Transat Delivers Strong Q4 and Fiscal 2023
Operating Results
Adjusted EBITDA1 margin
above target and solid free cash flow for the year
Fiscal
2024 adjusted EBITDA1 margin target of 7.5-9% and focus
on improving capital structure
For the fourth quarter 2023:
- Revenues of $764.5 million
- Adjusted EBITDA1 of $89.0
million
- Operating income of $44.7
million
- Net income of $3.2 million
For the year 2023:
- Revenues of $3,048.4 million
- Adjusted EBITDA1 of $263.3
million
- Operating income of $89.7
million
- Net loss of $25.3 million
Cash flow and financial position:
- Cash flow from operating activities of $321.8 million and free cash flow1 of
$162.4 million for the year,
partially used to reimburse $53.0
million in long-term debt
- Cash and cash equivalents of $435.6
million as at October 31,
2023, up from $322.5 million
last year
- Customer deposits for future travel of $754.2 million, up 25% from October 31, 2022
MONTREAL, Dec. 14,
2023 /CNW/ - Transat A.T. Inc., a leisure travel
reference worldwide, operating as an air carrier under the Air
Transat brand, announced today its results for the fourth quarter
and fiscal year ended October 31,
2023.
"Driven by a strong execution of its strategic plan, Transat has
solidified its positioning in the Canadian leisure travel industry.
As industry dynamics gathered momentum throughout the year, our
team focused on meeting growing demand and improving operating
efficiency, allowing us to end fiscal 2023 with financial results
that exceeded the upper range of our profitability target. Driven
by robust yields, we delivered a strong fourth-quarter performance
with revenues of $764.5 million, 10%
above 2019 levels on 7% less capacity and with similar load
factors, while adjusted EBITDA1 reached $89.0 million, culminating a solid second half.
We also generated free cash flow1 of $162.4 million in fiscal 2023, enabling us to
reduce debt and conclude the year with an improved cash position,"
said Annick Guérard, President and Chief Executive Officer of
Transat.
"Looking ahead to the new fiscal year, Transat will continue
executing on its strategic plan. Our recently announced joint
venture with Porter Airlines will be a key element in accelerating
growth, as we expect this agreement to gradually increase passenger
traffic. Meanwhile, a greater frequency on leading routes, the
launch of new destinations and ongoing efforts to
optimize fleet utilization will raise our capacity by
approximately 19% in 2024. Given the current operating environment,
we expect our adjusted EBITDA1 margin to be in the range
of 7.5% to 9% in fiscal 2024, which would exceed Transat's
historical levels. In addition, we intend to further improve our
capital structure through sustained free cash flow generation,"
added Ms. Guérard.
Fourth-quarter highlights
- For the fourth quarter, the Corporation generated $764.5 million in revenues, up $191.3 million from $573.1
million for the corresponding period of 2022.
- Adjusted EBITDA1 amounted to $89.0 million, up $100.6
million from a loss of $11.5
million in 2022.
- Transat recorded operating income of $44.7 million, an improvement of $93.6 million from a $48.8
million loss in 2022.
- Net income amounted to $3.2
million ($0.08 per share),
compared with a net loss of $126.2
million ($3.32 per share) for
the corresponding quarter of last year.
- Excluding non-operating items, Transat reported an adjusted net
income1 of $15.7 million
($0.41 per share) for the fourth
quarter of 2023, compared with an adjusted net loss1 of
$75.9 million ($2.00 per share) in 2022.
Fiscal year highlights
- For the full year, the Corporation recorded revenues of
$3,048.4 million, up $1,406.3 million from $1,642.0 million in 2022.
- Transat reported an adjusted EBITDA1 of $263.3 million, an improvement of $420.0 million compared with a loss of
$156.8 million in 2022.
- The Corporation recorded an operating income of $89.7 million, an improvement of $393.2 million compared with a loss of
$303.4 million in 2022.
