Sustained Demand in a More Challenging
Environment
Second-quarter highlights:
- Revenues of $973.2 million, up
11.8% from $870.1 million last
year
- Adjusted EBITDA1 of $37.6
million, compared to $56.1
million last year
- Net loss of $54.4 million
($1.40 per share), versus
$29.2 million ($0.76 per share) last year
- Positive free cash flow1 of $109.8 million, compared to $154.2 million last year
- Early repayment of $36.3 million
subordinated debt which was due on April 29,
2025
- Customer deposits for future travel of $896.9 million, up 3% from April 30, 2023
MONTREAL, June 6, 2024
/CNW/ - Transat A.T. Inc., a leisure travel reference worldwide,
operating as an air carrier under the Air Transat brand, announced
today its results for the second quarter ended April 30, 2024.
"Transat delivered double-digit revenue growth for a second
consecutive quarter on the strength of increased customer traffic.
On the profitability side, adjusted EBITDA declined to $38 million in the second quarter due to
well-documented industry-wide and company-specific issues," said
Annick Guérard, President and Chief Executive Officer of
Transat.
"We are fully prepared from an operational standpoint for the
summer season. As such, we recently completed the process of
bringing in-house passenger and ramp services at Montreal-Trudeau
International Airport to enhance the customer journey.
Additionally, with the launch of phase one of our commercial joint
venture with Porter announced yesterday, we will benefit from
additional leverage to optimize our partnership. Finally, in the
coming weeks, we will complete the reception of seven aircraft,
including four A321LRs that represent the cornerstone of Transat's
fleet and growth strategy," added Ms. Guérard.
"We diligently continued to deleverage our balance sheet in the
second quarter, reimbursing subordinated debt of $36 million and raising total loan repayments to
approximately $110 million in the
last three quarters. We also extended the maturity of the secured
debt from April 2025 to February 2026 to provide Transat with added
flexibility to secure a refinancing agreement," added Jean-François
Pruneau, Chief Financial Officer of Transat.
________________________
|
2Geared
turbofan ("GTF").1
|
Second-quarter results
For the three-month period ended April
30, 2024, revenues reached $973.2 million, up 11.8% from $870.1 million in the corresponding period a
year ago. The increase reflects sustained demand for leisure travel
driven by a 12% increase in traffic expressed in
revenue-passenger-miles (RPM). However, this increase was reined in
by intensified competition, inefficiencies resulting from Pratt
& Whitney GTF2 engine issue affecting revenue
management, consequences of union strike threats, and the economic
slowdown, which put downward pressure on airline unit revenues
(yield), resulting in a 7.5% decline. Company-wide capacity was up
13% from last year.
Adjusted EBITDA1 stood at $37.6 million, compared with $56.1 million a year ago. In addition to
lower yields, the variation is mainly due to higher operating
expenses associated with capacity expansion and expenses caused by
the Pratt & Whitney GTF2 engine issue, including
additional temporary aircraft leasing during the quarter to replace
grounded aircraft. These factors were partially offset by lower
fuel expenses reflecting a price decline of 11% compared to last
year.
Six-month results
For the six-month period ended April 30,
2024, revenues reached $1,758.7
million, up 14.4% from $1,537.6
million in the corresponding period a year ago. For the
six-month period, across the entire network, the capacity offered
increased by 19% compared with 2023, while the capacity for south
destinations, the main program during this period, increased by
20%. Overall, traffic was 16% higher than for the corresponding
period of 2023.
For the six-month period, adjusted EBITDA1 stood at
$29.0 million, compared with
$59.5 million a year ago. The decline
is mainly explained by the same factors provided for the
three-month period.
Cash flow and financial position
Cash flow from operating activities amounted to $183.2 million during the second quarter of
2024, compared with $190.6 million for the same period last
year, due to a decrease in operating income this year and to a
decrease in the net change in the provision for return conditions,
partially offset by higher liquidity generated by net change in
non-cash working capital balances as well as other assets and
liabilities. After accounting for investing activities and
repayment of lease liabilities, free cash flow1 reached
$109.8 million during the quarter,
versus $154.2 million a year
earlier.
As at April 30, 2024, cash and
cash equivalents amounted to $528.9
million, compared to $623.6
million at the same date in 2023 and $435.6 million as at October 31, 2023. Cash and cash equivalents in
trust or otherwise reserved mainly resulting from travel package
bookings remained relatively stable year-over-year reaching
$263.6 million as at April 30, 2024, compared with $262.2 million at the same date in 2023.
Reflecting sound demand, customer deposits for future travel
stood at $896.9 million as at
April 30, 2024, up 3% from
April 30, 2023.
