Canadian leisure carrier Air Transat is “closely analysing” the escalating trade war from US President Donald Trump, as souring consumer sentiment may affect the airline’s business.
Chief executive Annick Guerard said during Transat’s fiscal first-quarter earnings call that the carrier is watching warily for “any potential impact of tariffs”, while noting that its Europe-centric transatlantic network has limited direct exposure to the US market.
Air Transat flies to two destinations in Florida – Orlando and Fort Lauderdale – and no other US cities. Those routes represent about 3% of its passenger capacity as measured in available seat kilometres.
“However, the negative effects of a trade dispute with the US could have multiple impacts, with two key areas of concern,” Guerard says.
She points to the depreciation of the Canadian dollar “already underway” as a factor raising Transat’s operational costs – “particularly for fuel and aircraft leasing, which are priced in US dollars”, she says.
One Canadian dollar was worth $0.69 USD midday on 13 March, amid concerns that it could weaken further as a result of the economic squeeze from the USA.
Transat’s foremost concern, however, is the gloomy economic outlook that has sparked recession fears in the US and abroad, with market indexes decreasing sharply in recent days and consumers tightening spending.
”Even more critical is the broader economic uncertainty that such a dispute is creating, affecting consumer confidence and, in turn, potentially impacting travel demand,” Guerard says. “We recognise this is a highly volatile environment. We are closely monitoring the evolution and continue to factor it into our decision-making and forecasting processes.”
Transat has yet to see a negative impact on its booking trends, though Guerard notes that it is currently entering the busiest time of year for booking summer air travel.
”We are well aware that the current environment is affecting overall consumer confidence, and this could eventually affect travel demand,” she says. “But we haven’t seen any impact over the last week on our bookings.”
Guerard adds that Transat’s leadership team ”would not be surprised” if the company benefits from more last-minute bookings than usual as hesistant consumers take a similar wait-and-see approach.
Transat, which has long struggled to maintain profitability, reports a C$123 million ($85 million) loss during the three-month period ending 31 January.
That compares with C$61 million loss during the same stretch last year.
