Air Transat Posts Net Loss

[Gear_Down]

https://www.bnnbloomberg.ca/business/co ... -95m-toll/

[Hangry]

No hate, but what else is new. Transat couldn’t make money pre covid. They certainly aren’t going to turn a profit these days.

[Gear_Down]

I saw the writing on the wall and decided to leave in summer 2025.

[Realitychex]

Transat is once again back at the tax payer trough, this time with a cheap $150m, tax payer subsidized, "loan" that I'd wager will never be repaid.

To give an indication of just how bad things are at Transat, they managed to get $125m of the $150m paid immediately in late July, even though the LASR Overview page states:

Size / Principal Amount – The maximum aggregate loan amount available to an eligible borrower is $150 million. The facility amount will be based on CEEFC’s assessment of the amount required to offset the impact of increased aviation fuel costs from May 1st to November 1st, 2026, relative to the same period in 2025. The loan may be advanced in monthly tranches during the availability period ending November 15, 2026.

https://ceefc-cfuec.ca/lasr-overview/

Assuming the Feds will cap the "Loan" at $150m, ( and I wouldn't assume anything), that means the last $25m will be distributed in 3 monthly tranches of roughly $8.3m on Aug 1, Sept 1 and Oct 1.

So Transat pockets $150,000,000 for 96 days of ops as of today, July 28th, or $1.562m a day taxpayer subsidy. On a peak day in the summer, (ie Sunday 26 July), Transat operated 19,862 seats.

I wonder if the $78.67 per seat cash subsidy would be better spent on things like health care or education?

How many life saving MRI's could occur with $150m?

And what happens to Transat come Nov 1st when the cash dries up and aviation fuel is still us$3.60+ a gallon?

And who's next at the trough?

Two guesses. It ain't rocket science.

[rudder]

Market cap $95M. Feds loan it money because nobody else will, at least not on reasonable terms.

Lots of excuses for financial performance included in the Q2 report. Some of the causes may mitigate with time. Others, possibly not. Yet there is still a commitment to growth in capacity.

TRZ seems to live in its own little world largely exempt from financial reality. The feds seems to be the greatest enabler.

The balance sheet needs to be recapitalized (debt forgiveness is not recapitalization) and there needs to be new ownership. Peladeau was rebuffed. AC withdrew.

Pretty all that is left is Porter or WJ. That means Deluce or ONEX. If I had to pick the devil to dance with it would be ONEX. Less risk. Greater access to capital. Stronger long term ownership.

Porter fits better commercially but it doesn’t fix the immediate and long term requirement for cash. Neither one addresses the ‘Quebec based solution’.

Perhaps a trip through CCAA. Trump has 2 1/2 more years so uncertainty will prevail.

Good luck to the TS staff. Great product. Great service. Great employee morale. But that doesn’t fix the underlying issues.

[TFTMB heavy]

Market cap $95M. Feds loan it money because nobody else will, at least not on reasonable terms.

Lots of excuses for financial performance included in the Q2 report. Some of the causes may mitigate with time. Others, possibly not. Yet there is still a commitment to growth in capacity.

TRZ seems to live in its own little world largely exempt from financial reality. The feds seems to be the greatest enabler.

The balance sheet needs to be recapitalized (debt forgiveness is not recapitalization) and there needs to be new ownership. Peladeau was rebuffed. AC withdrew.

Pretty all that is left is Porter or WJ. That means Deluce or ONEX. If I had to pick the devil to dance with it would be ONEX. Less risk. Greater access to capital. Stronger long term ownership.

Porter fits better commercially but it doesn’t fix the immediate and long term requirement for cash. Neither one addresses the ‘Quebec based solution’.

Perhaps a trip through CCAA. Trump has 2 1/2 more years so uncertainty will prevail.

Good luck to the TS staff. Great product. Great service. Great employee morale. But that doesn’t fix the underlying issues.

There's always some chatter about AC coming back around but the sources are never reliable. That being said they could still come around. TS is lobbying hard, apparently, to allow foreign ownership up to 49% by one single entity.

Indeed they were not making money like the other airlines pre-COVID but at least there was no debt back then.

It'll be 40 years next year for this Airline.

[Realitychex]

AC's takeover attempt of Transat in May 2019 was predictably shot down in flames by EU regulators who, correctly, determined that an AC/TRZ link up would have very negative competitive implications in the marketplace.

Consider that on a recent peak day, 85% of Transat's capacity, (close to 66m ASM's), was to Europe, with just .78% of capacity, (yes, under 1%!), operating domestically. A single 737-800 YYZ-YYC r/t generates considerably more ASM's than Transat's entire daily domestic operations.

