Transat confronts ‘weak outlook’ as stock plummets to six-year low

MONTREAL — Transat A.T. saw its stock drop to a nearly six-year low Thursday as the travel company faces falling profits, higher costs and rising competition from Canadian airlines amid a transition toward sun destinations and beachside resorts.

The share price fell more 9.35 per cent to close at $4.85, its lowest closing since April 2013.

Analyst Benoit Poirier of Desjardins Securities said Transat is confronting a “weak outlook” for the second quarter.

The company has boosted its seat capacity by two per cent compared to a year ago, but the sun destination industry as a whole saw capacity rise 10 per cent, he said.

Meanwhile the travel company reported a loss of $49.6 million in its latest quarter compared with a loss of $3.2 million a year earlier.

It said it was hurt by a rise in operating costs due to the weakening of the loonie against the U.S. dollar, higher fuel prices and additional costs related to the transition and optimization of its fleet.

Chairman Jean-Marc Eustache dismissed the possibility of selling off the airline unit he co-founded 33 years ago.

“I know it’s not for me,” he said in response to an analyst’s question. “You need the airline to bring the customers to the hotel business, especially at the beginning.”

The company’s airline unit, Air Transat, competes for beach-bound customers against Air Canada, WestJet Airlines Ltd. and, since June, WestJet’s ultra-low-cost offshoot, which touts routes to Mexican hot spots and Jamaica’s Montego Bay.

The steeper competition comes as Transat shifts its focus to building a network of beachside hotels it hopes will better position the holiday tour operator against heightened competition from Canadian rivals.

Transat aims to own or manage 5,000 rooms in Mexico and the Caribbean by 2024, in a bid to defend its turf against Air Canada Rouge, WestJet Vacations and Sunwing Airlines.

In October 2017, the Montreal-based travel company sold its 35 per cent stake in its Ocean Hotels joint venture for $186 million. The next month it sold its Jonview Canada tour business to Japanese travel company H.I.S. Co. Ltd. for $44 million in November 2017 — adding to the disparity between that quarter’s profits and the latest quarter’s.

Last year the company completed the acquisition of a parcel of land in the village of Puerto Morelos — less than 40 kilometres from Cancun in Mexico’s Yucatan Peninsula — where it plans to build a beach resort.

The hotel — which will boast between 600 and 900 rooms — will be up and running by November 2020, with construction starting in June, Eustache said on a conference call with investors Thursday.

Transat said its earnings loss amounted to $1.32 per diluted share for the quarter ended Jan. 31 compared with a loss of nine cents per share a year ago when its results benefited from the sale of its Jonview subsidiary.

Revenue in what was the company’s first quarter totalled $647.6 million, down from $648.4 million.

On an adjusted basis, Transat says it lost $36 million or 96 cents per share in its most recent quarter compared with an adjusted loss of $32.2 million or 87 cents per share a year earlier.

Analysts on average had expected a loss of 78 cents per share and revenue of 760.7 million, according to Thomson Reuters Eikon.

Just Posted

Gasoline Alley Harley Davidson hosts 7th annual Toy Run

Bikers jumped on their motorcycles this weekend to help make Christmas better… Continue reading

Innisfail RCMP locate drugs during traffic stop

A Rocky Mountain House man is facing charges after Innisfail RCMP located… Continue reading

Expert says acquittal of Alberta parents in boy’s death unlikely to set precedent

CALGARY — A law professor says the acquittal of an Alberta couple… Continue reading

Take Back the Night rally marches through downtown Red Deer

Dozens marched through the city’s downtown chanting, “Red Deer unite, take back… Continue reading

Houston area sees relief, rescues after Imelda leaves 4 dead

HOUSTON — Emergency workers used boats Friday to rescue about 60 residents… Continue reading

Your community calendar

Tuesday Bower Place Community Association Seniors Card and Coffee party at 1:30… Continue reading

Missing hiker found safe after spending night on North Vancouver mountain

VANCOUVER — Rescue crews have found a missing female hiker safe after… Continue reading

Trudeau was only one in dark makeup at 2001 party but nobody took offence: attendee

VANCOUVER — A man who attended an “Arabian Nights” gala held by… Continue reading

McKenna defends Canada’s climate credibility amid Trudeau controversy

OTTAWA — Liberal cabinet minister Catherine McKenna says Canada still has credibility… Continue reading

Blue Jays rookie Bo Bichette trying to “be smart” with head injury

NEW YORK — Blue Jays rookie shortstop Bo Bichette says he’s feeling… Continue reading

Climate activists step up protests in Britain and France

PARIS — Environmental activists in Britain and France stepped up campaigns Saturday… Continue reading

Man from Winnipeg who was hiking alone found dead in Banff National Park

LAKE LOUISE, Alta. — A hiker has been found dead in Banff… Continue reading

Singh campaigns in Toronto, May in Winnipeg, as Liberal and Tory leaders pause

OTTAWA — Jagmeet Singh and Elizabeth May are continuing on the campaign… Continue reading

Most Read