- The net loss amounted to $25.3
million ($0.66 per share),
compared with $445.3 million
($11.77 per share), for the previous
year.
- Excluding non-operating items, Transat reported an adjusted net
loss1 of $11.5 million
($0.30 per share) for the year ended
October 31, 2023, compared with
$403.7 million ($10.67 per share) in 2022.
Cash flow and financial position
Driven by improved profitability and better working capital
management, cash flow from operating activities amounted to
$321.8 million in fiscal 2023,
compared with negative $177.9 million last year. After accounting
for investing activities and repayment of lease liabilities, free
cash flow1 reached $162.4 million in fiscal 2023, versus
negative $320.0 million a year
earlier. Free cash flow1 includes proceeds from the land
sale in Mexico received in the
fourth quarter and applied to reduce debt by $53.0 million.
As at October 31, 2023, cash and
cash equivalents amounted to $435.6
million, an increase of $113.1
million from $322.5 million at
the same date in 2022. Cash and cash equivalents in trust or
otherwise reserved mainly resulting from travel package sales also
improved year-over-year reaching $421.0
million as at October 31,
2023, compared with $344.3
million at the same date in 2022.
Reflecting healthy demand and selling prices in recent periods,
customer deposits for future travel stood at $754.2 million as at October 31, 2023, up 25% from October 31, 2022.
Outlook
To date, load factors for the winter season are 1.3 percentage
points lower than in fiscal 2023, while airline unit revenues,
expressed in yield, remain 2.4% higher. Current demand and pricing
conditions should allow the Corporation to cope with a cost
environment that remains volatile and subject to inflationary
pressures.
Considering the current operating environment, the Corporation
is setting a fiscal 2024 adjusted EBITDA1 margin
target range of 7.5% to 9%, which would exceed Transat's historical
levels. For fiscal 2024, the Corporation intends to increase
available capacity by 19% through recent and planned aircraft
additions, as well as further improvements in fleet utilization.
This capacity will mainly be deployed to expand frequency and
annualize best performing routes and to service recently announced
new destinations.
In making these forward-looking statements, the Corporation is
making the following assumptions for the fiscal year: weak GDP
growth in Canada, an exchange rate
of C$1.33 to US$1 and an average price per gallon of jet fuel
of C$4.00. It also assumes that we
reach a satisfactory resolution to renew the collective bargaining
agreement with flight attendants and that the Pratt & Whitney
engine issue follows the planned schedule, which currently involves
three grounded aircraft, and should increase to five or six
aircraft by the end of the fiscal year.
Additional Information
The results were affected by non-operating items, as summarized
in the following table:
Highlights and non-IFRS financial
measures
(In thousands of
Canadian dollars)
|
Fourth
quarter
|
Year
|
2023
|
2022
|
2023
|
2022
|
Revenues
|
764,467
|
573,139
|
3,048,352
|
1,642,038
|
|
|
|
|
|
Operating income
(loss)
|
44,721
|
(48,848)
|
89,733
|
(303,420)
|
Restructuring
costs
|
276
|
847
|
3,626
|
847
|
Depreciation and
amortization
|
48,732
|
42,068
|
186,355
|
154,212
|
Premiums related to
derivatives that matured during
the period
|
(4,722)
|
(5,612)
|
(16,450)
|
(8,391)
|
Adjusted operating
income (loss)1
|
89,007
|
(11,545)
|
263,264
|
(156,752)
|
|
|
|
|
|
Net income
(loss)
|
3,195
|
(126,231)
|
(25,292)
|
(445,324)
|
Asset
impairment
|
—
|
783
|
4,592
|
783
|
Restructuring
costs
