Transat comes off second best summer ever
The viewpoint in the Eiffel Tower.

Transat comes off second best summer ever

MONTREAL — Transat A.T. Inc. is coming off its second best summer ever posting revenues of $844.7 million for the quarter ended Oct. 31 compared with $808.6 million in 2013, an increase of $36.1 million, or 4.5%.

The company also recorded adjusted operating income of $72.9 million compared with $80.6 million in 2013; and net income of $30.6 million compared with $54.7 million in 2013. Before non-operating items, Transat reported adjusted net income of $49.4 million in 2014 compared with $54.8 million in 2013.

“We recorded very good results on the transatlantic market, and we recorded a profit on sun destinations and in France. In spite of a 10% increase in supply on our European routes, our numbers for the summer are among our best,” said Jean-Marc Eustache, Transat’s President and Chief Executive Officer, adding: “In the entire history of the company, we’ve done better only once, last year, which was a record. We delivered on all fronts, including costs, product, marketing, yield management and the outcome is a very satisfying summer season.

“For the year as a whole, our results also reflect initiatives stemming from our cost reduction and margin improvement plan, through which we delivered a favourable variance of $55 million in 2014 compared to 2011, including $20 million in 2014, partially offset by the decrease of the Canadian dollar and market conditions.”

Eustache said the broad guidelines of Transat’s strategic plan for 2015-2017 will be unveiled in March.

Revenues of North American business units, which are generated by sales in Canada and abroad, increased by $28.8 million (5.0%) compared with the same period in 2013. The increase stemmed from an increase of 3.3% in the number of travellers and higher average selling prices. During the quarter, the company’s capacity was similar to the previous year on the transatlantic market, and up by 7% on sun destinations. North American business units recorded an adjusted operating income of $55.5 million, compared with $69.1 million in 2013. The decline in value of the Canadian dollar versus the U.S. dollar, the euro and the pound led to an increase in operating expenses, partially offset by the company’s efforts to increase efficiency, but the decrease in adjusted operating income is attributable above all to the impact of a substantial increase in capacity on the transatlantic market.

Compared with 2013, revenues of European business units, which are generated by sales in Europe and in Canada, increased by $7.2 million (3.0%), owing to a 15.1% increase in the number of travellers, mainly in the medium-haul market segment, and to the strength of the euro and pound against the Canadian dollar. Measured in local currencies, average selling prices were slightly lower than in the same period in 2013, due to variances of the product mix. European operations generated an adjusted operating income of $17.4 million, compared with $11.5 million in 2013.

For fiscal 2014, the company posted revenues of $3.8 billion, compared with $3.6 billion in 2013, and an adjusted operating income of $91.8 million, compared with $116.6 million in 2013. The impact of the company’s decision to reduce capacity in its sun destinations, transatlantic and France markets and of lower load factors was offset by higher average selling prices and the conversion in Canadian dollars of revenues generated abroad (given the increase in value of the euro and pound against the Canadian dollar). A significant portion of the company’s expenses is in U.S. dollars, euros and pounds.

The increase in value of those currencies against the Canadian dollar led to increased operating expenses. The combined effect of increased selling prices plus efficiency gains was not sufficient to entirely offset the effects of those expense increases.