Transat shares dive as jet fuel prices bite
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.
Air Transat unveiled the Espace Air Transat multimedia installation in Montréal — Trudeau’s new international terminal.