Air Transat Reports Fourth Quarter Adjusted Net Loss of $156.4 million on 96% Revenue Decline
Transat reported their fourth quarter and FY 2020 financial results on Friday with a Q4 adjusted net loss of $156.4 million or ($4.14) per share on a 95.9% revenue decline to $28.4 million. For FY20, the carrier reported an adjusted net loss of $355.3 million.
On Friday (December 11, 2020), Transat A.T. Inc. (Air Transat) reported a fourth quarter adjusted net loss of $156.4 million or ($4.14) per share on a 95.9% revenue decline to $28.4 million. For the full year, the carrier reported an adjusted net loss of $355.3 million or ($9.41) per share on a revenue decline of 55.7% to $1.3 billion. Air Transat ended the fourth quarter on October 31, 2020 with cash and equivalents totaling $426.4 million and a short-term credit facility of $250 million (until March 31, 2021). A new arrangement agreement for the acquisition of the company by Air Canada was signed on October 9, 2020, which offers Transat shareholders $5.00 per share in cash or 0.2862 shares in Air Canada for each Transat share. Approval will be sought by shareholders at a meeting scheduled for December 15, 2020. In Friday’s announcement, Transat’s President and Chief Executive Officer, Jean-Marc Eustache, said,
“Our results reflect COVID-19's devastating impact across the travel industry. During the year, we took all necessary actions to limit the damage and preserve our cash. The upcoming completion of the transaction with Air Canada should give us the solidity to face the crisis and capitalize on the recovery that should be sparked by the arrival of a vaccine. We have put in place a $250.0 million short-term financing facility and are currently working on replacing it, should the transaction not take place, with an overall financing covering our needs for the year 2021. This financing could also be obtained as part of a support program for the industry, as announced by the government.”
Air Transat has taken numerous measures to weather the Global COVID-19 pandemic. On July 23, 2020, the carrier partially resumed operations after four months of inactivity, with a reduced summer program consisting of 23 routes to 17 destinations. For their winter 2020/21 program (November-April) Transat is gradually offering a reduced schedule of international flights from Montréal, Toronto and Quebec City.
Some of the company’s cost reduction initiatives include the early retirement of all Airbus A310s, Boeing 737s and some A330s. The company’s management and Board have taken voluntary compensation reductions ranging from 10-20%, with Executive offers taking reductions from 15-20%. Transat continues to negotiate with suppliers for cost reductions and changes in payment terms and has reduced all non-essential CAPEX spending. Last March, the company began temporary layoffs of personnel, eventually reaching 85% of employees at the peak of the crisis. With the resumption of operations, Transat has recalled a certain number of employees and their workforce is currently approximately 25% of pre-pandemic levels.
The company drew down a $50 million revolving credit facility last March for operating purposes and on October 9, 2020 put in place a $250 million subordinated short-term credit facility with the National bank of Canada as the lead arranger. The facility can be drawn down in tranches through February 28, 2021, subject to prerequisite borrowing conditions. At the close of the fourth quarter, Transat’s working capital ratio was 0.84, compared to 1.13 at the end of the fourth quarter of FY 2019. As of October 31, 2020, the company held $608.9 million in customer deposits for future travel, compared to $561.4 million at the end of the same period last year.
Material uncertainty exists on the company’s ability to continue as an ongoing concern, should the transaction with Air Canada not be completed. To continue operations without closing the transaction, Transat will have to put in place around $500 million in overall financing in 2021. Company management is currently seeking to secure this financing prior to the maturity of their new short-term credit facility and is in discussion with lenders.
Based in Montreal, Transat A.T. Inc. (Air Transat) is the third largest airline in Canada and leading integrated tourism company specializing in holiday travel. The company offers vacation packages, hotel accommodations and air service to more than 60 destinations over 25 countries in the Americas and Europe. Air Transat has been named ‘World’s Best Leisure Airline’ at the Skytrax World Airline Awards.
Source: Air Transat