not less advantageous to Transat than if the additional financing was obtained from a person dealing at arm’s length with Transat, and the additional financing is not convertible or repayable (as to principal or interest) in equity or voting securities of Transat (and the additional financing does not impact the number of securities of the Corporation beneficially owned, or controlled, by CEEFC and its affiliates). The additional financing has been unanimously approved by the Corporation’s board of directors and all of Transat’s directors are at arm’s length from CEEFC.

Key indicators

To date, load factors for the fourth quarter are 0.6 percentage points higher compared to the same date in fiscal 2025, while airline unit revenues, expressed as yield, remain broadly in line with last year.

For the fourth quarter of 2026, the Corporation expects a 2% increase in capacity, measured in available seat-miles, compared to 2025.

About Transat

Founded in Montreal in 1987, Transat has achieved worldwide recognition as a provider of leisure travel particularly as an airline under the Air Transat brand. Voted 2025 World’s Best Leisure Airline by passengers at the Skytrax World Airline Awards, it flies to international destinations. Air Transat’s fleet is primarily composed of some of the most energy-efficient aircraft in their category. Based in Montreal, Transat has over 5,000 employees with a common purpose to bring people closer together. (TSX: TRZ) www.transat.com