Transat struggles in battle for sun-seekers

MONTREAL • Transat A.T. endured a frigid earnings year despite refocusing its sun destinations and beachside resorts as rising jet fuel prices and currency fluctuations reduced the travel company’s profits ahead of the ramp-up of competition from Canadian airlines.

“The results of Q4 and summer ‘18 are not as positive as last year’s. Yearly results are clearly not satisfying, reflecting the headwinds from jet fuel costs,” said chief financial officer Denis Petrin on a conference call with investors Thursday.

Annual net income attributable to shareholders dropped 97 per cent to $3.8 million from $134.3 million last year, a difference owing in part to Transat’s hotel sales in 2017. The earnings were the second-worst it’s posted in six years, with competition only set to increase.

Swoop, a low-cost offshoot of Westjet that launched in June, has announced upcoming routes to Mexican hot spots Cancun, Puerto Vallarta and Mazatlan, with flights to Jamaica’s Montego Bay starting in a few days.

“We’ve been following them, of course,” Transat chief operating officer Annick Guerard told analysts. “But as we are dealing with other low-cost carriers in the Atlantic market, we know how to face those.”

The Swoop sun flights will take off from Hamilton, with B.C.’S Abbotsford also hosting flights to two of the four destinations.

Capacity among Canadian airlines for Mexican and Caribbean sun destinations will jump eight per cent yearover-year this winter, according to Transat. That includes a 16 per cent leap by Air Canada — which has put more pressure on the sun market since Rouge entered the airspace in 2012 — and a 14 per cent increase by Westjet — excluding the additional routes from Swoop.

Transat expects its own capacity to nudge up just two per cent in the winter season compared to the last year.

The steeper competition comes as Transat shifts its focus to building a network of beachside hotels it hopes will better position the holiday tour operator against heightened competition from Canadian rivals.

Transat aims to own or manage 5,000 rooms in Mexico and the Caribbean by 2024, in a bid to defend its turf against Air Canada Rouge, Westjet Vacations and Sunwing.

In October 2017, the Montreal-based travel company sold its 35 per cent stake in its Ocean Hotels joint venture for $186 million. The next month, Transat signed a deal to sell its Jonview Canada subsidiary to a Japanese company for $44 million.

The company recently completed the acquisition of a parcel of land in the village of Puerto Morelos — fewer than 40 kilometres from Cancun — where it plans to build a beach resort.