Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Transat AT Inc (TRZBF, Financial) reported customer traffic growth of nearly 3% in the third quarter and 10% for the first nine months of the year, indicating solid demand for leisure travel.
- The company launched the first phase of a joint venture with Porter Airlines, which has doubled the number of connecting passengers compared to the previous year.
- Transat AT Inc (TRZBF) recorded a significant increase in on-time performance and customer satisfaction scores, reflecting improved operational control and customer service.
- The company has initiated the Elevation Program, targeting a $100 million improvement in annual adjusted EBITDA over the next 18 months through various revenue and cost reduction initiatives.
- Transat AT Inc (TRZBF) received a financial compensation agreement with Pratt & Whitney for grounded aircraft, which includes two additional spare engines to mitigate future risks.
Negative Points
- Transat AT Inc (TRZBF) faced a challenging market environment characterized by oversupply, leading to strong pressure on earnings and a 9.7% decrease in yield compared to the previous year.
- The company reported a net loss of $40 million in the third quarter of 2024, compared to a net income of $57 million in the same period in 2023.
- Higher fuel expenses, increased maintenance costs, and inefficiencies from the Pratt & Whitney engine issue negatively impacted adjusted EBITDA.
- Transat AT Inc (TRZBF) experienced intensified competition and industry-wide overcapacity, which applied downward pressure on yields.
- The company's balance sheet remains over-leveraged due to emergency repayable loans received during the pandemic, affecting its ability to attract capital and compete effectively.
Q & A Highlights
Q: Can you provide more details on the $100 million EBITDA improvement target from the Elevation Program?
A: Annick Guerard, President and CEO, explained that the Elevation Program is driven by strategic priorities and operational focus in response to market conditions and competitive pressures. The program includes initiatives like optimizing pricing through AI, reducing external spend, and improving productivity. The company is confident in achieving the $100 million target with the support of external experts and a dedicated Elevation Management Office.
Q: What is the expected EBITDA margin for Transat in a more normalized market?
A: Jean-Francois Pruneau, CFO, stated that the target is to achieve an EBITDA margin beyond double digits, aiming for 10% or more.
Q: How is the yield environment affecting Transat, and have there been any recent changes?
A: Annick Guerard noted that yields and load factors were similar to Q3 up to mid-August, but there has been significant improvement recently, especially in September and October, with stronger demand for travel to Europe. This improvement is partly due to factors like the post-Olympic effect on France.
Q: What are the plans for Transat's capacity in 2025, and how will it affect operations?
A: Annick Guerard mentioned that there will be no additional aircraft added in 2025, with a small capacity growth of 3.7% in winter and flat for summer. The focus will be on stabilizing operations and improving cost efficiency and customer satisfaction, moving away from disruptions experienced in 2024.
Q: How is the partnership with Porter Airlines progressing, and are there any challenges?
A: Annick Guerard reported that the joint venture with Porter Airlines has doubled the number of connecting passengers compared to the previous year. The partnership is progressing well, with significant benefits expected to be realized by 2026. There are no negative impacts from Porter's capacity challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
