Recovery plan continues after interruption caused by Omicron
Significant improvement in revenues and results compared with 2021
For the first quarter:
- Revenues of $202.4 million
- Adjusted operating loss of $36.4 million (operating loss of $73.8 million)
- Adjusted net loss of $95.3 million (net loss of $114.3 million)
Financial position and financing:
- Unrestricted liquity of $485.1 million as at January 31, consisting of cash and cash equivalents of $343.1 million and borrowing capacity of $142.0 million
- The Corporation obtained an initial $43.3 million in additional financing and negotiated 20-month favorable extensions on certain key terms of the LEEFF unsecured financing agreement
MONTRÉAL, March 10, 2022 /CNW Telbec/ – Transat A.T. inc., a holiday travel reference worldwide, particularly as an air carrier under the Air Transat brand, announces its results for the first quarter ended January 31, 2022.
“While we were in the midst of a strong recovery, with November and December results matching our targets, the emergence of the Omicron variant brought our sales to a temporary halt between mid-December and early February. Subsequently, and particularly after the easing of restrictive measures at the borders, bookings picked up again, for both winter and summer, which augurs well for the coming months,” stated Annick Guérard, President and Chief Executive Officer of Transat.
“We, therefore intend to continue with our initial strategic plan and stay the course for the summer. Our recovery plan has allowed us to recall approximately 500 employees since the start of November and we are delighted to see that many of our customers in Canada and Europe are eager to travel after two years of the pandemic. Our code-sharing agreement with Porter Airlines announced on Tuesday also demonstrates the progress made towards our longer term strategic goals.
“The deferral of certain terms of our financing under the Large Employer Emergency Financing Facility (“LEEFF”), as well as the securing an additional $43.3 million for refunding travellers, will facilitate our recovery following the resurgence of the pandemic. In the short term, our priority is to protect our cash flows and access the liquidity needed to get through this period of uncertainty. Although we are in recovery, the impacts of COVID-19 are still being felt and the geopolitical situation is constantly changing. As we will remain in a cash burn situation for the coming months, we are also in discussions with the federal government for additional funding,” concluded Guérard.
First quarter highlights
Compared with 2021, revenues for the quarter ended January 31, 2022 were up $160.5 million (382.9%). This increase resulted mainly from a rise in the number of travellers combined with a slight increase in average selling prices. Compared with the same quarter of fiscal 2019, revenues for the current quarter were down 68.7%. Since mid-March of 2020, restrictions on international travel and government-imposed quarantine measures have made travel sales very difficult. Revenue growth in the quarter was dampened by the sharp decline in demand and massive booking cancellations following the emergence of the Omicron variant during the quarter and the new restrictive measures put in place by the federal government on December 15, 2021. As a result, the Corporation cancelled nearly 30% of flights scheduled for January.
Operations resulted in an operating loss of $73.8 million, compared with $98.0 million in 2021, an improvement of $24.2 million. The improvement in operating results was attributable to the gradual and partial resumption of airline operations. This improvement in operating results was however reined in by the cancellation of nearly 30% of flights scheduled for January following the emergence of the Omicron variant, as discussed previously. Transat reported an adjusted operating loss1 of $36.4 million compared with $53.6 million in 2021, an improvement of $17.3 million.
Net loss attributable to shareholders amounted to $114.3 million or $3.03 per share (diluted) compared with $60.5 million or $1.60 per share (diluted) for the corresponding quarter of last year. The net loss attributable to shareholders in 2022 was marked by a $22.0 million foreign exchange loss, partially offset by a $4.0 million gain on disposal of assets related to the termination of an aircraft lease. The net loss attributable to shareholders in 2021 was mitigated by a $32.9 million foreign exchange gain and a $17.4 million gain on disposal of assets related to the termination of three aircraft leases. Foreign exchange gains and losses resulted mainly from the exchange effect on lease liabilities related to aircraft, following the fluctuations of the dollar against the U.S. dollar. Excluding non-operating items, Transat reported an adjusted net loss1 of $95.3 million ($2.53 per share) for the first quarter of 2022, compared with $109.0 million ($2.89 per share) in 2021.
Financial position
As at January 31, 2022, cash and cash equivalents amounted to $343.1 million, compared with $302.8 million at the same date in 2021. In total, the available credit amounted to a maximum of $820.0 million, of which $678.0 million was drawn down, for unrestricted liquidity1 of $485.1 million. Note that subsequent to January 31, the Corporation drew an additional $112.0 million, bringing the amount drawn to $790.0 million.
