Transat reports first quarterly profit since 2019 on strong travel demand, higher fares and cheaper fuel

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Leisure airline Transat AT Inc. on Thursday posted its first quarterly profit since the onset of the pandemic, amid strong demand for travel, higher air fares and cheaper fuel costs.

The Montreal-based operator of Air Transat made $57-million, or $1.49 a share, in the third quarter, compared with a loss of $106-million or $2.82 a share a year earlier.

For the three months ending on July 31, revenue rose by $238-million to $746-million, year over year. This is 6 per cent higher than the same period in 2019, less than a year before COVID-19 halted most air travel and sent the aviation industry into a financial crisis.

Annick Guérard, Transat’s chief executive officer, said she was “very pleased” with the financial results reported before markets opened on Thursday. She attributed the better numbers to robust, pent-up demand for leisure travel, “significantly higher” seat prices and reduced jet-fuel expenses.

Transat has added three Airbus A321LR planes for the winter and will fly a fleet of 40 aircraft, an increase in capacity of 23 per cent over the past winter. The airline is flying new routes and will increase the frequency at which its planes fly, despite questions about the state of the economy and consumers’ response to inflation, she said.

“We believe demand will remain strong,” Ms. Guérard told analysts on a conference call on Thursday.

She highlighted other potential pitfalls ahead, including rising fuel prices, pilot shortages, delays in parts and aircraft deliveries, and the chance some of the fleet could be grounded for engine inspections to check for manufacturing flaws.

Engine maker Pratt & Whitney said as many as 3,000 of its engines will have to be removed and inspected for metal defects between 2023 and 2026. Transat flies several Airbus A321s, 10 of which are powered by the Pratt & Whitney engines and might be grounded for inspection, according to industry publication Aviation Week.

Transat spokeswoman Andréan Gagné said the airline does not know how many planes might be affected. “At this time, we are still missing too many elements to have a true picture of the situation,” she said in an e-mail. “We are working closely with Pratt & Whitney and will be in a better position to assess the situation once they issue their service bulletin.”

Ms. Guérard said Transat aircraft could be affected by the recalls in 2025. The carrier is working on backup plans, including using or acquiring other planes, and swapping in spare engines. “We have time to plan,” she said. “We have a year ahead before we need to put those contingency plans in place.”

Transat has lost a total of $1.4-billion since the fiscal year of 2020, when the pandemic was declared. The airline also lost money in 2019 and 2016. In 2019, Transat shareholders voted to sell the company to Air Canada AC-T for $720-million. The deal fell apart in 2021 after the European regulator refused to approve it.

To stay afloat during the pandemic, Transat received a taxpayer bailout of more than $800-million, laid off about 85 per cent of its work force, deferred plane payments and returned several aircraft to lessors.

Patrick Bui, Transat’s chief financial officer, said on Thursday the airline will meet its debt obligations due in the coming quarter, and is working on a refinancing plan with better borrowing terms.

Transat had $571-million in cash and $2-billion in debt, including lease liabilities, at the end of the latest quarter.