Transat A.T., says it has seen “encouraging signs” since resuming operations on July 30 with business “growing steadily.” But despite being optimistic that it is “on track to returning to normal,” the travel company cautions that it is impossible to provide an outlook for winter 2022 due to the ongoing impact of the COVID-19 pandemic.
In releasing its fourth quarter results yesterday for the fiscal year ended Oct. 31, Transat reported $62.8 million in revenues, up $34.4 million (120.9%) from $28.4 million for the corresponding period of 2020. Overall operations generated an operating loss of $118.3 million – about a million dollars per day – compared with $239.3 million in 2020, an improvement of $121.0 million.
For the fiscal year as a whole, the company recognized revenues of $124.8 million, a decrease of $1.2 billion (90.4%) compared with 2020. In 2021, operations generated an adjusted operating loss of $401.2 million compared with $426.0 million in 2020, an improvement of $24.7 million.
In recapping recent operations, Transat stated, “Since mid-March of 2020, restrictions on international travel and government-imposed quarantine measures have made travel sales very difficult. Due to the global COVID-19 pandemic, the Corporation suspended its airline operations on Jan. 29, 2021, for the second time since March 2020, until partial resumption on July 30, 2021. For the first half of winter, demand was very weak and capacity represented a fraction of the 2020 level. These factors caused the fall in revenues. Conversely, for the summer season, since the partial resumption of airline operations, demand has been growing steadily and load factors have been higher compared with 2020. However, capacity remained lower than in 2019.”
Other 2021 year-end report highlights include:
• As of Oct 31, cash and cash equivalents amounted to $433.2 million, compared with $426.4 million on the same date in 2020.
• In total, the available financing represents a maximum of $820.0 million, of which $650.0 million was drawn down as at Oct. 31, 2021. Of the drawn down amount, a total of $310.0 million was used to repay travellers who were scheduled to leave after Feb. 1, 2020, for which a travel credit had been issued due to COVID-19 and who had requested to be reimbursed.
• Deposits from customers for future travel amounted to $292.2 million, compared with $608.9 million as at Oct. 31, 2020, a decrease of $316.7 million. This change was due to refunds of travel credits made during the summer of 2021.
• On April 29, 2021, the Corporation entered into an agreement with the Government of Canada that allows it to borrow, among others, an amount of $310.0 million to issue refunds to eligible travellers. Customers had until Aug. 26, 2021, to submit their refund requests. The Corporation received requests for about $460.0 million and made refunds for approximately 99% of amounts claimed as of late November 2021.
• Despite recent uncertainty related to the emergence of a new variant, the current situation shows encouraging signs such as the level of bookings observed and the increase in the vaccination rate. However, it remains impossible for the moment to predict the impact of the COVID-19 pandemic on future bookings, and on financial results.
“Since we resumed operations on July 30, business has been growing steadily,” said Transat president and CEO Annick Guérard. “We met and exceeded our targets for resumption of operations in the last quarter and reduced our use of cash. The winter season that is now beginning will see the continuation of our return to more significant volumes. While we remain cautious given the evolving variants, we remain optimistic that we’re on track to returning to normal.”
Guérard added that the company is continuing its post-pandemic transformation.
“Following the extensive streamlining of our fleet that has been ongoing for several years, the codeshare agreement announced this quarter (with WestJet) is the first step forward in our alliance strategy, with further advances to follow in the coming months,” she said.
This winter, Transat plans to operate from eight Canadian airports to eight destinations in Europe, 22 in the South and five in the United States, including inaugural destinations Miami and Fort Myers, with a corresponding growth in pre-pandemic capacity of 50% to 75% over the winter.
Volume will continue to expand for summer season, which will include two new routes to Europe and two new destinations in the United States.
Overall, across all markets, average capacity for winter 2022 is 60% of 2019 capacity, increasing from 50% to 75% over the course of the season. On the sun destinations program, the capacity in 2022 represents 55% of 2019 levels. On the transatlantic program, where it is the low season, Transat’s capacity represents 65% of 2019 capacity. In addition, the Corporation is increasing its presence in the cross-border market with capacity growth of 45% compared to 2019 winter season capacity.
Guérard said Transat is well-positioned to take advantage of the recovering markets for leisure travel and visiting friends and family. “This is our target customer, and in the long run we will be less impacted than the average market by the loss of business traffic revenues, which I think represent 20% of the legacy carriers’ customers but count for 80% of their revenue.”
The CEO also said it is “heartwarming” to see staffing levels at the company bouncing back.
“We started 2022 (fiscal year) with over 2,000 employees, compared with only 750 at the height of the crisis, and the volume we project will allow us to recall about 1,500 more during the year,” she said, adding that she expects the workforce to reach 3,500 within a year.
Guérard said the Montreal-based company is gunning for competitive advantage through leaner operations that revolve around Eastern Canada after the company announced in May it would sell off its hotel properties to boost liquidity.
“We have great market share, but we didn’t have the right cost structure. And I could say as well that the revenue management was lacking behind,” she said on a conference call with financial analysts to discuss the company’s results Thursday.
While Guérard believes the impact of the Omicron strain of COVID-19 “will not last long,” noting that bookings have picked up in the last few days as preliminary data suggests it may not be as severe as initially feared, she concluded, “2022 will be a demanding year, no doubt, and we have a lot on our plate.”