Yahoo Finance Air Transat soars past expectations to post first quarterly profit since 2019
Transat A.T. Inc. reported record net income and adjusted earnings for the third quarter, the first time it has turned a profit since the end of 2019.
Buoyed by strong demand for leisure travel, it reported adjusted earnings before interest, taxes, depreciation and amortization of $114.8 million, an almost 300 per cent increase over the same quarter in 2022 and an 85 per cent jump from 2019 levels. The results well surpassed analyst expectations of $68 million.
The Montreal-based holiday airline said the improvement in adjusted EBITDA was due to a significant increase in average selling prices combined with 41 per cent cheaper fuel prices.
Transat reported $57 million in net income, the first time that figure has been positive since the fourth quarter of 2019. That compared to a loss of $106 million in the previous year.
“Despite inflation, Canadians continue to make travel a priority for their well-being,” chief executive Annick Guérard told analysts during a Sept. 14 earnings call. “The Canadian airline sector continues to benefit from pent-up demand, the market is still catching up, especially on international travel.”
Robust demand for leisure travel produced yields 29 per cent above those of 2019, despite 14 per cent less capacity, Guérard said. That demand has remained solid in the early stages of the fourth quarter, she said.
The CEO said future demand will also be supported by strong immigration as the Canadian government increased its immigration targets.
“Early bookings are ahead of last year, which, combined with firm pricing, bode well for the start of the new fiscal year,” Guérard said in a press release.
As a result, the airline is raising its adjusted EBITDA margin target for the year to a range of 7.5 to eight per cent from a range of 5.5 to seven per cent.
The yield on transatlantic routes was up 33 per cent compared to the same period in 2019.
The company recorded a $746.3 million revenue in the three months ended July 31, a 47 per cent jump from the prior year and approximately seven per cent above pre-pandemic levels.
Its adjusted net earnings came in at $1.10 per share, up from a loss of $3.20 per share in 2022.
The company attributed the year-over-year $238-million increase to the resumption of operations following a sharp decline in demand and massive booking cancellations amid the emergence of the Omicron variant in 2022, which had dampened its revenues.
“Booking velocity continues to mirror that of 2019 but at significantly higher prices,” Guérard said, adding that early bookings for the 2024 winter season suggest that consumer demand should remain healthy. Sales velocity is currently above that of winter 2023 with higher load factors on a comparable basis, she said.
The airline said it plans to increase capacity by 23 per cent for the upcoming winter season as it adds four aircraft to its fleet, which it said will be deployed on its best performing routes and new destinations.
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Air Transat said it expects to have positive free cash flow in the fiscal year 2023. Its third-quarter free cash flow was negative $52 million, from the prior year’s negative $96.9 million. Its net debt at the end of the quarter was $1.5 billion, with total debt at $2 billion.
• Email: dpaglinawan@postmedia.com
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