Transat Delivers Strong Q4 and Fiscal 2023 Operating Results
Adjusted EBITDA margin above target and solid free cash flow for the year
Fiscal 2024 adjusted EBITDA margin target of 7.5-9% and focus on improving capital structure
For the fourth quarter 2023:
- Revenues of $764.5 million
- Adjusted EBITDA of $89.0 million
- Operating income of $44.7 million
- Net income of $3.2 million
For the year 2023:
- Revenues of $3,048.4 million
- Adjusted EBITDA of $263.3 million
- Operating income of $89.7 million
- Net loss of $25.3 million
Cash flow and financial position:
- Cash flow from operating activities of $321.8 million and free cash flow of $162.4 million for the year, partially used to reimburse $53.0 million in long-term debt
- Cash and cash equivalents of $435.6 million as at October 31, 2023, up from $322.5 million last year
- Customer deposits for future travel of $754.2 million, up 25% from October 31, 2022
MONTREAL, Dec. 14, 2023 /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 fourth quarter and fiscal year ended October 31, 2023.
“Driven by a strong execution of its strategic plan, Transat has solidified its positioning in the Canadian leisure travel industry. As industry dynamics gathered momentum throughout the year, our team focused on meeting growing demand and improving operating efficiency, allowing us to end fiscal 2023 with financial results that exceeded the upper range of our profitability target. Driven by robust yields, we delivered a strong fourth-quarter performance with revenues of $764.5 million, 10% above 2019 levels on 7% less capacity and with similar load factors, while adjusted EBITDA reached $89.0 million, culminating a solid second half. We also generated free cash flow of $162.4 million in fiscal 2023, enabling us to reduce debt and conclude the year with an improved cash position,” said Annick Guérard, President and Chief Executive Officer of Transat.
“Looking ahead to the new fiscal year, Transat will continue executing on its strategic plan. Our recently announced joint venture with Porter Airlines will be a key element in accelerating growth, as we expect this agreement to gradually increase passenger traffic. Meanwhile, a greater frequency on leading routes, the launch of new destinations and ongoing efforts to optimize fleet utilization will raise our capacity by approximately 19% in 2024. Given the current operating environment, we expect our adjusted EBITDA margin to be in the range of 7.5% to 9% in fiscal 2024, which would exceed Transat’s historical levels. In addition, we intend to further improve our capital structure through sustained free cash flow generation,” added Ms. Guérard.
Fourth-quarter highlights
- For the fourth quarter, the Corporation generated $764.5 million in revenues, up $191.3 million from $573.1 million for the corresponding period of 2022.
- Adjusted EBITDA amounted to $89.0 million, up $100.6 million from a loss of $11.5 million in 2022.
- Transat recorded operating income of $44.7 million, an improvement of $93.6 million from a $48.8 million loss in 2022.
- Net income amounted to $3.2 million ($0.08 per share), compared with a net loss of $126.2 million ($3.32 per share) for the corresponding quarter of last year.
- Excluding non-operating items, Transat reported an adjusted net income of $15.7 million ($0.41 per share) for the fourth quarter of 2023, compared with an adjusted net loss1 of $75.9 million ($2.00 per share) in 2022.
Fiscal year highlights
- For the full year, the Corporation recorded revenues of $3,048.4 million, up $1,406.3 million from $1,642.0 million in 2022.
- Transat reported an adjusted EBITDA of $263.3 million, an improvement of $420.0 million compared with a loss of $156.8 million in 2022.
- The Corporation recorded an operating income of $89.7 million, an improvement of $393.2 million compared with a loss of $303.4 million in 2022.
- The net loss amounted to $25.3 million ($0.66 per share), compared with $445.3 million ($11.77 per share), for the previous year.
- Excluding non-operating items, Transat reported an adjusted net loss of $11.5 million ($0.30 per share) for the year ended October 31, 2023, compared with $403.7 million ($10.67 per share) in 2022.
Cash flow and financial position
Driven by improved profitability and better working capital management, cash flow from operating activities amounted to $321.8 million in fiscal 2023, compared with negative $177.9 million last year. After accounting for investing activities and repayment of lease liabilities, free cash flow reached $162.4 million in fiscal 2023, versus negative $320.0 million a year earlier. Free cash flow includes proceeds from the land sale in Mexico received in the fourth quarter and applied to reduce debt by $53.0 million.
As at October 31, 2023, cash and cash equivalents amounted to $435.6 million, an increase of $113.1 million from $322.5 million at the same date in 2022. Cash and cash equivalents in trust or otherwise reserved mainly resulting from travel package sales also improved year-over-year reaching $421.0 million as at October 31, 2023, compared with $344.3 million at the same date in 2022.
Reflecting healthy demand and selling prices in recent periods, customer deposits for future travel stood at $754.2 million as at October 31, 2023, up 25% from October 31, 2022.
Outlook
To date, load factors for the winter season are 1.3 percentage points lower than in fiscal 2023, while airline unit revenues, expressed in yield, remain 2.4% higher. Current demand and pricing conditions should allow the Corporation to cope with a cost environment that remains volatile and subject to inflationary pressures.
