Canada’s Transat AT, the parent company of leisure carrier Air Transat, posted revenues of just C$9.5 million ($7.2 million) in its third fiscal quarter. During that period, it had just a single week of operations due to business interruptions from the coronavirus pandemic.
That represents a 99% decline in revenue from the same period a year ago, the Montreal-based vacation specialist says on 10 September.
Transat shut down on 1 April after the government of Canada imposed numerous measures to attempt to contain the virus, including lockdowns and shelter-in-place orders that resulted in a sharp decline in passenger demand. Transat did not resume a partial schedule until 23 July, just nine days before the end of the company’s fiscal third quarter.
“The reduction of operations to just one week for this quarter is unprecedented for Transat and for the industry as a whole,” Transat’s president and chief executive Jean-Marc Eustache says.
The carrier says its net loss for the quarter was C$140 million. And it says the future is still so uncertain that it will not venture a guess as to how business will fare going forward.
“In the current situation, it is impossible for the moment to predict the impact of the Covid-19 pandemic on future bookings, the partial resumption of flight operations and financial results,” Transat says. “Consequently, for now the corporation is not providing an outlook for summer 2020 or winter 2021.”
“It’s now very clear that [the coronavirus’] effects are going to be long-lasting ones,” Eustache adds.
But with the company’s focus on the leisure sector of the market, Transat is optimistic that it will come out of the crisis in a strong position.
“We do not believe there will be structural change in leisure demand,” says chief operations officer Annick Guerard. “We have a 100% leisure class product and are not stuck with long-haul business class products.”
She says that the carrier has seen that the booking trend has shifted to more of a last-minute younger traveller, who are primarily visiting family and friends. Experts agree that this is the sector of the market that will probably bounce back first.
The airline is now once again flying to 17 destinations, and its load factors in July and August were above-average, at 58% and 53% respectively, Guerard says.
But the carrier continues to suffer under Canada’s ongoing strict travel restrictions which include a mandatory 14-day quarantine for any inbound passengers from abroad. Some provinces have also imposed isolation requirements for customers arriving from other Canadian provinces.
“This is putting an enormous pressure on the system, leading to unbearable consequences for airlines,” Eustache says.
Echoing its competitor Air Canada, Transat is advocating for a different approach when it comes to containing the spread of the virus.
“With Canada maintaining some of the most stringent border restrictions and still requiring quarantine for people returning from abroad, it’s time for the government to provide targeted support for the airline sector to ensure the existence of a competitive industry in Canada over the long term,” Transat says.
Unlike in the USA, the Canadian government did not set aside a billions-of-dollars aid package targeted specifically at its aviation industry. Transat says it did participate in the Canada Emergency Wage Subsidy (CEWS) which provided partial salary relief for a limited period of time.
However, the airline adds that it may still have to terminate the employment of “at least” 2,000 employees or 40% of its workforce due to the long-lasting after-effects of the coronavirus.
“We see that our foreign competitors are receiving tremendous sector-specific support from their governments and the playing field may not be level when the demand comes back,” says Eustache.
He notes that the recent nearly 30% increase in fees by Nav Canada, the country’s provider of civil air navigation services, is also not helpful as the sector gets back on its feet.
Nav Canada raised the rates on 1 September, and Calgary-based WestJet said at the time that it would need to pass on the increase on to customers.
AIR CANADA MERGER
Transat says that it is still “firmly committed” to its planned merger with Air Canada, though “certain factors beyond its control and related to the Covid-19 pandemic could influence the outcome of the proposed arrangement.”
The deal, which was approved by shareholders more than a year ago, is still being examined by competition regulators in Canada and the European Union. The airline says the transaction is still on track and expects it to close by the deadline of 27 December.
Eustache expressed a degree of exasperation at the long and drawn-out process around the approvals for the merger.
“The two organsations are working together to get regulatory approval to try to answer to all the questions that Transport Canada and the competition bureau in Europe are asking for,” he says. “It’s unbelievable, we sent thousands and thousands of documents, I think more than 100,000 pages of reports to Europe… they live in another world, not the same world as me.”
“We are trying to put the transaction together and it takes time but we have no choice, we have to do what we have to do,” Eustache says.