MONTREAL — Transat A.T. Inc. reported a big boost in profits in its latest quarter, driven by millions of dollars in compensation from an engine maker as well as more passengers. But the airline's ongoing financial woes cast a shadow over the past year, even as its CEO saw hope on the horizon.
Net income surged to $41.2 million in the three months ended Oct. 31 versus $3.2 million in the same period a year earlier, the travel company said.
About $33.6 million of those earnings came from aircraft engine giant Pratt & Whitney, which dolled out the compensation after recalling its turbofans for inspection and repair. Air Transat, one of many airlines hit by the recall, had grounded a half-dozen planes as a result.
The profit increase also owes to a nearly three per cent rise in passenger traffic and a decline in fuel costs, Transat said Thursday.
The results marked the first time this year that Transat turned a quarterly profit.
Chief executive Annick Guérard maintained a "cautious optimism" toward the year ahead.
"We keep seeing sustained demand for travel, as we saw over the last year," she told analysts on the company's earnings conference call.
"However, we remain in a context of high economic uncertainty which leads us to take a cautious approach to our predictions for next year."
Guérard said lower inflation and interest rates could buoy consumer spending on air travel — including the vacation packages Transat offers — but "volatility, especially around the Canadian dollar," mitigates that upbeat forecast.
Some tourists and snowbirds may be rethinking plans to fly to the U.S. — a key sun destination for Transat in the winter months — with the loonie hovering around its lowest exchange rate in years following U.S. president-elect Donald Trump’s proposal for a 25 per cent tariff on imports from Canada.
The company offered no update on efforts to refinance its balance sheet. Net debt at the end of the quarter stood at more than $2 billion, up from $1.6 billion a year earlier.
For the full fiscal year, adjusted earnings shrank by more than a quarter even as revenues grew eight per cent to $3.05 billion.
"Clearly, we are not satisfied with these annual results," said chief financial officer Jean-François Pruneau.
The drop in adjusted earnings stemmed mainly from capacity growth that raised operating costs and expenses linked to the Pratt & Whitney engines, he said.
"We haven't been able to recover 100 per cent of our cost," Pruneau said of the grounded planes, adding that Transat will try to recoup more money in upcoming negotiations with the Connecticut-based aerospace manufacturer. Transat began to ground the aircraft early in the year, with six now out of commission, comprising roughly 14 per cent of its 43-plane fleet.
Guérard outlined cost-cutting measures that included axing "several management positions" and integrating more artificial intelligence into its call centre services. The moves are part of Transat's plan to boost adjusted earnings by $100 million annually.
On the revenue front, Transat launched a joint venture with Porter Airlines in June, allowing it to tap Porter's swiftly expanding North American market and link it to Air Transat's main hubs of Montreal and Toronto.
About four per cent of Transat passengers came or went by way of Porter over the past year, Guérard said.
On an adjusted basis, Transat reported earnings of 67 cents per share for its fourth quarter compared with an adjusted profit of 41 cents per share a year earlier. The results far exceeded analysts' expectations, according to financial markets firm LSEG Data & Analytics, largely because of the compensation from Pratt & Whitney.
Revenue for the quarter totalled $788.8 million, up three per cent from $764.5 million a year ago.
Transat's capacity rose four per cent compared with the year before.
This report by The Canadian Press was first published Dec. 12, 2024.
Companies in this story: (TSX:TRZ)
Christopher Reynolds, The Canadian Press
