Transat profit climbs as higher ticket prices offset rising costs

Montreal-based airline and tour operator Transat AT Inc. posted a bigger profit in the fourth quarter as higher ticket prices offset rising costs.

Transat’s revenue rose by almost 4 per cent to $693-million in the three months ending Oct. 31, compared with a year earlier. Profit rose to $20.3-million, or 54 cents a share, from $6.8-million (18 cents). For the full year, rising fuel prices and a weaker dollar helped send Transat to a loss of $33.2-milllion (88 cents), compared with a profit of $6.5-million (17 cents) in the previous year. The 2018 results included a gain of $31.3-million from the sale of tour operator Jonview Canada.

Adjusted for $17.5-million in expenses related to the takeover by Air Canada, Transat’s adjusted full-year loss was $9.4-million (25 cents). Transat’s cash and cash equivalents totalled $565-million compared with $594-million in the previous year.

Transat raised ticket prices on transatlantic flights by 2 per cent, and by 4 per cent on flights to Caribbean holiday resorts, said Denis Petrin, Transat’s chief financial officer, on a conference call with analysts. Mr. Petrin said he expects the Air Canada takeover to be final by the second quarter of 2020 when regulatory approvals in Canada and Europe are complete. “Meanwhile, we remain fully focused on our operations and note that this year’s results show some improvements compared to last year’s,” he said.

Transat shareholders in August approved Air Canada’s offer worth $18 a share or $720-million in cash. Air Canada raised the offer by $200-million after complaints of low-balling from large Transat shareholders, and higher, rival offers.

Transat’s shares were trading at $16.12 in midday trading on Thursday.

Air Canada has said it will preserve the Transat brand name and Montreal headquarters once the merger is approved by regulators.

But there are concerns the combined companies will command too much market share. The combination of the two airlines would hold a 50-per-cent share of international scheduled capacity and 63 per cent of transatlantic flights. Air Canada is the largest domestic airline, with 53 per cent of scheduled capacity in 2018, according to its own data. WestJet Airlines Ltd. is second, with 37 per cent. Onex Corp.’s takeover of WestJet was finalized on Wednesday.

Transat’s appeal as a takeover target is enhanced by its updated fleet of fuel-efficient Airbus passenger jets at a time Air Canada and WestJet face capacity constraints due to the grounding of the Boeing 737 Max.

However, Annick Guérard, Transat’s operating chief, said the industry’s seat availability for the winter is up by 5 per cent, and there are no signs the loss of the Max is hampering growth. “We haven’t seen the effect of the 737 Max. Most carriers are able to find other options to replace that capacity,” Ms. Guérard said. “It’s a little bit too early for us to speculate on next summer.”

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