Transat A.T. Inc. - Results for third quarter 2012

MONTREAL, Sept. 13, 2012 /CNW Telbec/ – Transat A.T. Inc., one of the largest integrated tourism companies in the world and Canada’s holiday travel leader, posted revenues of $909.1 million for the quarter ended July 31, 2012, compared with $937.0 million in 2011, a decrease of $27.9 million, or 3.0%. The Corporation recorded a margin1 of $22.1 million, compared with of $14.7 million in 2011, and a net income of $9.4 million ($0.25 per share on a diluted basis), compared with a net loss of $2.8 million ($0.07 per share on a diluted basis) in 2011. Before non-cash and non-operating items, Transat reported an adjusted after-tax income3 of $10.5 million ($0.28 per share on a diluted basis), compared with $2.8 million ($0.07 per share on a diluted basis) in 2011.

“We had a satisfactory early summer on the transatlantic market, where our unique offering of some 60 city-pairs is tailored to the needs of Canadian and European tourists. The improvement in margin stems from our commercialization efforts and cost reduction measures,” said President and Chief Executive Officer Jean-Marc Eustache.

Third quarter highlights

The Corporation’s margin in the third quarter was $22.1 million, compared with $14.7 million in 2011, despite lower revenues of $909.1 million, compared with $937.0 million in 2011. In the second half of the quarter, transatlantic market prices and load factors continued to evolve favourably, those of the France and the sun destinations markets, as well as currency exchange impact, were stable.

Revenues of North American business units, which are generated by sales in Canada and abroad, decreased by $15.6 million compared with the same period in 2011. The decrease is mainly attributable to the Corporation’s decision to reduce capacity on the transatlantic market and sun destinations, hence a lower number of travellers. On the transatlantic market, average selling prices and load factors were up. The Corporation recorded a margin of $11.1 million, compared with an operating loss of $15.8 million in 2011.

Revenues of European business units, which are generated by sales made in Europe and in Canada, decreased by $12.3 million over 2011. The decrease is mainly attributable to a lower number of travellers and the exchange rate variance for the dollar versus the euro. European operations produced a margin of $11.0 million for the quarter, compared with $30.5 million in 2011. The decrease in margin is partially attributable to the expiration of the Corporation’s contract with Thomas Cook Airways and the entire Canada-UK capacity now being operated by Air Transat. It also stems from intense competition in France, where market conditions remain very difficult for the whole industry, notably on North Africa.

First nine-month period highlights

For the first nine months, the Corporation’s revenues increased by $102.5 million over 2011, from $2.8 billion to $3.0 billion. Transat recorded an operating loss of $36.0 million, compared with a margin of $9.5 million in 2011. In the first half, the Corporation has been unable to increase selling prices, while operating costs, especially for fuel (on all markets) and hotels (in the second quarter) were higher.

Financial position

The Corporation’s free cash totalled $292.7 million as at July 31, 2012, compared with $ 307.6 million as at July 31, 2011. Working capital ratio stood at 0.99 compared with 1.02 and deposits from customers for future travel were $395.9 million, compared with $386.7 million. Off-balance-sheet agreements stood at $573.2 million as at July 31, 2012, compared with $598.8 million as of July 31, 2011. The decrease over the same date in 2011 stems from payments made during the 9-month period.

International Financial Reporting Standards (IFRS)

The condensed interim consolidated financial statements for the three-month period ended July 31, 2012 were prepared in accordance with International Financial Reporting Standards (“IFRS”). The 2011 comparative figures have been restated to reflect this change. In summary, the adoption of IFRS has had a minor impact on Transat. It decreased the total equity’s carrying value by $25.4 million as at October 31, 2011, compared with the previous Canadian GAAP’s carrying value as at the same dates. For the three-month period ended July 31, 2011, the consolidated net loss attributable to shareholders has been reduced by $0.1 million compared to the figures disclosed last year under Canadian GAAP ($0.3 million for the nine-month period). Please see the Management Discussion & Analysis for more details.

Outlook

Business conditions remain demanding, but the outlook for the fourth quarter has improved during the last three months.

The transatlantic market accounts for a very significant portion of Transat’s business in the summer. For the fourth quarter, the Corporation’s capacity is approximately 10% lower than the actual capacity in 2011. To date, slightly more than 85% of the seats have been sold. Load factors and prices are higher than last year.

In the sun destinations market from Canada, Transat’s capacity is 17% lower than last year. Load factors and prices are slightly inferior.

In France, bookings are slightly higher, and prices are similar to last year.

The implementation of the measures contained in the Corporation’s plan to return to profitability is proceeding. For the fourth quarter, Transat expects to record an increase in margin over last year.