At just under 20,000 seats a day, they have a near identical footprint to Flair, another aviation afterthought.

Europe's concerns will not have moved an inch; they'll require all kinds of undertakings that would negate any benefits accruing from a takeover, (it wouldn't be a "merger").

Domestically, Transat isn't even in the game. If they stopped flying tomorrow, few outside Toronto and Montreal would even notice.

If Transat shut down late 3Q, all their capacity would be replaced by others with little more than some temporary minor inconveniences.

Fuel is currently averaging US$3.90 a gallon.

Only an eternal optimist would believe the middle east is going to settle down anytime soon.

Who will be Transat's next lender of last resort?

[rudder]

https://www.lapresse.ca/affaires/entrep ... ottawa.php

https://www.ledevoir.com/economie/10032 ... ns-transat?

Sorry to the anglophones as the articles are from two QC publications. They do speak to the extra run rate for cash flow at TRZ due to spiked spot fuel prices.

[Gear_Down]

https://www.lapresse.ca/affaires/entrep ... ottawa.php

https://www.ledevoir.com/economie/10032 ... ns-transat?

Sorry to the anglophones as the articles are from two QC publications. They do speak to the extra run rate for cash flow at TRZ due to spiked spot fuel prices.

Thanks for sharing, Rudder.

[Babar350]

TS is lobbying hard, apparently, to allow foreign ownership up to 49% by one single entity.

This is the most likely way of clearing the debt and growing.

Some are very interested, but TRZ’s lack of business class is a no-go for them.

[TFTMB heavy]

TS is lobbying hard, apparently, to allow foreign ownership up to 49% by one single entity.

This is the most likely way of clearing the debt and growing.

Some are very interested, but TRZ’s lack of business class is a no-go for them.

I expect that cabin classes will change very soon.

[DanWEC]

The first upgraded cabins with expanded first/club/business class will arrive in 2027.

The problem with TRZ isn't getting people in the door- revenue goes up every year, and global load factors are respectably high- it's that they aren't charging enough.
Back when I ran restaurants, an old owner often said "If you give away cheap food, you'll have a lineup around the block, and be closed in a week."
They may have established that their pricing accurately reflects the value of the product and economic status of their core demographic, and are hesitant to strengthen pricing in the face of competition- in which case they need to be making the move upmarket towards a more premium offering.
Personally, I think there have been genuine missed opportunities to capture more market share from populations with deeper pockets, such as YOW, YYZ region, etc.
The re-expansion back from the covid efficiency shrink was always part of the long term strategy, but it's been progressing very slowly.

Of course, they've been hamstrung with tail availability and I'm just armchair quarterbacking. They also have a limited ability to react to commodity pricing such as fuel due to the nature of advance vacation bookings.
They have a talented C-suite, a strong board made of very reputable execs- as well as about 25% CEEFC ownership. They have a fantastic reputation for product delivery, and despite constant headwinds, they're still here, and likely will be for a long time.

[cdnavater]

The first upgraded cabins with expanded first/club/business class will arrive in 2027.

The problem with TRZ isn't getting people in the door- revenue goes up every year, and global load factors are respectably high- it's that they aren't charging enough.
Back when I ran restaurants, an old owner often said "If you give away cheap food, you'll have a lineup around the block, and be closed in a week."
They may have established that their pricing accurately reflects the value of the product and economic status of their core demographic, and are hesitant to strengthen pricing in the face of competition- in which case they need to be making the move upmarket towards a more premium offering.
Personally, I think there have been genuine missed opportunities to capture more market share from populations with deeper pockets, such as YOW, YYZ region, etc.
The re-expansion back from the covid efficiency shrink was always part of the long term strategy, but it's been progressing very slowly.

Of course, they've been hamstrung with tail availability and I'm just armchair quarterbacking. They also have a limited ability to react to commodity pricing such as fuel due to the nature of advance vacation bookings.
They have a talented C-suite, a strong board made of very reputable execs- as well as about 25% CEEFC ownership. They have a fantastic reputation for product delivery, and despite constant headwinds, they're still here, and likely will be for a long time.

That is hard to say, at some point the answer will be no to a bail out package, I’m not sure 2027 will be soon enough for the cabin change.
A few key things going on, airlines are offering deep discounts on airfare right now despite the much higher operating costs, this is not good for AT, they posted a rolling 12 months net loss and forecast of continued loosing for at least three years.
They also owe nearly 1 billion dollars with a market cap of 81.6 million cdn.
The company is currently unprofitable and not forecast to become profitable over the next 3 years.