|
276
|
847
|
3,626
|
847
|
Change in fair value
of derivatives
|
(7,268)
|
1,057
|
4,434
|
9,685
|
Revaluation of
liability related to warrants
|
(35,421)
|
(8,292)
|
(3,544)
|
(21,989)
|
Foreign exchange
loss
|
59,392
|
64,435
|
23,378
|
92,150
|
Write-off of deferred
financing costs
|
12,743
|
—
|
12,743
|
—
|
Loss on business
disposal
|
341
|
—
|
341
|
—
|
Foreign exchange gain
on business disposal
|
(7,275)
|
—
|
(7,275)
|
—
|
Loss (gain) on asset
disposals
|
—
|
71
|
(2,511)
|
(3,934)
|
Gain on long-term debt
modification
|
(5,585)
|
—
|
(5,585)
|
(22,191)
|
Premiums related to
derivatives that matured during
the period
|
(4,722)
|
(5,612)
|
(16,450)
|
(8,391)
|
Tax recovery on ABCP
losses
|
—
|
(2,988)
|
—
|
(5,347)
|
Adjusted net income
(loss)1
|
15,676
|
(75,930)
|
(11,543)
|
(403,711)
|
|
|
|
|
|
Diluted earnings (loss)
per share
|
0.08
|
(3.32)
|
(0.66)
|
(11.77)
|
Asset
impairment
|
—
|
0.02
|
0.12
|
0.02
|
Restructuring
costs
|
0.01
|
0.02
|
0.09
|
0.02
|
Change in fair value
of derivatives
|
(0.19)
|
0.03
|
0.12
|
0.26
|
Revaluation of
liability related to warrants
|
(0.92)
|
(0.22)
|
(0.09)
|
(0.58)
|
Foreign exchange
loss
|
1.55
|
1.70
|
0.62
|
2.43
|
Write-off of deferred
financing costs
|
0.33
|
—
|
0.33
|
—
|
Loss on business
disposal
|
0.01
|
—
|
0.01
|
—
|
Foreign exchange gain
on business disposal
|
(0.19)
|
—
|
(0.19)
|
—
|
Loss (gain) on asset
disposals
|
—
|
—
|
(0.07)
|
(0.10)
|
Gain on long-term debt
modification
|
(0.15)
|
—
|
(0.15)
|
(0.59)
|
Premiums related to
derivatives that matured during
the period
|
(0.12)
|
(0.15)
|
(0.43)
|
(0.22)
|
Tax recovery on ABCP
losses
|
—
|
(0.08)
|
—
|
(0.14)
|
Adjusted net
earnings (loss) per share1
|
0.41
|
(2.00)
|
(0.30)
|
(10.67)
|
|
|
|
|
|
|
|
|
As at
October 31, 2023
|
As at
October 31, 2022
|
Cash and cash
equivalents
|
|
|
435,647
|
322,535
|
Undrawn funds from
credit facilities
|
|
|
—
|
100,000
|
Unrestricted
liquidity1
|
|
|
435,647
|
422,535
|
|
|
|
|
|
|
Fourth
quarter
|
Year
|
(In thousands of
Canadian dollars)
|
2023
|
2022
|
Difference
|
2023
|
2022
|
Difference
|
$
|
$
|
$
|
$
|
$
|
$
|
Cash flows related
to operating activities
|
(56,363)
|
(60,061)
|
3,698
|
321,750
|
(177,854)
|
499,604
|
Cash flows related to
investing activities
|
13,961
|
(8,782)
|
22,743
|
(7,935)
|
(33,783)
|
25,848
|
Repayment of lease
liabilities
|
(41,442)
|
(24,736)
|
(16,706)
|
(151,389)
|
(108,336)
|
(43,053)
|
Free cash
flow1
|
(83,844)
|
(93,579)
|
9,735
|
162,426
|
(319,973)
|
482,399
|
About Transat
Founded in Montreal 36 years
ago, Transat has achieved worldwide recognition as a provider of
leisure travel particularly as an airline under the Air Transat
brand. Voted World's Best Leisure Airline by passengers at the 2023
Skytrax World Airline Awards, it flies to international
destinations. By renewing its fleet with the most energy-efficient
aircraft in their category, it is committed to a healthier
environment, knowing that this is essential to its operations and
the destinations it serves. Transat has been Travelife-certified
since 2018. (TSX: TRZ) www.transat.com
(1) Non-IFRS financial measures
Transat prepares its financial statements in accordance with
International Financial Reporting Standards ["IFRS"]. We will
occasionally refer to non-IFRS financial measures in the news
release. These non-IFRS financial measures do not have any meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other issuers. They are intended to
provide additional information and should not be considered as a
substitute for measures of performance prepared in accordance with
IFRS. All dollar figures are in Canadian dollars unless otherwise
indicated.
