Higher ticket prices boost Transat fourth-quarter profits by 200 per cent

MONTREAL — Higher ticket prices and fees helped Transat AT Inc. triple its profits last quarter as it worked to complete its takeover by Air Canada.

Net income jumped to $20.3 million in the quarter ended Oct. 31, up from $6.8 million a year earlier. Revenue rose 3.6 per cent to $693.2 million from $668.8 million.

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Despite spending more on maintenance than in 2018, chief financial officer Denis Petrin said, higher average ticket prices and growth in ancillary revenue led to the increase in profit.

So-called ancillary revenue, which includes baggage fees, seating upgrades and onboard snacks as well as frequent flyer programs, grew 50 per cent year over year to $162 million in 2019.

Popularized by budget airlines more than a decade ago, these fees are playing an increasingly critical role in the industry, helping to diversify income and insulate airlines from fluctuations in fuel price and competition.

Ticket prices climbed 1.8 per cent on transatlantic routes — Transat's main market in the summer and fall. Tickets for flights to sun destinations such as Cuba and Jamaica cost 3.9 per cent more on average.

Transat's higher income was "partially offset by the costs associated with the transaction with Air Canada and by higher aircraft maintenance costs," the company said.

Transat shareholders voted in August to approve the acquisition by Air Canada, but the deal still faces scrutiny by regulators eyeing the impact of a takeover that will see Air Canada control about 62 per cent of transatlantic air travel from Canada.

Transport Canada has until May 2 to conduct a review — with input from the Competition Bureau — and make a recommendation to the minister.

"Everything seems to proceed according to the plan," Petrin said on a conference call with analysts Thursday.

Transat expects the takeover to close in the second quarter of the 2020 calendar year.

Air Canada has said Transat will remain a distinct brand based in Montreal.

Transat says it has not suffered financially from the collapse in September of British travel company Thomas Cook Group Plc, a shut-down that killed Transat's recently launched seven-year deal to exchange seven aircraft on a seasonal basis.

Instead, Transat leased six Airbus A321 narrow-body planes and rerouted some wide-bodies, "so we're all set for winter," said chief operating officer Annick Guerard.

More than half of sun destination flights for winter are now sold, and the company has boosted bookings by about 13 per cent year over year amid higher capacity.

Transat said profits amounted to 54 cents per diluted share in the fourth quarter, up from 18 cents per diluted share in the same period last year.

On adjusted basis, it earned 72 cents per share for the quarter, up from 36 cents per share a year ago.

For the full year, net loss totalled $33.2 million versus a profit of $6.5 million in 2018. Revenue in 2019 increased 3.1 per cent year over year to $2.94 billion.

This report by The Canadian Press was first published Dec. 12, 2019.

Companies in this story: (TSX:TRZ, TSX:AC)

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