MONTREAL — Transat AT Inc.’s shares fell by as much as 10 per cent in intraday trading on Monday, as the company reported disappointing earnings results for its latest quarter.
The Montreal-based tour operator capped an unprecedented year by losing $238.1 million attributable to shareholders in the fourth quarter, with revenues down a stunning 96 per cent from the year before.
“No company is built to operate at close to zero revenue for nine months,” said Jean-Marc Eustache, president and CEO of Transat, on a call with analysts Monday.
“The mere fact that we are still standing is attributable to how solid a balance sheet we had before the pandemic hit and how quickly we adjusted ourselves to protect our cash.”
The earnings call comes a day before Transat’s board is scheduled to meet to vote on whether to approve its acquisition by Air Canada. In August 2019, shareholders approved a previous offer from Air Canada, but the sale price was lowered in October to $5 from $18 per share.
On the call, Eustache reiterated his recommendation that shareholders approve the transaction, but said the company was taking steps to improve its cash position should the deal fail to close.
“We have said many times in the past that the alliance with Air Canada was the best way forward for Transat and all of the stakeholders, and that is even more true in the context of the pandemic,” Eustache said.
In a memo after the earnings were released, Desjardins analyst Benoit Poirier said Transat’s future was uncertain if the deal didn’t go through, adding that the company’s initiatives to preserve cash were weaker than expected.
Transat says it expects regulatory approval for its takeover by Air Canada on Feb. 15.
Transat’s earnings reflect the toll that the pandemic has taken on Canada’s airlines, which are currently lobbying Ottawa for industry-specific financial assistance. The federal government has said that any aid is contingent on airlines refunding passengers for flights cancelled due to the pandemic.
Various consumer groups have demanded that the airlines issue full refunds rather than travel vouchers, but the airlines have yet to budge.
Airlines have responded to the slowdown in demand by slashing routes. Last week, Air Canada said it would cancel some routes in Atlantic Canada and suspend others temporarily — a move that local airport operators said would be devastating for the region’s economy.
Eustache said Monday that the lack of assistance from Ottawa means that foreign competitors will be better positioned than domestic airlines to take advantage of a recovery in demand for air travel once the public health situation improves.
Transat said the quarterly loss amounted to $6.31 per diluted share, compared with a profit of 62 cents per share or $23 million in the fourth quarter of 2019.
The adjusted loss was $156.4 million or $4.14 per share, compared with an adjusted profit of $30.1 million or 80 cents per share in the prior year’s quarter.
Revenues for the three months ended Oct. 31 were $28.4 million, down $664.8 million from a year earlier on dramatically reduced service.
Transat’s adjusted loss was expected to be $2.35 per share on $138.4 million of revenues, according to data firm Refinitiv.
For the full year, Transat lost $496.5 million or $13.15 per share on $1.3 billion of revenues. That compared with a loss of $32.3 million or 86 cents per share in 2019 when revenues were $2.9 billion.
This report by The Canadian Press was first published Dec. 14, 2020.
Companies in this story: (TSX:TRZ, TSX:AC)
Jon Victor, The Canadian Press