Transat en route to banner season

Montreal-based tour operator expects its third-best summer

MONTREAL— Canadian tour operator Transat A.T. is on track to posting its third-best summer after third-quarter core earnings increased despite softer demand in France.

The Montreal-based parent of Air Transat and various vacation businesses says it earned $27.2 million, or 71cents per diluted share, in adjusted profits for the period ended July 31.

That compared with $26.7 million, or 69 cents per share, in the prior year.

Transat’s net income fell to $13.1 million from $25.8 million, largely due to $14.1 million non-cash losses related to fuel hedging contracts.

Hedging contracts provide airlines with protection against rising jet fuel prices but the contracts lose market value when the market price declines, as it has over the past year.

Year over year, Air Transat’s parent company says it earned $500,000 more in adjusted profit for the period ended July 31, despite softer demand in France

Transat’s revenue slipped 2.3 per cent to $920.1 million from $941.7 million, mainly because of the lower value of the euro. Analysts had expected Transat would record 69 cents per share in adjusted profits on $942.7 million of revenues.

During the summer months, the transatlantic market is the largest for Transat, which operates in Europe, Canada, the United States and other countries.

North American operating profits increased 26 per cent to $26.3 million as lower fuel costs partially offset a weaker loonie. Revenues increased 2.3 per cent. In Europe, operating income slipped by nearly half to $8.6 million as sales fell 13 per cent due to a large drop in the number of passengers and lower sales to North Africa and some Mediterranean destinations.

Transat says that the fourth quarter will be “satisfying” if current trends hold, but slightly inferior to 2014, which saw the second-best earnings in the company’s history.