Air Transat loses $112 million in the second quarter: What you need to know

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Transat A.T. Inc., the Montreal-based holiday airline, reported a net loss of $111.6 million in the second quarter, and said rising fuel prices continue to thwart its attempts to recover from two difficult years. Here’s what you need to know:

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Backstory

Transat had a rocky first quarter, as the Omicron variant forced it to cancel 30 per cent of its flights in January and February.

When things opened up, Transat saw an increase in demand for tickets, which persisted even as fuel prices rose as a result of the war in Ukraine.

The company has taken steps to protect itself against sharp increases in the summer, implementing a fuel-hedging program. The airline will continue to raise ticket prices to try and recoup their losses. “We observe that consumers are ready to accept price hikes,” chief executive Annick Guérard said in a press release on June 9.

Like many airlines, Transat has been battered by the pandemic. In December 2020, Transat shareholders voted to be acquired by Air Canada, but the European Commission put a stop to it, stating that it would narrow market competition and potentially create a monopoly.

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Transat recently partnered with 4Ukraine to help bring displaced Ukrainian nationals to Canada.

Financials

Transat ticket purchases reached $494.2 million in the second quarter, 80 per cent of pre-pandemic levels, which management sees as a sign of improvement. But revenue of $358.2 million ultimately did not offset the impact of rising fuel prices.

Transat’s stock price dropped about three per cent after it released its latest earnings report, and shares were trading at about $4.17 around 10 a.m. Toronto time.

Diluted net earnings per share were $98.3 million, or $2.60 per share, compared with $69.6 million or $1.84 per share in the same quarter last year.

Outlook

Looking ahead, Transat executives said they were confident they can push through the fuel crisis, moving toward eventual profitability.

“We foresee a strong recovery and will continue to implement all the measures necessary to capitalize on it,” Guérard said in the press release.

“For the longer term, we continue to implement our strategic plan.”

The company said it plans to continue rebuilding its pre-pandemic flight network and adding fuel efficient Airbus SE’s A321neoLR models to its fleet.

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