Transat shares dive as jet fuel prices bite

Saskatoon StarPhoenix - - FINANCIAL POST - DAVID PADDON

Shares of Transat AT Inc. fell sharply as the com­pany said Thurs­day it ex­pects to have a tougher 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 Guer­ard, 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,” Guer­ard 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 seven per cent to close at $7.64 in Toronto.

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

He added that about one-third 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,” Petrin said.

Petrin 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.

CNW GROUP/AIR TRANSAT

Air Transat un­veiled the Es­pace Air Transat mul­ti­me­dia in­stal­la­tion in Mon­tréal — Trudeau’s new in­ter­na­tional ter­mi­nal.

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