Four new Airbus A321XLR aircraft on the way for Air Transat

At the 1-year mark, Transat sounds the alarm

MONTREAL — For one year Canada’s airlines have been hit with sharply decreased demand fuelled by some of the strictest travel restrictions in the world.

Now with its sale to Air Canada unable to proceed until the European Commission gives the OK – and that’s a decision that the EC has said will only come in the first half of 2021 – and with no announcement yet on an industry bailout, Transat is sounding the alarm.

“As at January 31, 2021, there exists material uncertainty that may cast significant doubt on the Corporation’s ability to continue as a going concern,” says Transat in its Q1 2021 results, released today.

Transat’s Q1 results included revenues of $41.9 million, an adjusted operating loss of $53.6 million (operating loss of $98.0 million), and an adjusted net loss of $109 million (net loss attributable to shareholders, $60.5 million).

Meanwhile as of Jan. 31, 2021, Transat had $302.8 million in cash and cash equivalents. Transat says that if its transaction with Air Canada falls through, Transat will have to find at least $500 million in financing in 2021 to keep operations going.

Transat adds that its management is actively seeking to secure financing and is continuing discussions with potential lenders, including federal and provincial government authorities.

That assistance could come in the form of financial aid from the federal government. Since November 2020 when then-Transport Minister Marc Garneau first announced the start of discussions, there have been few concrete details on the airline industry bailout, however indications are that talks are in the home stretch.



The Canadian government gave its go-ahead to the Air Canada – Transat deal on Feb. 11, however the EC, which has already missed its December 2020 deadline to make a decision, gave notice that it won’t make a ruling until only the first half of 2021.

Meanwhile the outside date for the consummation of the deal came and went on Feb. 15, 2021, and while neither party has backed out, each is entitled terminate the deal at any time. The deal, first announced in May 2019 for $520 million and later upped to $720 million, has since dropped to $190 million amid the pandemic.

Another complication is the bid from Pierre Karl Peladeau’s investment firm, Gestion. Peladeau, who has long signalled his interest in the company, said last month that he still has the interest and the resources to buy Transat should the proposed Air Canada acquisition fall through.

Peladeau has made a bid of $5 per share, however Transat notes in its Q1 results that “no evidence of a binding, fully committed financing has been provided.” Transat says discussions with Gestion could only take place if its arrangement agreement with Air Canada falls through.




Deposits from customers for future travel amounted to $573.6 million, compared with $809.1 million as at January 31, 2020, a decrease of $235.5 million, says Transat.

Issuing future travel credits, like every Canadian airline did, exposes companies to litigation and enforcement measures by legislative and regulatory authorities, including class action suits, “which the Corporation intends to contest in good faith and with good reason,” says Transat.

Customer deposits as at Jan. 31, 2021 included these travel credits amounting to $519.1 million, says the company.

Transat also spoke to its hotel strategy in its Q1 results. For several years Transat has been pursuing more vertical integration with its own sun destination resorts. In the wake of the pandemic and its proposed acquisition by Air Canada, Transat says it has agreed to limit its commitments and expenses on its hotel plan and “is currently considering different options for its hotel strategy.”



On Jan. 29, 2021 the federal government announced that Canada’s four major airlines – Air Canada, Transat, Sunwing and WestJet – had agreed to suspend winter sun flights until April 30, 2021.

Transat President and CEO Jean-Marc Eustache says Transat is looking ahead to its summer schedule and resuming sun flights for winter 2021-22.

“These results are for a quarter where it was once again impossible to operate our business in a sustainable manner,” he says. “With the arrival of vaccines, we’re now preparing ourselves for a resumption of operations in the summer and particularly next winter. Our priority for the current quarter, while continuing to work on obtaining EU approval, is to secure financing, finalize our recovery plan and review all our options in the event the transaction with Air Canada will not take place.”

Transat’s Q1 statement also adds that while the availability of a vaccine makes it possible to hope for the resumption of operations at a certain level during 2021, Transat does not expect such level to reach the pre-pandemic level before 2023, in the best case scenario.


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