Transat A.T. Inc. - Results for third quarter of 2022

Confirmed return of bookings to pre-pandemic levels
Order of four A321XLRs

For the third quarter:

• Revenues of $508.3 million
• Adjusted operating loss¹ of $57.8 million (operating loss of $93.2 million)
• Adjusted net loss¹ of $120.9 million (net loss of $106.5 million)

Financial position:

• Unrestricted liquity¹ of $511.3 million as at July 31
• The Corporation obtained an additional amount of $100.0 million under LEEFF
• Customer deposits of $585.6 million, representing 96% of pre-pandemic levels and a 19% increase over last quarter, reflecting the recovery in demand

Continuation of the strategic plan:

• The Corporation took delivery of two A321LR
• Signing of an agreement to deliver four A321XLR aircraft (three firm orders and one option)

MONTRÉAL, Sept. 8, 2022 /CNW Telbec/ - Transat A.T. inc., a holiday travel reference worldwide, particularly as an air carrier under the Air Transat brand, announces its results for the third quarter ended July 31, 2022.

"The recovery emerging at the end of the last quarter has been confirmed in recent months. With our prudent planning and our teams' exceptionally high quality execution, we were able to deploy virtually all of our programs, with continuously improving load factors," stated Annick Guérard, President and Chief Executive Officer of Transat.

"We are on track for a winter season that promises to match pre-pandemic levels. The pace of sales is currently very comparable to 2019. Although the quarterly results are still affected by the costs of resuming operations, July was our first profitable month in more than two years, setting the stage for improved results. The strong pricing this quarter also partially absorbed the increase in fuel costs, the adverse effect of which is likely to persist for some time."

"Our current cash position, combined with new financing obtained during the quarter, gives us the required flexibility for the future. We also continued to implement our strategic plan during the quarter, particularly with respect to the fleet, with the receipt of two new A321LRs and the order of four A321XLRs. These new aircraft will bring us all the advantages of the LR, including cost and environmental benefits, with an even longer range", concluded Ms. Guérard.

Compared with 2021 (a quarter with virtually no operations), the Corporation's revenues increased by $495.8 million for the quarter ended July 31, 2022. Compared with 2019, quarterly revenues were down  $190.6 million or 27%. Capacity offered was 82% of that deployed in 2019 across all programs and 68% for Europe, the main program during this period. Overall, the number of travellers was down 24% for the third quarter compared with 2019. The gradual recovery of demand combined with higher fuel prices also contributed to the increase in average selling prices compared with 2019. The increase in average selling prices is approximately 8% for the Europe program and 26% for the sun destinations program.

Operations resulted in an operating loss of $93.2 million, an improvement of $5.2 million compared with the $98.4 million loss in 2021. The improvement was reined in by a 112% surge in fuel prices (or $103.3 million) during the quarter, compared with 2021. Transat reported an adjusted operating loss¹ of $57.8 million, a deterioration of $6.9 million, compared with $50.9 million in 2021.

Net loss attributable to shareholders amounted to $106.5 million (or $2.82 per diluted share) compared with $138.1 million (or $3.66 per diluted share) for the corresponding quarter of last year. The net loss attributable to shareholders in 2022 was reduced by a $14.5 million gain on the revaluation of the liability related to warrants, partially offset by the $6.9 million loss related to the change in the fair value of fuel-related derivatives and other derivatives. The net loss attributable to shareholders in 2021 was increased by the $15.9 million foreign exchange loss, primarily attributable to the exchange effect on lease liabilities related to aircraft and the $9.4 million loss on the revaluation of the liability related to warrants. Excluding non-operating items, Transat reported an adjusted net loss¹ of $120.9 million ($3.20 per diluted share) for the third quarter of 2022, compared with $115.6 million ($3.06 per diluted share) in 2021.

As at July 31, 2022, cash and cash equivalents amounted to $411.3 million, compared with $429.4 million as at the same date in 2021. In total, the available financing amounted to a maximum of $963.3 million, of which $863.2 million was drawn down, for unrestricted liquidity¹ of $511.3 million.

Customer deposits for future travel stood at $585.6 million, representing 96% of pre-pandemic levels (as at July 31, 2019) and up 19% from the last quarter, reflecting the recovery in demand.

The Corporation took delivery of two A321LRs during the quarter and is expecting five more aircraft of this type in 2023 and 2024. In recent days, Transat also finalized its first order since 2018, for four A321XLRs, including three firm orders for delivery in 2025-2026 and an option for 2027. These aircraft have an even longer range than the A321LR and will eventually allow the Corporation to complete its fleet and serve more faraway destinations with an aircraft that has the same advantages as the LR, namely cost per passenger, reduced carbon footprint and exceptional on-board experience.

