Transat AT Inc., the parent company of Air Transat, reported a net loss of $79 million in its second quarter, attributing the downturn to soaring fuel costs and the suspension of flights to Cuba. The Montreal-based travel company disclosed the results on Thursday, noting that revenue fell 12% year-over-year to $520 million.
Fuel prices and Cuba suspension weigh heavily
The company pointed to a 30% increase in jet fuel prices compared to the same period last year, which added approximately $25 million in unexpected costs. Additionally, the suspension of flights to Cuba, following new U.S. sanctions that restrict travel to the island, led to a $15 million revenue shortfall. Transat had operated several weekly flights to Havana, Varadero, and other Cuban destinations, which were halted in late March.
Operational challenges and outlook
Transat also faced operational disruptions, including aircraft maintenance delays and pilot shortages, which resulted in flight cancellations and higher compensation costs. The company's load factor, a measure of how full its planes are, dropped to 78% from 82% a year earlier. CEO Annick Guérard said in a statement that the company is implementing cost-cutting measures, including a hiring freeze and renegotiating supplier contracts, to mitigate the impact. She added that Transat expects to resume flights to Cuba once regulatory conditions allow, but no timeline was provided.
Analysts had anticipated a loss, but the magnitude was larger than expected. Desjardins analyst Benoit Poirier noted that the fuel price surge and Cuba suspension were partly offset by strong demand on European routes, particularly to France and the United Kingdom. However, he warned that the third quarter may also be challenging due to continued fuel volatility and potential labor disruptions.
Transat shares fell 4.5% to $3.20 on the Toronto Stock Exchange following the earnings release. The company has lost nearly 30% of its market value this year.