As previously mentioned, the
Corporation has also reached an agreement with the government for an additional $43.3 million under the unsecured credit facility related to travel credits. Considering the unrestricted liquidity1 of $485.1 million at January 31, 2022, the pro forma unrestricted liquidity1 position at that date was $528.4 million.
Outlook
The Corporation continues to implement a series of operational, commercial and financial measures, including cost reduction, to preserve its cash flow. The Corporation continues to monitor the situation on a daily basis in order to adjust these measures as the situation evolves.
Following the recent announcements regarding the easing of health measures and travel restrictions by various governments in Canada and other countries, the current situation is showing encouraging signs in terms of bookings. However, it remains impossible at this time to predict the impact of the COVID-19 pandemic on future bookings, and on financial results. Consequently, the Corporation is not currently providing an outlook for the second quarter or for summer 2022.
Second quarter 2022
Across all our markets, the capacity for the second quarter of the fiscal year represents 48.0% of the overall capacity of 2019. For the sun destinations program, the Corporation’s main market for the winter season, the capacity in 2022 represents 44.0% of the 2019 levels. In the transatlantic market, where it is the low season, the Corporation’s capacity represents 59% of the 2019 levels while the transborder market represents 94%.
Summer 2022
Across all our markets, the planned capacity for summer 2022 is 91% of the 2019 overall capacity. For the transatlantic program, the Corporation’s main market for the summer season, the planned capacity in 2022 is 78% of the 2019 levels. In the sun destinations program, where it is the low season, the Corporation’s planned capacity represents 96% of the 2019 levels. Moreover, the Corporation plans to increase its presence in the transborder market by quadrupling its capacity compared with 2019 by offering, among other things, new flights from Montreal to Los Angeles and San Francisco. Lastly, the Corporation also plans to increase its capacity by 9.0% in the domestic market compared with 2019.
Impact of Omicron and liquidity protection measures
In addition to its impact on our revenues and operating results, the emergence of the Omicron variant as well as new restrictive measures introduced by Canada and other countries had a significant negative effect on cash flow.
Accordingly, the Corporation continued and strengthened its cost reduction and liquidity protection measures put in place since the beginning of the pandemic, including negotiations with suppliers and lenders and deferral of expenses.
In addition, in order to continue the recovery of operations and preserve liquidity, the Corporation renegotiated certain terms of its financing agreements with the Canada Enterprise Emergency Funding Corporation under the Large Employer Emergency Financing Facility (“LEEFF”).
The amendments are as follows:
Unsecured credit facility related to travel credits
- An additional amount of $43.3 million, corresponding to a change in the cap on reimbursements made by the Company during previous waves
- The maturity date of April 29, 2028 and interest rate of 1.22% remained unchanged
Unsecured debt – LEEFF
- Deferring the interest rate increase. The interest rate will increase from 5% to 8% on December 31, 2023, and by 2% each year thereafter. The interest rate was scheduled to increase on April 29, 2022 and also increase each year thereafter.
- Interest on the unsecured debt – LEEFF may be capitalized until December 31, 2024 (previously until April 29, 2023).
- 50% of the vested warrants would be forfeited if the loan were to be repaid in full before December 31, 2023 (previously before April 29, 2022).
- Loan maturity remains at April 29, 2026.
In total, the financing available under LEEFF will amount to a maximum of $743.3 million. There are ongoing discussions with the federal government for additional funding.
As the Corporation has ceased to recognize deferred tax assets, the presentation of the adjusted loss before tax expense has been suspended, this result being similar to the adjusted net loss, which continues to be presented.
About Transat
Founded in Montreal 35 years ago, Transat has grown to become a holiday travel reference worldwide, particularly as an air carrier under the Air Transat brand. Voted World’s Best Leisure Airline by passengers at the Skytrax World Airline Awards, it flies to international and Canadian destinations, striving to serve its customers with enthusiasm and friendliness at every stage of their trip or stay, and emphasizing safety throughout. Transat has been Travelife-certified since 2018, renewing its fleet with the greenest aircraft in their category as part of a commitment to a healthier environment, knowing that this is essential to the integrity of its operations and the magnificent destinations it serves.
