Transat shares slip as fuel prices bite

Ex­tra ca­pac­ity in in­dus­try also hit­ting fares

National Post (Latest Edition) - - FP INVESTING - DaviD PaDDon Transat AT Inc.

Shares of fell sharply as the com­pany said Thursday it ex­pects to have a more dif­fi­cult sum­mer sea­son than last year as a re­sult of a sud­den in­crease in jet fuel prices since April and lim­ited abil­ity to pass along the cost to cus­tomers.

An­nick Guérard, the travel com­pany’s chief op­er­at­ing of­fi­cer, said on a con­fer­ence call with an­a­lysts that “we see most of the play­ers in the mar­ket not be­ing able to in­crease their price, at this point.”

It’s al­ways dif­fi­cult to trans­fer fuel costs to­wards con­sumers when prices change rapidly, she said, and at this time there’s the added dif­fi­culty of a nine per cent in­crease in in­dus­try ca­pac­ity.

That in­cludes new com­peti­tors as well as a 15 per cent hike in Transat’s own ca­pac­ity as it in­creases flight fre­quen­cies to de­fend its mar­ket share.

“(But) we re­main op­ti­mistic that in the weeks to come the price is go­ing to go up on cer­tain routes,” Guérard said.

“We def­i­nitely need all the ef­forts in­ter­nally to yield as much as we can (dur­ing) the high sea­son, es­pe­cially July and Au­gust, to be able to re­cu­per­ate on the fuel in­crease.”

Transat shares slid 7 per cent to close at $7.64 in Toronto trad­ing.

Chief fi­nan­cial of­fi­cer De­nis Pétrin said that “book­ings re­main strong, but there has been some pres­sure on fares re­cently.”

He added that about onethird of Transat’s in­ven­tory of sum­mer sea­son flights and travel pack­ages have not yet been sold, so it’s pos­si­ble that over­all fare prices will rise over the next few weeks dur­ing the peak book­ing sea­son.

As with other travel-ori­ented com­pa­nies, Transat has a dy­namic pric­ing sys­tem that ad­justs to var­i­ous fac­tors af­fect­ing sup­ply and de­mand.

“Where the pric­ing will be a cou­ple weeks from now, hard to say,” Pétrin said.

Pétrin said the com­pany’s op­er­at­ing ex­penses this year are now pro­jected to be $53 mil­lion higher be­cause of the higher fuel prices, com­pared with a pre­vi­ous es­ti­mate in mid-March.

Transat re­ported ear­lier Thursday that its profit at­trib­ut­able to share­hold­ers amounted to $6.7 mil­lion or 18 cents per share com­pared with a loss of $8.4 mil­lion or 23 cents per share a year ago.

Ex­clud­ing non-op­er­at­ing items, Transat says it had an ad­justed loss of $4.5 mil­lion or 12 cents per share for the quar­ter com­pared with a loss of $8.1 mil­lion or 22 cents per share in the same quar­ter last year.

Rev­enue for the quar­ter ended April 30 to­talled $902.0 mil­lion, com­pared with $884.3 mil­lion in the same quar­ter a year ago.

The in­crease in rev­enue was driven by a 4.8 per cent rise in the num­ber of trav­ellers in the sun des­ti­na­tion mar­ket and 10.7 per cent in the transat­lantic mar­ket, Transat said.

GROUPE CNW / AIR TRANSAT

Chief fi­nan­cial of­fi­cer at Transat AT Inc. De­nis Pétrin said that “book­ings re­main strong, but there has been some pres­sure on fares re­cently.”

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