Carrier was hit by higher labour costs atop fuel-price spikes.
Transat AT, parent of Canadian leisure carrier Air Transat, swung to a loss for its fiscal third quarter as fuel costs and a new labour agreement took a toll.
The company reported an adjusted loss (before interest, taxes, depreciation and amortisation) of C$949,000 ($684,000) for the period, compared with a C$81.2 million adjusted profit a year ago.
Executives blame high fuel costs that have caused headaches across the industry, and note they had less pricing power to pass those bills along to customers.
“We compete in a segment where customers are highly price sensitive,” chief executive Annick Guerard told analysts on a 10 September conference call.
“The key difference lies above the economy cabin,” she continued. “Legacy carriers have premium corporate and loyalty revenue streams that have more than compensated for higher fuel costs across their networks. Unfortunately, we do not have those same levers at scale today.”
A new pilot contract, ratified in January, included a wage hike of more than 60% over five years, which added to fuel-cost pains.
Air Transat is working to upgrade its fleet and launch a loyalty programme, though neither will be accretive to earnings this year. New premium cabins will roll out first, on flights to primary year-round markets like Paris, London and Portugal, executives say.
The new loyalty scheme, in a beta phase now, has 23,000 members signed up.
By late 2027, both should help increase yields. But for now, all focus remains on fuel.
Capacity growth through the end of the year will be less than 2% compared to a year ago and flat for the winter season.
“Capacity deployment will remain highly disciplined with a focus on our strongest performing markets and the most attractive opportunities for value creation,” says Guerard.
Government lifeline
In July, Transat received a C$150 million credit line from the Canadian government’s Liquidity for Airline Sector Resilience program, from which it drew the full amount.
The funding came with a 3.91% interest rate and comes due in 2030.
The new liquidity came in tandem with an additional C$250 million to Transat’s existing Large Employer Emergency Financing Facility under an agreement inked during the pandemic.
“I would like to sincerely thank the Government of Canada for its support,” says Guerard. “The financing strengthens our liquidity position and provides additional flexibility as we navigate the current difficult environment.”
GTF issues linger
The carrier says four aircraft were grounded due to ongoing issues with Pratt & Whitney geared turbofans (GTFs) – one more than planned and down one from the end of June.
Full resolution is expected by 2028, Air Transat said at the time.
Across the industry, hundreds of commercial aircraft have been grounded at any given time since 2023, as airlines await GTF inspections and part replacements.
“We continue to manage the GTF-related pressure through additional leased spare engines and active fleet management,” says chief financial officer Jean-Francois Pruneau. “Additional costs and revenue management inefficiencies are expected to persist until the issue is fully resolved, which is not anticipated before 2028.”
During the quarter, Transat recognised C$7 million in compensation from the supplier. However “this compensation, once again, did not fully offset the financial impact of the ongoing engine-related disruptions”, says Pruneau.
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