Canadian tour operator Transat A.T. missed expectations with higher losses in the fourth quarter and full year, pulled down by restructuring costs and higher fuel costs.
The Montreal-based company lost $4.5-million or 12 cents per share for the period ended Oct. 31. That compared to a profit of $52.4-million, or $1.37 per share the previous year.
The results were affected by a $16.5-million restructuring charge and a $4.9-million fuel hedging loss, partially offset by a $1.2-million gain in asset-backed commercial paper.
Adjusted for these one-time costs, Transat earned $10.1-million or 27 cents per share, compared to $47.7-million or $1.25 per share last year.
Analysts had expected 35 cents in adjusted EPS.
Revenues increased to $809.9-million from $778.6-million.
For the full year, Transat lost $12.2-million or 32 cents per share, compared to a net profit of $65.6-million or $1.73 per share in 2010. Revenues increased to 3.7 billion from $3.5-billion in 2010.
Transat has been developing a new cost-cutting plan as it focuses on returning to profitability despite its expectations for a challenging 2012.
“We have started implementing an action plan aimed at returning to profitability and resume growth,” said president and CEO Jean-Marc Eustache in a release.
It is reducing overhead costs in Canada and France, abolished 143 positions, “optimized” its IT systems and outsourced aircraft to third parties.
The efforts are expected to add $20-million to $25-million in margins next year, $35-million to $40-million in 2013 and $50-million in 2014.
Laurentian Bank Securities analyst Ben Vendittelli said Transat's business model remains viable despite the “very disappointing 2011 results.”
“With restructuring initiatives that should lead to $50-million improvement over the next three years combined with the high operating leverage in the business, we believe Transat can return to higher profitability,” he wrote in a report.
Transat's revenues were helped by a 15.3 per cent increase in the number of transatlantic travellers in the quarter, partially offset by a 14.2 per cent decrease in European revenues.
Excess industry capacity and challenging economic conditions in Europe lowered prices and reduced margins in North America and Europe.
The trend to last-minute bookings and volatility of margins makes it difficult to forecast upcoming quarters.
Its capacity in the key winter period is 2 per cent lower than last year, including down 8 per cent in the first quarter.
Medium-haul bookings in Europe are down 13 per cent while long-haul bookings are up 8 per cent.
Transatlantic capacity is up 20 per cent.
Transat A.T. is an integrated international tour operator that offers package holidays to more than 60 countries but operates mainly in Europe, the Caribbean, Mexico and the Mediterranean Basin. It also operates Air Transat.
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