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 EBITDA 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 flow 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.
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 totaled $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.
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) | 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 loss | (39,383) | (7,957) | (120,725) | (69,521) |
| Adjusted net loss | (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 share | (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 flow | 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 debt | 1,943,484 | 2,058,046 | ||
| Total debt | 1,943,484 | 2,058,046 | ||
| Cash and cash equivalents | (528,886) | (435,647) | ||
| Total net debt | 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. www.transat.com