The economic recovery continues for Canada’s airlines.
Transat A.T. Inc. today announced it generated $764.5 million in revenues for its fiscal fourth quarter, up $191.3 million from $573.1 million for the corresponding period of 2022. The resulting profit of $3.2 million in its latest quarter compared compares with a loss a year ago as its revenue rose more than 30 per cent.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) amounted to $89.0 million for its fourth quarter, which ended 31OCT 2023. That’s up $100.6 million from a loss of $11.5 million in 2022.
"Driven by a strong execution of its strategic plan, Transat has solidified its positioning in the Canadian leisure travel industry,” said Annick Guérard, President and Chief Executive Officer of Transat. “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.”
Guérard said 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,” she said.
In related news, Air Transat and the union representing its flight attendants have reached an agreement in principle for the renewal of the collective agreement. Details of the agreement, subject to a vote, will be presented to members in the coming days.
Speaking to the media on a conference call, Guérard said she’s “highly encouraged” by Transat’s “major turnaround.” said Transat expects to add four new aircraft in 2024 (up to 44 in total) as it strengthens top routes, including European routes, and adds new destinations.
Guérard hailed Transat’s joint venture agreement with Porter Airlines as a major coup, suggesting it could account for 15-18% of all passenger traffic.
There are potential headwinds ahead, she said, including issues with some of the airline’s Pratt & Whitney engines, fuel price volatility, consumer confidence and the weak Canadian dollar. Transat also is seeing slower price growth of late.
But she said Canadian consumers continue to travel and that Transat is “well positioned” for growth in 2024.
“We see a strong booking curve” for the year ahead, Guérard said.
She also noted competition from ultra low-cost carriers in Canada but said Transat’s tour operations division gives it a leg up .
