Clarification following a report by The Canadian Press

2018-09-14

An article entitled “Transat vows to raise prices after fuel costs hit earnings,” published by The Canadian Press on September 13, 2018, mistakenly gave the impression that Transat had voluntarily decided not to increase prices during the summer of 2018 in response to a rise in fuel costs, while its competitors did raise prices for that reason, and said that “Transat executives have pledged to raise prices next summer.”

The article reported that Chief Operating Officer Annick Guérard had said the company “opted not to join” competitors in raising prices. The transcript of the Third Quarter 2018 conference call with business reporters shows that she in fact said “we haven’t been able to see any increase on pricing for the summer.”

Transat’s anticipation that pricing will increase next summer should not have been construed as a “vow” or “pledge”: the move to raise prices is not only voluntary, but also an adaptation to competitive conditions.

The CP article went on to imply that Transat has kept prices low in a market in which “climbed 28 per cent overall in Canada in the first half of 2018.” This is misleading: Transat did not see any significant increase in prices on its routes, and has said as much in its investor-relations communications. If prices have indeed increased by 28 percent, this no doubt reflects price changes in markets in which Transat is not active, and/or in fare classes specific to competitors (e.g., First Class, Business Class) and not Transat.

Moreover, the 28 percent figure was drawn from a Statistics Canada table of the non-seasonally-adjusted monthly Consumer Price Index (CPI). That table is accompanied by a disclaimer, which states: “Users are reminded that the methodology for the air transportation index was updated in March 2018 as part of the regular review of the CPI methodology. Interpretation of the 12-month price change indicator should be made with caution, particularly in the year following the implementation of the new methodology” (the emphasis is Transat’s).