Transat says Quebec ready to help airline weather pandemic
The chief executive of Transat AT Inc. says the Quebec government has been in touch with his company, offering “help” in the face of the novel coronavirus crisis, which has hit the travel industry hard.
“(François) Legault said he is going to help everybody. They are already doing it. They are phoning us even before we told them,” Transat’s Jean-Marc Eustache told analysts on an earnings call Thursday afternoon.
“I’m pretty sure they will be there to help because this is a very, very special situation.”
Transat, which was founded by Eustache and Legault 30 years ago, has seen its stock price plummet 45 per cent over the last month.
Airlines have been particularly hard hit by the virus as governments impose restrictive travel measures, and flight cancellations pile up ahead of the critical March break travel period.
On Wednesday, U.S. President Donald Trump abruptly imposed a widespread ban on travel between the U.S. and Europe, a move that applied to 26 European countries, but excluded the United Kingdom.
“Ottawa has been in touch, everyone has been in touch,” Eustache added, though he did not provide specifics on what kind of assistance might be coming.
Transat acknowledged in its first-quarter earnings statement that daily bookings had already been severely affected by the virus, and that it would be “impossible to predict” the effect of COVID -19 on future bookings.
That sent its shares cascading downward, plunging 20 per cent to below the $10 mark in the first hour of Thursday trading, before closing near $11.
Eustache emphasized the company would not provide an outlook for the second quarter or for the summer period, because of the level of uncertainty ahead.
“I have been in this industry for 42 years. The only thing I can say is we will do what we have to do to survive. If we have to ground half the fleet — it is not something we want to do — we will do it. If we have to lay off people, we don’t want to do it, but we will do it,” he said on the call.
He added that the government “would have to” help the airline industry, referencing taxes incurred by airlines. “They will have to do their part too. We will all do it together, step by step.”
Transat’s rapidly plummeting stock price could potentially throw a wrench in a $720-million takeover bid by Air Canada, which was formalized last August but will only close pending reviews by the Competition Bureau, Transport Canada and EU authorities.
Air Canada agreed to purchase Transat for $18 per share. A previous bid, which was rejected by major Transat shareholders, valued the company at $13 per share.
Transat shareholders, including its biggest — Letko, Brosseau & Associates — voted overwhelmingly in favour of the all-cash deal after Air Canada sweetened its bid to $18 per share. Eustache’s own stake in the company is just over one per cent.
On the call, the co-founder and CEO dismissed concerns raised by analysts that the deal was on shaky ground given Transat’s stock price, reiterating that it would go through, subject to government approval.
“The price of the share doesn’t have anything to do with the deal. The conditions of the market doesn’t have anything to do with the deal. The virus is outside of the deal. Nothing material is happening right now that can change the price of the deal,” he stated, in response to a question on the terms of the transaction.
The Competition Bureau is expected to release its report on the transaction on March 23. Eustache cautioned analysts that the report would be negative, given the narrow scope of what the bureau evaluates.