The following are non-IFRS financial measures used by management
as indicators to evaluate ongoing and recurring operational
performance.
Adjusted operating income (loss) or adjusted
EBITDA: Operating income (loss) before depreciation,
amortization and asset impairment expense, restructuring and
transaction costs and other significant unusual items, and
including premiums related to derivatives that matured during the
period. The Corporation uses this measure to assess the operational
performance of its activities before the aforementioned items to
ensure better comparability of financial results.
Adjusted pre-tax income (loss) or adjusted
EBT: Income (loss) before income tax expense before change in
fair value of derivatives, revaluation of liability related to
warrants, gain (loss) on long-term debt modification,
gain (loss) on business disposals, gain (loss) on asset
disposals, restructuring and transaction costs, write-off of
assets, foreign exchange gain (loss) and other significant unusual
items, and including premiums related to derivatives that matured
during the period. The Corporation uses this measure to assess the
financial performance of its activities before the aforementioned
items to ensure better comparability of financial results.
Adjusted net income (loss): Net
income (loss) before net income (loss) from discontinued
operations, change in fair value of derivatives, revaluation of
liability related to warrants, gain (loss) on long-term debt
modification, gain (loss) on business disposals,
gain (loss) on asset disposals, restructuring and transaction
costs, write-off of assets, foreign exchange gain (loss),
reduction in the carrying amount of deferred tax assets and other
significant unusual items, and including premiums related to
derivatives that matured during the period, net of related taxes.
The Corporation uses this measure to assess the financial
performance of its activities before the aforementioned items to
ensure better comparability of financial results. Adjusted net
income (loss) is also used in calculating the variable
compensation of employees and senior executives.
Adjusted net earnings (loss) per share:
Adjusted net income (loss) divided by the adjusted weighted
average number of outstanding shares used in computing diluted
earnings (loss) per share.
Unrestricted liquidity: The sum of
cash and cash equivalents and available undrawn funds from credit
facilities. The Corporation uses this measure to assess the total
potential cash available in the short term.
Free cash flow: Cash flows related
to operating activities less cash flows related to investing
activities and repayment of lease liabilities. The Corporation uses
this measure to assess the cash that's available to be distributed
in a discretionary way such as repayment of long-term debt or
deferred government grant or distribution of dividend to
shareholders.
Conference call
Fourth-quarter 2023 conference call: Thursday, December 14, 10:00 a.m. To join
the conference call without operator assistance, you may register
and enter your phone number here to receive an instant automated
call back.
You can also dial direct to be entered into the call by an
operator:
Montreal: 514-225-7344
North America (toll-free):
1-888-390-0620
Name of conference: Transat
The conference will also be accessible live via webcast: click here
to register.
An audio replay will be available until December 21, 2023, by dialing 1 888 390-0541
(toll-free in North America),
access code 223355 followed by the pound key (#). The webcast will
remain available for three months following the call.
First-quarter 2024 results will be announced on March 14, 2024.
Caution regarding forward-looking statements
This news release contains certain forward-looking statements
with respect to the Corporation, including those regarding its
results, its financial position and its outlook for the future.
