Transat narrows loss on strong travel demand, higher prices

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Stronger demand for travel and higher ticket prices helped Air Transat’s parent company narrow its loss in the second quarter.

Transat AT Inc. TRZ-T lost $29-million, or 76 cents a share, in the three months ending on April 30, compared with a loss of $98-million ($2.60 a share) in the same period of 2022, the Montreal-based airline and tour operator said.

Revenue more than doubled to $870-million, and the amount of cash or its equivalent rose to $624-million from $511-million, compared with a year ago, Transat said.

Customer deposits for future travel reached $867-million, an increase of 38 per cent from prepandemic levels on April 30, 2019. Transat said this reflects “the rebound in demand and higher average selling prices.”

Compared with the same period in 2019, ticket prices rose by 15 per cent in the beginning of the quarter and by 24 per cent at the end. For the summer, Transat said it is offering 89 per cent of 2019′s seat capacity, and more than 60 per cent of this is sold.

“The combination of strong demand and upward pricing will allow the corporation to cope with a cost environment that remains generally higher and volatile,” said Transat, which raised its financial targets for the year.

Annick Guérard, Transat’s chief executive officer, said the rebound that began early in the year is continuing. “We really don’t see signs of a slowdown for the summer or the winter,” she said.

“The Canadian airline sector continues to benefit from pent-up demand,” Ms. Guérard said on a conference call with analysts on Thursday. “Demand is strong and prices continue to trend upward. The summer is looking bright.”

Much of the demand is owing to Baby Boomers travelling for the first time since the pandemic, she said.

Patrick Bui, chief financial officer, said Transat is carefully managing expenses. Transat did not lease its customary 20 seasonal planes for the winter, and flew 93 per cent of its usual capacity with just 34 aircraft. “We have increased utilization of our aircraft,” Mr. Bui said.

Three Airbus A321LRs will be delivered in the summer, and another four in the winter.

Transat has borrowed as much as $843-million from a taxpayer-backed emergency finance program called the Large Employer Emergency Financing Facility, intended to keep companies from failing in the pandemic. COVID-19 spurred governments to close borders and bar visitors, sending the global airline industry into financial straits.

Ms. Guérard said the airline has been focused on crew recruitment, especially in Ontario. This has allowed it to avoid the shortage of pilots, mechanics and flight attendants that has beset much of the industry.

“The labour market is tight. But we have been able to attract and retain all the people we need,” Ms. Guérard said.

The International Air Transport Association said global airline traffic in April was at 90.5 per cent of prepandemic levels, and planes are 81-per-cent full, on average.

“April continued the strong traffic trend we saw in the 2023 first quarter. The easing of inflation and rising consumer confidence in most OECD countries combined with declining jet fuel prices, suggests sustained strong air travel demand and moderating cost pressures,” said Willie Walsh, IATA’s director-general.

Transat’s share price has risen by 50 per cent on the Toronto Stock exchange this year, to $4.40.

Transat’s optimism for the summer is mirrored by its rivals and the country’s airports, all of which say they are sufficiently staffed to handle the expected surge of passengers. The industry is eager to make people forget the problems of the summer of 2022, marred by delays, cancelled flights and lost luggage owing to a poorly staffed aviation sector.

However, DBRS Morningstar, a credit agency, says the industry is better prepared but problems are likely. This is because of persistent staff shortages, delays in new aircraft deliveries, and – in the United States – labour unrest.

“These issues raise the potential for delays and cancellations, which would preclude the sector from achieving full operational capacity,” said Rohit Kumar, a DBRS analyst, in a note to clients. “While relatively better positioned compared with last summer, we expect delays and cancellations to remain higher than normal and to be more volatile in the short term, but then gradually improve as the replenished workforce becomes more efficient and demand growth becomes more predictable.”