Transat reports bigger Q1 loss, expects "inferior" Q2 results due to weak loonie


Transat A.T. Inc. (TSE:TRZ.B), Canada’s largest tour operator, reported a wider-than-expected first-quarter loss and expected "inferior" results in the current quarter due to a weak Canadian dollar that increased expenses.

Net loss in the three months ended Jan. 31 expanded to C$25.6 million, or 67 Canadian cents per share, from C$15.1 million, or 39 Canadian cents per share, a year earlier, the Montreal, Quebec-based company said in a statement today.

Analysts had been looking for a loss of 45 Canadian cents per share, according to Bloomberg estimates.

Total revenue increased 5 percent to C$847.2 million. Revenue from the company's North American business units rose 4.6 percent, while revenue from its European business units grew 8.7 percent.

Operating expenses increased 2.7 percent in the first quarter from a year earlier.

"(The weak dollar) resulted in a significant increase in our operating expenses, which was offset only partially by higher selling prices and by our hedging program," Chief Executive Jean-Marc Eustache said in the statement.

“That situation alone is what keeps us from posting improved results over last year at this time, both for the quarter and for the winter,” Eustache said.

The company, which also owns holiday travel airline Air Transat, makes major purchases such as planes and fuel in U.S. dollars.

If the dollar remains at current levels that are expected to rise to 3.7 percent in the second quarter, the company said, adding that it expected its second-quarter earnings to be inferior to a year ago.

Low inflation and a possibility of an interest rate cut nudged down the loonie to a four-and-a-half year low against U.S. dollar on Jan. 31.

The company said Air Transat's load factor was expected to fall about 2 percent in its "sun destinations" market and about 5 percent in its Transatlantic market in the quarter ending April.

Transat offers discounted air fares and vacation packages, competing mainly with WestJet Airlines' WestJet Vacations and Air Canada's Air Canada Vacations.

Air Canada warned last month that adverse weather conditions and weakness in the Canadian dollar were likely to weaken its current-quarter earnings and revenue.

Transat shares closed up 2.4 percent to C$11.01 in Toronto yesterday, extending gains over the past 12 months to 75 percent. The stock is down 13 percent this year.





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