These forward-looking statements are identified by the use of terms
and phrases such as "anticipate" "believe" "could" "estimate"
"expect" "intend" "may" "plan" "potential" "predict" "project"
"will" "would", the negative of these terms and similar
terminology, including references to assumptions. All such
statements are made pursuant to applicable Canadian securities
legislation. Such statements may involve but are not limited to
comments with respect to strategies, expectations, planned
operations or future actions. Forward-looking statements, by their
nature, involve risks and uncertainties that could cause actual
results to differ materially from those contemplated by these
forward-looking statements.
The forward-looking statements may differ materially from
actual results for a number of reasons, including without
limitation, economic conditions, changes in demand due to the
seasonal nature of the business, extreme weather conditions,
climatic or geological disasters, war, political instability, real
or perceived terrorism, outbreaks of epidemics or disease and the
lingering effects of the COVID-19 pandemic, consumer preferences
and consumer habits, consumers' perceptions of the safety of
destination services and aviation safety, demographic trends,
disruptions to the air traffic control system, the cost of
protective, safety and environmental measures, competition, the
Corporation's ability to adequately mitigate the Pratt &
Whitney engine issues, maintain and grow its reputation and brand,
the availability of funding in the future, fluctuations in fuel
prices and exchange rates and interest rates, the Corporation's
dependence on key suppliers, the availability and fluctuation of
costs related to our aircraft, information technology and
telecommunications, cybersecurity risks, changes in legislation,
unfavourable regulatory developments or procedures, pending
litigation and third-party lawsuits, the ability to reduce
operating costs, the Corporation's ability to attract and retain
skilled resources, labour relations, collective bargaining and
labour disputes, pension issues, maintaining insurance coverage at
favourable levels and conditions and at an acceptable cost, and
other risks detailed in the Risks and Uncertainties section of this
MD&A.
The reader is cautioned that the foregoing list of factors is
not exhaustive of the factors that may affect any of the
Corporation's forward-looking statements. The reader is also
cautioned to consider these and other factors carefully and not to
place undue reliance on forward-looking statements.
The forward-looking statements in this news release are based
on a number of assumptions relating to economic and market
conditions as well as the Corporation's operations, financial
position and transactions. Examples of such forward-looking
statements include, but are not limited to, statements
concerning:
- The outlook whereby, the Corporation will be able to meet
its obligations with cash on hand, cash flows from operations and
drawdowns under existing credit facilities.
- The outlook whereby, the current demand and pricing
conditions should allow the Corporation to cope with a cost
environment that remains volatile and subject to inflationary
pressures.
- The outlook whereby, the Corporation is setting a fiscal
2024 adjusted EBITDA1 margin target range
of 7.5% to 9%.
- The outlook whereby, for fiscal 2024, the Corporation
intends to increase available capacity by 19% through recent and
planned aircraft additions, as well as further improvements in
fleet utilization.
In making these statements, the Corporation assumes, among
other things, that the standards and measures for the health and
safety of personnel and travellers imposed by government and
airport authorities will be consistent with those currently in
effect, that workers will continue to be available to the
Corporation, its suppliers and the companies providing passenger
services at the airports, that credit facilities and other terms of
credit extended by its business partners will continue to be made
available as in the past, that management will continue to manage
changes in cash flows to fund working capital requirements for the
full fiscal year and that fuel prices, exchange rates, selling
prices, and hotel and other costs remain stable. If these
assumptions prove incorrect, actual results and developments may
differ materially from those contemplated by the forward-looking
statements contained in this press release.
The Corporation considers that the assumptions on which these
forward-looking statements are based are reasonable.
These statements reflect current expectations regarding
future events and operating performance, speak only as of the date
this news release is issued, and represent the Corporation's
expectations as of that date. For additional information with
respect to these and other factors, see the MD&A for the year
ended October 31, 2023 filed with the Canadian securities
commissions and available on SEDAR at www.sedar.com. The
Corporation disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, other than as required by
applicable securities legislation.
www.transat.com
SOURCE Transat A.T. Inc.