Transat sticks to hotels plan

MONTREAL• Trans at A.T. chairman Jean-marc Eustache dismissed the possibility of selling off the airline unit he co-founded 33 years ago, as the travel company faces higher costs and rising competition from Canadian airlines amid a transition toward sun destinations and beachside resorts.

“I know it’s not for me,” he said in response to an analyst’s question. “You need the airline to bring the customers to the hotel business, especially at the beginning.”

Air Transat competes for beach-bound customers against Air Canada, Westjet Airlines Ltd. and, since June, Westjet’s ultra-low-cost offshoot.

Analyst Benoit Poirier of Desjardins Securities said Transat is confronting a “weak outlook” for the second quarter.

The company has bumped up its seat capacity by two per cent compared to a year ago, but the sun destination industry as a whole saw capacity rise 10 per cent, he said.

The travel company reported a loss of $49.6 million in its latest quarter compared with a loss of $3.2 million a year earlier.

It said it was hurt by a rise in operating costs due to the weakening of the loonie against the U.S. dollar, higher fuel prices and additional costs related to the transition and optimization of its fleet.

The disparity owes in part to Transat’s sale of its Jonview Canada tour business to Japanese travel company H.I.S. Co. Ltd. for $44 million in November 2017.

The steeper competition comes as Transat shifts its focus to building a network of beachside hotels.

Transat aims to own or manage 5,000 rooms in Mexico and the Caribbean by 2024.