During the quarter, the Corporation renegotiated its LEEFF
secured credit facility with a principal amount of $41.4 million, as well as its revolving credit
facility of $50.0 million, extending
their maturity from April 2025 to
February 2026. During the six-month
period ended April 30, 2024, the
Corporation early repaid its subordinated credit facility for its
operations that was due to mature on April
29, 2025. The repayment totalled $46.0 million. Following this repayment,
long-term debt and deferred government grant, net of cash, amounted
to $252.1 million as at April 30, 2024, down from $380.1 million as at October 31, 2023.
Key indicators
To date, load factors for the summer period, which consists of
the third and fourth quarters, are 2.1 percentage points lower
compared to the same date in fiscal 2023, while airline unit
revenues, expressed as yield, are 8.0% lower than they were at this
time last year.
Reflecting market conditions and aircraft availability, the
Corporation made a slight adjustment to its fiscal 2024 capacity
expansion plans, which now stands at 11%, versus 13%
previously.
Conference call
Second-quarter 2024 conference call: Thursday, June 6, 10:00 a.m. To join the
conference call without operator assistance, you may register and
enter your phone number here to receive an instant automated call
back.
You can also dial direct to be entered into the call by an
operator:
Montreal: 514-225-7344
North America (toll-free):
1-888-390-0620
Name of conference: Transat
The conference will also be accessible live via webcast: click here
to register.
An audio replay will be available until June 13, 2024, by dialing 1 888 390-0541
(toll-free in North America),
access code 110355 followed by the pound key (#). The webcast will
remain available for three months following the call.
Third-quarter 2024 results will be announced on September 12, 2024.
(1) Non-IFRS financial measures
Transat prepares its financial statements in accordance with
International Financial Reporting Standards ["IFRS"]. We will
occasionally refer to non-IFRS financial measures in the news
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) or adjusted
EBITDA: Operating income (loss) before depreciation,
amortization and asset impairment expense, reversal of impairment
of the investment in a joint venture, restructuring and transaction
costs and other significant unusual items, and including premiums
related to derivatives that 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 pre-tax income (loss) or adjusted EBT: Income
(loss) before income tax expense before change in fair value of
derivatives, revaluation of liability related to warrants, gain
(loss) on long-term debt modification, gain (loss) on business
disposals, gain on disposal of investment, gain (loss) on
asset disposals, restructuring and transaction costs, write-off of
assets, reversal of impairment of the investment in a joint
venture, foreign exchange gain (loss) and other significant unusual
items, and including premiums related to derivatives that matured
during the period. 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): Net income (loss)
before change in fair value of derivatives, revaluation of
liability related to warrants, gain (loss) on long-term debt
modification, gain (loss) on business disposals, gain on
disposal of investment, gain (loss) on asset disposals,
restructuring and transaction costs, write-off of assets, reversal
of impairment of the investment in a joint venture, foreign
exchange gain (loss), reduction in the carrying amount of
deferred tax assets and other significant unusual items, and
including premiums related to 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 earnings (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.
Free cash flow: Cash flows related to operating
activities less cash flows related to investing activities and
repayment of lease liabilities. The Corporation uses this measure
to assess the cash that's available to be distributed in a
discretionary way such as repayment of long-term debt or deferred
government grant or distribution of dividend to shareholders.
Total debt: Long-term debt plus lease liabilities,
deferred government grant and liability related to warrants, net of
deferred financing costs related to the unsecured debt - LEEFF.
Management uses total debt to assess the Corporation's debt level,
future cash needs and financial leverage ratio. Management believes
this measure is useful in assessing the Corporation's capacity to
meet its current and future financial obligations.
Total net debt:Total debt (described above) less cash and
cash equivalents. Total net debt is used to assess the cash
position relative to the Corporation's debt level. Management
believes this measure is useful in assessing the Corporation's
capacity to meet its current and future financial obligations.