On August 23, 2022, the Corporation and the Canada Revenue Agency ("CRA") came to an agreement concerning the tax treatment of ABCP-related tax losses. Under this agreement, the Corporation is expected to receive $11.8 million, of which $9.5 million had already been recognized. In addition, the Corporation could receive accrued interest in connection with this settlement agreement. The Corporation could also receive $6.0 million from provincial tax authorities, of which $4.9 million had already been recognized.

Fourth quarter 2022 - The current situation is showing very encouraging signs in terms of bookings as the last-minute booking trend persists. After the low reached during the Omicron wave, load factors have largely improved in recent months. Selling prices of bookings for the summer season have been steadily increasing since the start of spring across all our programs.

Across all our markets, the planned capacity for summer 2022 represents 92% of the 2019 capacity. For the transatlantic program, the Corporation's main market for the summer season, the planned capacity in 2022 is 81% of the 2019 level. In the sun destinations program, the Corporation's planned capacity is slightly higher than in 2019. Lastly, the Corporation tripled its capacity in the transborder market and deployed a slightly higher capacity for its domestic program, compared with 2019.

Fuel prices, if they remain at the current level, are creating strong pressure on the Corporation's operating costs and profitability.

It remains difficult at this time to forecast the evolution of the health and economic situations or their impact on bookings and future financial results with sufficient precision for the Corporation to present a more comprehensive outlook for the fourth quarter of 2022.

Winter 2023 - In the sun destinations program, the Corporation's main program for the period, Transat's capacity is the same as that deployed in 2019 and 75% higher compared with 2022. To date, and overall, the load factors are comparable to 2019 levels while prices are higher.

The Corporation believes it is still too early to draw any conclusions regarding winter season results.

The results were affected by non-operating items, as summarized in the following table: 

Highlights and Non-IFRS financial measures

 

As the Corporation has ceased to recognize deferred tax assets, the presentation of the adjusted loss before tax expense has been suspended, this result being similar to the adjusted net loss, which continues to be presented.

Founded in Montreal 35 years ago, Transat has achieved worldwide recognition as a provider of holiday travel particularly as an airline under the Air Transat brand. Voted World's Best Leisure Airline by passengers at the Skytrax World Airline Awards 4 times since 2017, it flies to international and Canadian destinations, striving to serve its customers with enthusiasm and friendliness at every stage of their trip or stay, and emphasizing safety throughout. Transat has been Travelife-certified since 2018, renewing its fleet with the greenest aircraft in their category as part of a commitment to a healthier environment, knowing that this is essential to its operations and the magnificent destinations it serves (TSX: TRZ). www.transat.com

 

Transat prepares its financial statements in accordance with International Financial Reporting Standards ["IFRS"]. We will occasionally refer to non-IFRS financial measures in the press release. These non-IFRS financial measures do not have any meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. They are intended to provide additional information and should not be considered as a substitute for measures of performance prepared in accordance with IFRS. All dollar figures are in Canadian dollars unless otherwise indicated.

The following are non-IFRS financial measures used by management as indicators to evaluate ongoing and recurring operational performance.

Adjusted operating income (loss): Operating income (loss) before depreciation, amortization and asset impairment expense, restructuring charge and other significant unusual items, and including premiums for fuel-related derivatives and other derivatives matured during the period. The Corporation uses this measure to assess the operational performance of its activities before the aforementioned items to ensure better comparability of financial results.

Adjusted net income (loss): Net income (loss) attributable to shareholders before net income (loss) from discontinued operations, change in fair value of fuel-related derivatives and other derivatives, revaluation of liability related to warrants, gain (loss) on long-term debt modification, gain (loss) on business disposals, gain (loss) on asset disposals, restructuring charge, asset impairment, foreign exchange gain (loss), reduction in the carrying amount of deferred tax assets and other significant unusual items, and including premiums for fuel-related derivatives and other derivatives that matured during the period, net of related taxes. The Corporation uses this measure to assess the financial performance of its activities before the aforementioned items to ensure better comparability of financial results. Adjusted net income (loss) is also used in calculating the variable compensation of employees and senior executives.

Adjusted net income (loss) per share: Adjusted net income (loss) divided by the adjusted weighted average number of outstanding shares used in computing diluted earnings (loss) per share.

Unrestricted liquidity: The sum of cash and cash equivalents and available undrawn funds from credit facilities. The Corporation uses this measure to assess the total potential cash available in the short term.

Third-quarter 2022 conference call: Thursday, September 8, 10:00 a.m. Dial 1 800 926-9795 or 1 212 231-2919. Name of conference: Transat. Webcast: follow this link. The archived call will be available at 416 626-4100 or 1 800 558-5253, access code 22015316, until July 10, 2022.

The fourth quarter results will be announced on December 15, 2022.

