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Air Transat Reports Q4 and Full Year Earnings, Expects Acquisition by Air Canada to Close in Q2 2020

On Thursday, Air Transat reported fourth quarter revenue of $693.2M, with an adjusted net income of $27.2M. For the full year, the airline earned revenues of $2.9B and an adjusted net loss of $9.4M.

Air Transat Airbus A330-300 - Courtesy Air Transat

Transat A.T. Inc. (Air Transat) reported a 3.6% improvement in fourth quarter revenue to $693.2M and an adjusted net income of $27.2M versus $13.7M in 2018. For the full fiscal year, the airline reported revenues of $2.9B, a 3.1% increase from 2018 and an adjusted net income loss of (9.4M) versus a loss of ($24M) last year. Adjusted net earnings per share (EPS) in the fourth quarter were $0.72 compared to $0.36 in Q4 2018, while full year EPS came in at a loss of $0.25 versus $0.64 for the full fiscal year 2018. In Thursday’s announcement, Transat’s President and Chief Executive Officer, Jean-Marc Eustache said,

“We’re working to obtain the required approvals to complete our transaction [with Air Canada], while focusing significant efforts on serving our customers and improving our results. I salute our employees’ professionalism which has allowed us to achieve these last two objectives this year.”

Air Transat attributes the fourth quarter revenue improvement to higher average selling prices across all programs and growth in ancillary revenues. The 3.1% increase in annual revenues to $2.9B were partially offset by a higher percentage of “flight-only sales” which generate less revenue than bundled tour packages. During the winter season, Air Transat reported an operating loss of $65.7M up from a winter season loss of $46.7M in 2018, with the higher loss attributable to increased costs in fuel, the weakening of the Canadian dollar versus the U.S. dollar and fleet optimization. During the summer season, operating income was $15.9M versus a loss of $3.9M in 2018. The summer operating income improvement was offset by costs related to the Air Canada transaction as well as higher maintenance costs.

At the end of October, the company had $564.8M in cash and equivalents versus $593.7M on October 31, 2018. The working capital ratio at year-end was 1.23 compared to 1.33 at the end of fiscal year 2018 and future travel deposits increased to $561.4M from $517.4M on October 31, 2018. Excluding contracts with service providers, off-balance-sheet commitments were reduced by $296.6M to $2.2B.

Air Transat concluded an agreement with Air Canada to acquire all outstanding Transat shares on June 27, 2019. The majority of shareholders approved the buyout on August 23, 2019 and Transat Class A variable voting and Class B shareholders will receive $18.00/share. On August 29, 2019 the Superior Court of Quebec issued a final order approving the buyout by Air Canada. The closing of the deal is still subject to regulatory approvals from the Government of Canada and the European Union but is expected to be completed by the second quarter of 2020.

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 in over 25 countries in the Americas and Europe.

Source: Air Transat

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