Additional Information
The results were affected by non-operating items, as summarized
in the following table:
Highlights and non-IFRS financial
measures
|
Second
quarter
|
First six-month
period
|
2024
|
2023
|
2024
|
2023
|
(in thousands of
Canadian dollars, except per share amounts)
|
$
|
$
|
$
|
$
|
|
|
|
|
|
Operating income
(loss)
|
(15,161)
|
18,740
|
(67,590)
|
(19,363)
|
Depreciation and
amortization
|
54,748
|
42,763
|
104,912
|
83,871
|
Reversal of impairment
of the investment in a joint venture
|
—
|
—
|
(3,112)
|
—
|
Restructuring costs
(reversal)
|
1,911
|
(557)
|
1,977
|
2,343
|
Premiums related to
derivatives that matured during
the period
|
(3,863)
|
(4,802)
|
(7,177)
|
(7,376)
|
Adjusted operating
income (loss)1
|
37,635
|
56,144
|
29,010
|
59,475
|
|
|
|
|
|
Net loss
|
(54,387)
|
(29,180)
|
(115,364)
|
(85,790)
|
Reversal of impairment
of the investment in a joint venture
|
—
|
—
|
(3,112)
|
—
|
Restructuring costs
(reversal)
|
1,911
|
(557)
|
1,977
|
2,343
|
Change in fair value
of derivatives
|
(4,978)
|
13,949
|
17,181
|
23,870
|
Revaluation of
liability related to warrants
|
(6,236)
|
(3,234)
|
5,511
|
6,905
|
Foreign exchange
(gain) loss
|
28,170
|
15,867
|
(13,957)
|
(6,962)
|
Gain on disposal of an
investment
|
—
|
—
|
(5,784)
|
—
|
Gain on asset
disposals
|
—
|
—
|
—
|
(2,511)
|
Premiums related to
derivatives that matured during
the period
|
(3,863)
|
(4,802)
|
(7,177)
|
(7,376)
|
Adjusted net
loss1
|
(39,383)
|
(7,957)
|
(120,725)
|
(69,521)
|
|
|
|
|
|
Adjusted net
loss1
|
(39,383)
|
(7,957)
|
(120,725)
|
(69,521)
|
Adjusted weighted
average number of outstanding shares used
in computing diluted
earnings per share
|
38,713
|
38,222
|
38,645
|
38,153
|
Adjusted net loss
per share1
|
(1.02)
|
(0.21)
|
(3.12)
|
(1.82)
|
Cash flows related to
operating activities
|
183,216
|
190,559
|
293,918
|
385,647
|
Cash flows related to
investing activities
|
(31,247)
|
(7,279)
|
(59,992)
|
(17,760)
|
Repayment of lease
liabilities
|
(42,184)
|
(29,083)
|
(85,048)
|
(69,540)
|
Free cash
flow1
|
109,785
|
154,197
|
148,878
|
298,347
|
|
|
|
As at
April 30, 2024
|
As at
October 31, 2023
|
(in thousands of
dollars)
|
|
|
$
|
$
|
Long-term
debt
|
|
|
646,814
|
669,145
|
Deferred government
grant
|
|
|
134,182
|
146,634
|
Liability related to
warrants
|
|
|
26,327
|
20,816
|
Lease
liabilities
|
|
|
1,136,161
|
1,221,451
|
Total
debt1
|
|
|
1,943,484
|
2,058,046
|
|
|
|
|
|
Total debt
|
|
|
1,943,484
|
2,058,046
|
Cash and cash
equivalents
|
|
|
(528,886)
|
(435,647)
|
Total net
debt1
|
|
|
1,414,598
|
1,622,399
|
About Transat
Founded in Montreal 36 years
ago, Transat has achieved worldwide recognition as a provider of
leisure travel particularly as an airline under the Air Transat
brand. Voted World's Best Leisure Airline by passengers at the 2023
Skytrax World Airline Awards, it flies to international
destinations. By renewing its fleet with the most energy-efficient
aircraft in their category, it is committed to a healthier
environment, knowing that this is essential to its operations and
the destinations it serves. Transat has been Travelife-certified
since 2018. (TSX: TRZ) www.transat.com
Caution regarding forward-looking statements
This news release contains certain forward-looking statements
with respect to the Corporation, including those regarding its
results, its financial position and its outlook for the future.
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.
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,
maintain and grow its reputation and brand, the availability of
funding in the future, the Corporation's ability to repay its debt,
the Corporation's ability to adequately mitigate the Pratt &
Whitney GTF engine issues, 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,
cybersecurity risks, changes in legislation, 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 2023
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 news 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 the Corporation will be able to meet its
obligations with cash on hand, cash flows from operations and
drawdowns under existing credit facilities.
- The outlook whereby the Corporation made a slight adjustment
to its fiscal 2024 capacity expansion plans, which now stands at
11%, versus 13% previously.
In making these statements, the Corporation assumes, among
other things, that the standards and measures for the health and
safety of personnel and travellers imposed by government and
airport authorities will be consistent with those currently in
effect, 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 and that fuel prices, exchange rates, selling
prices and hotel and other costs remain stable, and the Corporation
will be able to adequately mitigate the Pratt & Whitney GTF
engine issues. 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 news release is issued, and represent the Corporation's
expectations as of that date. For additional information with
respect to these and other factors, see the MD&A for the
quarter ended April 30, 2024 filed with the Canadian
securities commissions and available on SEDAR at www.sedarplus.ca.
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.
(www.transat.com)
Media site and image bank:
transat.com/en-CA/corporate/media
SOURCE Transat A.T. Inc.