“Trailing 12-month net loss: CA$228m
Forecast net loss in 3 years: CA$15m
This is considered a minor risk. Companies that are not profitable are more likely to be burning through cash and less likely to be well established. Ultimately, shareholders want to see a good return on their investment and that generally comes from sharing in the company's profits. Without profits, the company is under pressure to grow significantly while potentially having to reduce costs and possibly needing to take on debt or raise capital to remain afloat.

Currently, the following risks have been identified for the company:

Major Risk

Negative equity (-CA$858m).”

Currently unprofitable and not forecast to become profitable over next 3 years (CA$15m net loss in 3 years).
Market cap is less than US$100m (CA$81.6m market cap, or US$58.8m).

[Brakefans]

The first upgraded cabins with expanded first/club/business class will arrive in 2027.

The problem with TRZ isn't getting people in the door- revenue goes up every year, and global load factors are respectably high- it's that they aren't charging enough.
Back when I ran restaurants, an old owner often said "If you give away cheap food, you'll have a lineup around the block, and be closed in a week."
They may have established that their pricing accurately reflects the value of the product and economic status of their core demographic, and are hesitant to strengthen pricing in the face of competition- in which case they need to be making the move upmarket towards a more premium offering.
Personally, I think there have been genuine missed opportunities to capture more market share from populations with deeper pockets, such as YOW, YYZ region, etc.
The re-expansion back from the covid efficiency shrink was always part of the long term strategy, but it's been progressing very slowly.

Of course, they've been hamstrung with tail availability and I'm just armchair quarterbacking. They also have a limited ability to react to commodity pricing such as fuel due to the nature of advance vacation bookings.
They have a talented C-suite, a strong board made of very reputable execs- as well as about 25% CEEFC ownership. They have a fantastic reputation for product delivery, and despite constant headwinds, they're still here, and likely will be for a long time.

They're stuck. If they don't raise fares, they don't cover their costs. If they raise fares, the load factor drops. Annick said it herself on the calls, their core customers on most markets are very price sensitive. Transat's real edge is lower costs but that doesn't matter when Europe and the South are flooded with seats.

Going after premium traffic and launching a loyalty program makes total sense. You want those passengers who fly regardless of price. I just think it's too late.

Letting Transat fail is a political non-starter during election season but what happens after the Quebec elections?

On fuel and commodity prices every airline is in the same boat but it hits Transat harder because of who their customers are.

I don't buy the talented C-suite claim. Multiple CFO changes the last few years and people leaving, Hennebelle even went to Air Canada.

Reputation-wise I agree with you. You almost never see bad press about them stranding people or refusing to compensate. That has to cost them a fortune.

Last point: Annick said zero capacity growth this winter and only a trickle of deliveries over the next couple years. That looks like slow death to me. In this industry the only way to stay ahead of inflation and debt is constant growth

[330heavy]

I don't buy the price sensitive customer line. Every airline has raised fares, TS has the same fares as 1 year ago, as per shareholder call. A random search of flights compared to AC shows often a large discount, in some cases over $70,000 for a 90% full flight, cheaper (loss) than AC. Costomers will go to whoever is $5 cheaper, and most certainly when over $500 on an economy seat. Additionally, they continue to imply the pilot contract as a source of loss, when it was a tentative agreement, they told shareholders, that it was reasonable and affordable, so which is it?.

I use to be hopeful of this management, but less so now. I'm not fan of PKP but he was right during covid TS needed to be better at pricing fares, and again recently of a board of directors overhaul.

Also, in 2021/ 2022, the idea of loyalty program and better cabin product by employees was floated to them and dismissed as "our customers aren't usually repeating enough for a loyalty program. Now its catch-up with the wrong financial company of desjardins.

We've been limping along since covid restart. When burning through 1 million dollars a day now, that 450 million in govt loan will last only so long. Price of jet fuel isn't going to come down anytime soon. So a new direction and vision is required, as status quo will not cut it. I also wouldn't count on continued bail out/ loan forgiveness from the Cdn or QC gov't

[DanWEC]

What they need is an equity partner and a large capital injection to drive the processes faster. Buy more slots and invest in more new routes, as they usually take a while to become profitable. Have to capture different markets and strengthen pricing. Need more tails too. It's been said that the established benchmark in Canada is that you need 50 aircraft in order to stay viable.
Again, it's easy to spout off from where I'm sitting, and I'm sure none of this is news to the board. I'm sure they'll manage- they always do.