Transat AT, the parent of Canadian leisure operator Air Transat, has posted lower fiscal third-quarter earnings as aircraft availability due to Pratt & Whitney engine issues and lower yields put pressure on the company.
The Montreal-based carrier told investors on 12 September that “year-to-date financial performance has been below expectations”. Fiscal third-quarter revenue was slightly down at C$736 million ($542 million). Adjusted EBITDA was C$41.3 million, compared with C$114.8 million a year ago.
The airline reports an adjusted net loss of C$43 million, compared with a profit of C$42 million during the same period in 2023.
“The intensified competition, industry-wide overcapacity, inefficiencies resulting from the Pratt & Whitney [geared turbofan] engine issue affecting revenue management and the economic uncertainty put downward pressure on airline unit revenues,” the company says.
“Demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty,” adds chief executive Annick Guerard. “Capacity increases throughout the industry also added to competitive pressure and negatively impacted yields.”
The airline has launched a new corporate plan called “Elevation” after a strategic review this summer, which is designed to drive long-term growth and is targeting a $100 million improvement in annual adjusted EBITDA over the next 18 months.
“The programme… aims for a complete review of operations and business practices,” Guerard adds. “Its objective is to accelerate the implementation of enhanced tools and processes for our teams, in order to optimise overall execution and efficiency.”
The airline’s profitability “remains affected” by costs related to capacity deployment and the accelerated inspections of Pratt & Whitney GTF engines – an issue that has affected the entire industry for more than a year now.
“We have agreed to a financial compensation from Pratt & Whitney relating to operational disruptions during the 2023-2024 period,” Guerard says. “Such financial compensation, which is mostly in the form of credits, will be applied to the purchase of additional spare engines, which we intend to monetise through a sale and leaseback transaction.”
The airline says its fleet will be impacted by grounded aircraft “through 2025 and beyond”.
During the fiscal third quarter, five aircraft were grounded, and currently six are unable to fly.
“This number is expected to remain stable through fiscal 2025, reflecting an improvement over the previous estimate of eight,” the company adds.
Full-year 2024 capacity is expected to increase 9.9%, and the company is expecting no new aircraft deliveries through 2025. Transat currently has 43 aircraft in its fleet, rising to 44 during the upcoming northern hemisphere’s winter travel season.
