Transat posted a $9.4 million adjusted net loss in its year-end results, significantly less than the $24 million loss posted last year, as the company looks ahead to finalization of its purchase by Air Canada, which will likely close in the second quarter of 2020.
"We're working to obtain the required approvals to complete our transaction, while focusing significant efforts on serving our customers and improving our results," stated Jean-Marc Eustache, President and Chief Executive Officer of Transat. "I salute our employees' professionalism which has allowed us to achieve these last two objectives this year."
In its year-end results for 2019, Transat recognized revenues of $2.9 billion, up $88.2 million or 3.1 per cent from 2018. During winter, higher revenues were partially offset by a greater proportion of flight-only sales, which generate lower revenue per unit than packages. During the summer season, revenues were $58.7 million higher than in 2018. The higher revenues were driven primarily by the increase in average selling prices and load factors across all programs, as well as growth in ancillary revenues.
Transat recognized an operating loss for the winter season amounting to $65.7 million (4.2 per cent) compared with $46.7 million (3.1 per cent) in 2018, resulting primarily from the increase in fuel prices, combined with the weakening of the dollar against the U.S. dollar and from the additional costs incurred for the transition and optimization of its fleet, which in total exceeded the increase in the average selling prices of packages.
During the summer, operating income totalled $15.9 million (1.1 per cent) compared with an operating loss of $3.9 million (0.3 per cent) for the previous year. The improvement in operating income was driven by higher average selling prices and load factors across all programs, and growth in ancillary revenues. The increase in operating income was partially offset by the costs associated with the transaction with Air Canada, amounting to $23.9 million, and by higher aircraft maintenance costs due to a larger number of maintenance events than last year.
For the year, operations resulted in an adjusted operating income of $38.0 million compared with $17.2 million in 2018, an increase of $20.8 million. This increase resulted from the higher adjusted operating income during the summer season, partially offset by the increase in adjusted operating loss for the winter season.
Net loss attributable to shareholders amounted to $33.2 million compared with net income of $6.5 million for the previous year. Net income for 2019 included after tax expenses of $17.5 million related to the transaction with Air Canada, while net income for 2018 included a $31.3 million gain on the sale of the Corporation's subsidiary Jonview. Excluding non-operating items, Transat reported an adjusted net loss of $9.4 million for the period ended October 31, 2019, compared with a loss of $24 million in 2018.
Fourth quarter results
Transat’s Q4 results saw revenues of $693.2 million for the quarter, up $24.4 million (3.6 per cent) compared with 2018, attributable to higher average selling prices across all programs, as well as growth in ancillary revenues.
Net income attributable to shareholders amounted to $20.3 million compared with $6.8 million in 2018. Net income attributable to shareholders included expenses of $10.1 million recorded in connection with the transaction with Air Canada. Before non-operating items, Transat reported adjusted net income of $27.2 million for the fourth quarter of 2019, compared with $13.7 million in 2018.
In the sun destinations program for winter 2020, Transat's capacity is higher by 6.7 per cent. To date, 56 per cent of that capacity has been sold, bookings are ahead by 13.1 per cent, and load factors are 3.4 per cent higher compared with 2019. The impact of fluctuations in the Canadian dollar, combined with decreased fuel costs, will result in a nil increase in operating expenses if the dollar against the U.S. dollar and aircraft fuel prices remain stable. Margins are currently at slightly higher levels compared with the same date last year.
In the transatlantic program, where it is low season, load factors are tracking 1.6 per cent higher than last winter. Prices are currently up 4.2 per cent from the same date last year.
If the current trends hold, Transat expects its results for the winter season to be slightly higher than those of last year.
The Air Canada purchase
On August 29, 2019, the Corporation announced that the Superior Court of Quebec issued a final order approving the plan of arrangement with Air Canada. The arrangement remains subject to certain customary closing conditions, including regulatory approvals, particularly those of Canada and the European Union. Notably, a public interest assessment regarding the arrangement is being undertaken by Transport Canada with input from the Commissioner of Competition.
If the required regulatory approvals are obtained and conditions are met, it is expected that the transaction will close by the second quarter of the 2020 calendar year.
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