Recession fears have not dampened consumer enthusiasm, allowing Transat AT to start the winter season on the right foot. But the tour operator is not out of the woods yet, since it will have to continue to dip into its reserves to get through a “transition year”.
If the parent company of Air Transat is still in the red, the picture is slowly improving. The rate of reservations is currently equivalent to – and sometimes even higher – than what was observed at the same time in 2019, before the outbreak of COVID-19.
However, the Quebec company has not yet turned the page on the health crisis. After having burned around 20 million monthly during the financial year which ended on October 31, the coffers of the tour operator will still be solicited in 2023, even if the sums which must be withdrawn are set to decrease.
“Although far from ideal, Transat AT’s financial situation has stabilized,” said its President and Chief Executive Officer, Annick Guérard, on Thursday during a conference call to discuss the results. of the fourth quarter, where the company exceeded analysts’ expectations.
The Montreal-based company had access to 423 million at the end of October.
Like other airlines, the company borrowed from the federal government. This caused its net debt to jump, which reached 1.6 billion as of October 31. In its annual report, Transat AT recalls that there are still “significant uncertainties” about its ability to “continue its activities”.
Other indicators are more encouraging. For the winter season, revenue per passenger mile is approximately 15% higher than in winter 2019. At the end of the fourth quarter, customer deposits reached 603 million, which is 7% higher than before the pandemic .
“Consumers are willing to pay more to travel, believes Mme Guerard. Travel spending is a priority for them, even in a context of economic slowdown and inflation. »
However, investors will need to be patient. We will probably have to wait until 2024 before we see Transat AT free up cash, said its chief financial officer, Patrick Bui.
“2023 is a year of transition,” he told analysts. Our goal is to be as close to balance as possible. »
Transat AT expects its adjusted operating margin to vary between 4% and 6% next year. Over the past decade, the average has hovered around 7 percent, Bui said. The company still has its work cut out for it, he acknowledged.
According to data compiled by the firm Refinitiv, the tour operator’s cash deficit stood at 210.4 million in 2022. It is expected to be negative 7 million next year. By comparison, Air Canada, whose activities go beyond leisure travel, should generate a surplus of 675 million this year, forecasts Refinitiv.
For its part, the Sunwing group, based in Toronto, returned to profitability during its financial year ended on September 30. According to the annual report of the European giant TUI, which owns 49% of Sunwing, the company generated a surplus of 10 million CAN (7 million euros), after losing 215 million in 2021.
“The scale of the company’s debt remains a concern,” said CIBC World Markets analyst Kevin Chiang in a note sent to clients.
Transat AT beat analysts’ expectations in the fourth quarter in terms of revenue and because it lost less money than expected. On Thursday afternoon, on the Toronto Stock Exchange, the company’s stock took 2.88%, or 9 cents, to trade at $3.22.
A sign that things are getting back on their feet in the industry, the tour operator expects to deploy, in 2023, a capacity equivalent to 90% of what it was before the pandemic. The company set this target based on forecasts from the International Air Transport Association (IATA), which represents some 300 airlines around the world.
- 4035 people
- This was the workforce of Transat AT and its subsidiaries as of October 31.
SOURCE: Transat AT