This press release contains certain forward-looking statements with respect to the Corporation, including those regarding its results, its financial position, the impacts of the coronavirus ["COVID-19"] pandemic, its outlook for the future and planned measures, including in particular the gradual resumption of certain flights and actions to improve its cash flows. These forward-looking statements are identified by the use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "will," "would,", the negative of these terms and similar terminology, including references to assumptions. All such statements are made pursuant to applicable Canadian securities legislation. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements.

As at July 31, 2022, a material uncertainty exists that may cast significant doubt on the Corporation's ability to continue as a going concern. The MD&A's Section 7. Financial position, liquidity and capital resources and Note 2 to the interim condensed consolidated financial statements contain more detail on this issue.

The global air transportation and tourism industry has faced a collapse in traffic and demand. Travel restrictions introduced by numerous countries, vaccination and testing requirements in Canada and in other countries, as well as concerns related to the pandemic and its economic impacts are creating some demand uncertainty, at least for fiscal 2022. For the 2022 winter season, the Corporation rolled out a reduced winter program that had to be adjusted following the emergence of the Omicron variant and new restrictive measures implemented by Canada and other countries. For the summer 2022 season, the Corporation has also deployed a further reduced program although much more similar to pre-pandemic levels. While the situation considerably improved since the second quarter, the Corporation cannot yet predict with certainty all the impacts of COVID-19 on its operations and results, the pace at which the situation will improve or precisely when conditions will become normal again. Since the beginning of the pandemic, the Corporation implemented a series of operational, commercial and financial measures, including new financing and cost reduction measures, aimed at preserving its cash. The Corporation is monitoring the situation daily to adjust these measures as it evolves. However, until the Corporation is able to resume operations at a sufficient level, the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows from operations and operating results. Although the lifting of certain restrictions has allowed a significant resumption of operations during 2022, the Corporation does not expect to reach the pre-pandemic level before 2023.

The forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, economic conditions, changes in demand due to the seasonal nature of the business, extreme weather conditions, climatic or geological disasters, war, political instability, real or perceived terrorism, outbreaks of epidemics or disease, consumer preferences and consumer habits, consumers' perceptions of the safety of destination services and aviation safety, demographic trends, disruptions to the air traffic control system, the cost of protective, safety and environmental measures, competition, the Corporation's ability to maintain and grow its reputation and brand, the availability of funding in the future, fluctuations in fuel prices and exchange rates and interest rates, the Corporation's dependence on key suppliers, the availability and fluctuation of costs related to our aircraft, information technology and telecommunications, changes in legislation, unfavourable regulatory developments or procedures, pending litigation and third party lawsuits, the ability to reduce operating costs, the Corporation's ability to attract and retain skilled resources, labour relations, collective bargaining and labour disputes, pension issues, maintaining insurance coverage at favourable levels and conditions and at an acceptable cost, and other risks detailed in the Risks and Uncertainties section of the MD&A included in our 2021 Annual Report.

The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect any of the Corporation's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements.

The forward-looking statements in this press release are based on a number of assumptions relating to economic and market conditions as well as the Corporation's operations, financial position and transactions. Examples of such forward-looking statements include, but are not limited to, statements concerning:

• The outlook whereby until the Corporation is able to resume operations at a sufficient level, the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows from operations and operating results.
• The outlook whereby, subject to going concern uncertainty as discussed in Section 7. Financial position, liquidity and capital resources of the MD&A and Note 2 to the interim condensed consolidated financial statements, we believe that the Corporation will be able to meet its obligations with cash on hand, cash flows from operations and drawdowns under existing credit facilities.

In making these statements, the Corporation has assumed, among other things, that travel and border restrictions imposed by government authorities will be relaxed to allow for a resumption of operations of the type and scale expected, that the standards and measures imposed by government and airport authorities to ensure the health and safety of personnel and travellers will be consistent with those announced or currently anticipated, that travellers will continue to travel despite the new health measures and other constraints imposed as a result of the pandemic, that workers will continue to be available to the Corporation, its suppliers and the companies providing passenger services at the airports, that credit facilities and other terms of credit extended by its business partners will continue to be made available as in the past, that management will continue to manage changes in cash flows to fund working capital requirements for the full fiscal year. If these assumptions prove incorrect, actual results and developments may differ materially from those contemplated by the forward-looking statements contained in this press release.

The Corporation considers that the assumptions on which these forward-looking statements are based are reasonable.

These statements reflect current expectations regarding future events and operating performance, speak only as of the date this press release is issued, and represent the Corporation's expectations as of that date. For additional information with respect to these and other factors, see Section 1. Caution regarding forward-looking statements of the MD&A for the quarter ended July 31, 2022 filed with the Canadian securities commissions and available on SEDAR at www.sedar.com. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable securities legislation.

Image bank: transat.com/en-CA/corporate/media 

SOURCE Transat A.T. Inc.