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Transat first quarter loss widens

March 15, 2012, Montreal - Transat A.T. Inc. deepened its losses in the first quarter as higher fuel prices dug into its results.


March 15, 2012
By The Canadian Press

The tour operator says losses grew to $29.5 million, or 77 cents per share in the three months ended Jan. 31, compared to $13.4 million loss, or 35 cents per share, a year earlier.

On an adjusted basis, after-tax losses were 79 cents per share, deeper than the per-share loss of 61 cents expected by analysts, according to Thomson Reuters. It compared to 51 cents a year ago.

The first quarter is a seasonally weak period, having generated profits only twice in the company's history.

Revenue increased to $829.3 million from $810.2 million.

"The results were hit by high aircraft fuel costs, as market conditions made it impossible to increase selling prices sufficiently to fully offset the increase,'' said president and chief executive Jean-Marc Eustache.

"Meanwhile, we are proceeding as planned with the implementation of three-year plan to return to profitability, announced last fall.''

Fuel costs were a challenge during the quarter as a 22.5 per cent increase in the price of jet fuel was expected to offset most of the progress Transat made in restructuring and lowering non-fuel costs.

Ben Vendittelli of Laurentian Bank Securities said the impact of the restructuring changes should begin to be felt in the key winter period of the second quarter, which was plagued last year by overcapacity to sun destinations.

Transat had indicated that its capacity in the winter season would be two per cent lower than last year while market capacity should be flat.

"With restructuring initiatives, that should lead to a $50-million improvement over the next three years (and) combined with the high operating leverage in the business, we believe Transat can return to higher profitability,'' he wrote in a report this week.