Falling Dollar Hurts Transat Numbers
Transat A.T. Inc. has posted revenues of $847.2 million for the quarter ended Jan. 31, 2014, compared with $805.7 million for the same period in 2013, an increase of $41.5 million, or 5.2%. The Corporation, however, recorded an operating loss before amortization and depreciation of $23.8 million, compared with $21.0 million in 2013, and a net loss of $25.6 million ($0.67 per share on a diluted basis), compared with a net loss of $15.1 million ($0.39 per share on a diluted basis) in 2013.
The decline in value of Canadian dollar alone resulted in increase in operating expenses of $14 million. Before non-operating items, Transat reported an adjusted after-tax loss of $23.3 million in 2014 ($0.60 per share on a diluted basis), compared with $21.6 million ($0.56 per share on a diluted basis) in 2013.
“A substantial portion of the loss over this quarter is attributable to the sudden and rapid drop in the value of the Canadian dollar,” said Jean-Marc Eustache (pictured), president and chief executive officer of Transat, adding, “This resulted in a significant increase in our operating expenses, which was offset only partially by higher selling prices and by our hedging program. That situation alone is what keeps us from posting improved results over last year at this time, both for the quarter and for the winter. However, our cost-control and margin-improvement program, which includes internalization of our narrow-body fleet, is unfolding as planned and delivering the expected results. We are on the right course.”
!!! Outlook for the second quarter
On the Sun destinations market, Transat’s capacity is approximately 2% lower than that commercialized last year. To date, 70% of that capacity has been sold, load factors are lower by 2%, and selling prices are higher by 4% compared with those recorded last year at the same date.
In France, where winter corresponds to low season, compared to last year at this time medium-haul bookings are higher by 16%, long-haul bookings are down by 4%, and selling prices are similar.
On the transatlantic market, also in low season, Transat’s capacity is 6% lower than that commercialized last winter. To date, 67% of that capacity has been sold, load factors are lower by 5%, and selling prices are higher by 2%.
!!! Outlook for winter
The Sun destinations market out of Canada accounts for a substantial portion of Transat’s business during the winter season, and on that market, margins are particularly slim and volatile. Owing to the rapid recent decline in the value of the Canadian dollar, the Corporation expects that its second-quarter results will be inferior to those posted for the corresponding quarter last year.
!!! Summer 2014
With regard to summer 2014, while it is too soon to draw firm conclusions given that only 27% of seats have been sold, Transat’s capacity on the transatlantic market is 1% higher than in 2013. Load factors are similar and prices are higher by 5%. The weakened Canadian dollar will mean an increase in operating expenses this summer, estimated to be 6% if the dollar remains at its current value against the US dollar, the euro and the pound.
