Transat A.T. Inc. experienced a significant decline into an adjusted operating loss during the second quarter, as elevated aviation fuel prices and the suspension of flights to Cuba severely impacted financial results.
Second-quarter financial performance
The airline reported a loss of negative adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $20.7 million in the second quarter, representing a 121 percent drop from an adjusted EBITDA of $98.4 million in the same period last year. Transat also posted a net loss of $79.0 million, or $1.94 per share, compared to a net loss of $22.9 million, or $0.58 per share, a year earlier.
CEO comments on disappointing results
“Following a solid first quarter that continued the positive momentum of fiscal 2025 … second-quarter results were disappointing as factors largely beyond our control severely impacted profitability,” said Transat chief executive Annick Guérard in the earnings release.
Guérard noted that the suspension of flights to Cuba since early this year and the industry-wide fuel crisis caused by the Iran war resulted in an estimated negative impact of $95 million on adjusted EBITDA. Approximately $70 million of this decline is attributable to higher fuel costs in March and April, she added. The impact of rising aviation fuel prices persisted through May, bringing additional costs compared to the same period last year.
Analyst insights
In a note to clients, National Bank analyst Cameron Doerksen said that Transat warned in mid-May that the surge in jet fuel prices would be reflected in its fiscal Q2 results without much benefit from fuel surcharges or other pricing actions, given that the majority of bookings for the quarter were made prior to the spike in costs.
Mitigation measures
The carrier implemented measures early in the conflict, including surcharges on new bookings and selective capacity adjustments across its network, to mitigate the effects of higher operating costs. “While surcharges on new bookings were initially well absorbed by consumers and effectively mitigated the impact of rising fuel costs, recent market volatility has weakened pricing power,” said CEO Guérard.
More details to follow.