Considering the current operating environment, the Corporation is setting a fiscal 2024 adjusted EBITDA margin target range of 7.5% to 9%, which would exceed Transat’s historical levels. For fiscal 2024, the Corporation intends to increase available capacity by 19% through recent and planned aircraft additions, as well as further improvements in fleet utilization. This capacity will mainly be deployed to expand frequency and annualize best performing routes and to service recently announced new destinations.
In making these forward-looking statements, the Corporation is making the following assumptions for the fiscal year: weak GDP growth in Canada, an exchange rate of C$1.33 to US$1 and an average price per gallon of jet fuel of C$4.00. It also assumes that we reach a satisfactory resolution to renew the collective bargaining agreement with flight attendants and that the Pratt & Whitney engine issue follows the planned schedule, which currently involves three grounded aircraft, and should increase to five or six aircraft by the end of the fiscal year.
Additional Information
The results were affected by non-operating items, as summarized in the following table:
Highlights and non-IFRS financial measures
| (In thousands of Canadian dollars) | Fourth quarter | Year | ||
| 2023 | 2022 | 2023 | 2022 | |
| Revenues | 764,467 | 573,139 | 3,048,352 | 1,642,038 |
| Operating income (loss) | 44,721 | (48,848) | 89,733 | (303,420) |
| Restructuring costs | 276 | 847 | 3,626 | 847 |
| Depreciation and amortization | 48,732 | 42,068 | 186,355 | 154,212 |
| Premiums related to derivatives that matured during the period | (4,722) | (5,612) | (16,450) | (8,391) |
| Adjusted operating income (loss) | 89,007 | (11,545) | 263,264 | (156,752) |
| Net income (loss) | 3,195 | (126,231) | (25,292) | (445,324) |
| Asset impairment | — | 783 | 4,592 | 783 |
| Restructuring costs | 276 | 847 | 3,626 | 847 |
| Change in fair value of derivatives | (7,268) | 1,057 | 4,434 | 9,685 |
| Revaluation of liability related to warrants | (35,421) | (8,292) | (3,544) | (21,989) |
| Foreign exchange loss | 59,392 | 64,435 | 23,378 | 92,150 |
| Write-off of deferred financing costs | 12,743 | — | 12,743 | — |
| Loss on business disposal | 341 | — | 341 | — |
| Foreign exchange gain on business disposal | (7,275) | — | (7,275) | — |
| Loss (gain) on asset disposals | — | 71 | (2,511) | (3,934) |
| Gain on long-term debt modification | (5,585) | — | (5,585) | (22,191) |
| Premiums related to derivatives that matured during the period | (4,722) | (5,612) | (16,450) | (8,391) |
| Tax recovery on ABCP losses | — | (2,988) | — | (5,347) |
| Adjusted net income (loss) | 15,676 | (75,930) | (11,543) | (403,711) |
| Diluted earnings (loss) per share | 0.08 | (3.32) | (0.66) | (11.77) |
| Asset impairment | — | 0.02 | 0.12 | 0.02 |
| Restructuring costs | 0.01 | 0.02 | 0.09 | 0.02 |
| Change in fair value of derivatives | (0.19) | 0.03 | 0.12 | 0.26 |
| Revaluation of liability related to warrants | (0.92) | (0.22) | (0.09) | (0.58) |
| Foreign exchange loss | 1.55 | 1.70 | 0.62 | 2.43 |
| Write-off of deferred financing costs | 0.33 | — | 0.33 | — |
| Loss on business disposal | 0.01 | — | 0.01 | — |
| Foreign exchange gain on business disposal | (0.19) | — | (0.19) | — |
| Loss (gain) on asset disposals | — | — | (0.07) | (0.10) |
| Gain on long-term debt modification | (0.15) | — | (0.15) | (0.59) |
| Premiums related to derivatives that matured during the period | (0.12) | (0.15) | (0.43) | (0.22) |
| Tax recovery on ABCP losses | — | (0.08) | — | (0.14) |
| Adjusted net earnings (loss) per share | 0.41 | (2.00) | (0.30) | (10.67) |
| As at October 31, 2023 | As at October 31, 2022 | |||
| Cash and cash equivalents | 435,647 | 322,535 | ||
| Undrawn funds from credit facilities | — | 100,000 | ||
| Unrestricted liquidity | 435,647 | 422,535 | ||
| Fourth quarter | Year | |||||
| (In thousands of Canadian dollars) | 2023 | 2022 | Difference | 2023 | 2022 | Difference |
| $ | $ | $ | $ | $ | $ | |
| Cash flows related to operating activities | (56,363) | (60,061) | 3,698 | 321,750 | (177,854) | 499,604 |
| Cash flows related to investing activities | 13,961 | (8,782) | 22,743 | (7,935) | (33,783) | 25,848 |
| Repayment of lease liabilities | (41,442) | (24,736) | (16,706) | (151,389) | (108,336) | (43,053) |
| Free cash flow | (83,844) | (93,579) | 9,735 | 162,426 | (319,973) | 482,399 |
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