Transat AT vows to raise prices next summer after third-quarter losses

Transat AT vows to raise prices next summer after third-quarter losses
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MONTREAL — Transat AT Inc. executives have pledged to raise prices next summer after a spike in fuel costs sent the carrier on course to its least-profitable third quarter in a decade.

“The fuel increases happened very suddenly in a short time period. In those circumstances, often we are not able to pass those increases to consumers,” said chief operating officer Annick Guerard in a conference call with analysts Thursday.

Chief financial officer Denis Petrin noted that the number of travellers in the transatlantic market increased 11.5 per cent in the third quarter — which spans the high summer season — alongside 13.9 per cent capacity growth, but not enough to offset losses from fuel costs.

“Next summer, we can all anticipate that the pricing will include the price of fuel as it is today. We have no doubt about this,” he said.

Rising fuel costs over the past year drove a 28 per cent year-over-year rise in the price of airfare and helped push inflation to its highest level in Canada since 2011.

The leap in airfares — which moved in rough alignment with a 25-per-cent increase in the price of gasoline — tacked on 0.3 percentage points to overall price growth over the past year, TD Economics senior economist James Marple said last month.

Guerard said the company opted not to join Air Canada and WestJet Airlines Ltd. by jacking up prices. “We are different beasts,” she said.

Transat president and chief executive Jean-Marc Eustache expressed enthusiasm about the travel company’s long-term outlook, but remained cool on near-term prospects.

“We are still confident that we will meet our long-term targets, while Air Transat was just named the world’s best leisure airline by Skytrax,” Eustache said, adding that the company opened its hotel division headquarters in Miami.

“We think that in the winter, the best thing that we will do will be around break-even,” he later told investors.

Earlier in the day, Transat reported a loss of $4.0 million or 11 cents per diluted share for the third quarter, compared with a profit of $26.6 million or 72 cents per share in the same quarter last year.

Excluding non-operating items, Transat reported an adjusted loss of $3.0 million or eight cents per share for the quarter compared with an adjusted profit of $26.9 million or 73 cents per share a year ago — which had blown past analyst expectations by more than half.

The latest earnings report came in far below analyst expectations of $15.34 million in net income or 31 cents per share, according to Thomson Reuters Eikon.

Revenues totalled $696.6 million, down five per cent from $733.2 million in the same quarter in 2017 when its results included $77.0 million from its Jonview subsidiary, which was sold last November.

The number of travellers was up 7.9 per cent in the sun destinations market while capacity rose 7.0 per cent, Transat said.


Companies in the story: (TSX:TRZ, TSX:AC, TSX:WJA)

Christopher Reynolds, The Canadian Press

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