CEO CONFIDENT AS TRANSAT BEATS EXPECTATIONS:

Canadians are still eager to travel to sun resorts and European getaways, in spite of higher inflation and interest rates, says Transat AT Inc. chief executive Annick Guerard. On Thursday Transat reported its highest net income ever for a third quarter and turned a profit for the first time since 2019, prompting a brighter financial forecast for the year.

“We’re pretty much confident about the fact that the Canadian airline sector continues to benefit from pent-up demand,” Guerard told investors on a conference call to discuss the company’s latest financial results.

Healthy demand for leisure travel boosted revenue per passenger by 29 percent compared with four years earlier, an indication of fare hikes on tickets to Europe. The price tag on round-trip flights by Canadian airlines to Europe this fall rose 22 percent from 2019 levels, according to online travel agency Hopper Inc.

To meet the sustained demand, Transat plans to expand capacity by nearly a quarter next year, increasing its fleet to about 40 planes. The push comes as other Canadian carriers also ramp up capacity, particularly on sun-bound routes, setting the stage for heightened competition.

“With what we see today, despite inflation, we’re pretty much comfortable that that’s the right capacity to deploy to make sure that we position ourselves well in the market,” Guerard said.

“Early bookings are ahead of last year which, combined with firm pricing, bode well for the start of the new fiscal year.”

As a result, Transat raised its margin target on adjusted earnings for 2023 to between 7.5 and eight percent from a previous outlook of 5.5 to seven percent, its second guidance bump this year.

The Montreal-based tour company also said revenue in the three months ended July 31 rose nearly seven percent above 2019 levels, despite capacity sitting 14 percent below – another hint of higher prices and packed planes.

Meanwhile, Transat closed the sale of a piece of land in Mexico to resort company Finest Resorts last month, putting the $50-million proceeds toward reduction of debt, which stands at $2 billion, or $1.5 billion in net debt, following a financially devastating pandemic period.

On Thursday, Transat reported net income of $57.3 million in its third quarter – its highest quarterly profit since late 2017 – versus a loss of $106.5 million a year earlier

Revenues rose 47 percent to $746.3 million from $508.3 in the same three months last year.

On an adjusted basis, Transat said it earned $1.10 per share in its most recent quarter, up from an adjusted loss of $3.20 per share the year before.

The average analyst estimate had been for an adjusted loss of nine cents per share, according to estimates compiled by financial markets data firm Refinitiv.