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Sep 10, 2020

Transat CEO urges feds' support as revenue plunges 98.6%

Transat revenue tanks more than 98% as CEO calls for aid

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The chief executive of Transat A.T. Inc. is pleading for direct government support for airlines after the company’s revenue nearly evaporated in the latest quarter, in another grim reminder of how the COVID-19 pandemic is ravaging the sector.

The company reported a net loss attributable to shareholders of $45.1 million or $1.20 per share for its third quarter compared with a loss of $1.5 million or four cents per share a year earlier, while revenue totalled $9.5 million, down 98.6 per cent from year-ago levels.

On an adjusted basis, Transat says it lost $3.70 per share for the quarter compared with an adjusted profit of 16 cents per share in the same quarter last year.

The travel company says the quarter ended July 31 included one week of operations as it resumed flying on July 23 after shutting down April 1 due to the COVID-19 pandemic.

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    Transat is flying to 11 European destinations in France, the United Kingdom and Portugal as well as to Mexico, the Dominican Republic and Haiti. It is also running a domestic program linking Montreal, Toronto, Calgary and Vancouver.

    The results prompted President and CEO Jean-Marc Eustache to call on the government for support for the airline sector as it continues to be held back by pandemic-related travel restrictions.  

    “Given the dynamic measures we took to protect the corporation and its cash flow, we're ready for the recovery," Eustache said in a statement Thursday. "However, 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 also warned it may have to lay off 2,000 employees, or 40 per cent of its workforce, in the future.

    In a conference call Thursday, Eustache said the situation is "especially difficult in Canada."

    "Restrictions at the border are particularly stringent, with the closure to foreigners and mandatory quarantine for Canadians coming back from any other country at least until Sept. 30," he said, echoing comments made by other airline CEOs.

    "We are frustrated."

    Transat bled about $1.7 million in cash per day in the quarter ended July 31, but still had $576.4 million in cash and cash equivalents as of that date.

    Class action lawsuits and reimbursement rules add another financial drain on the carrier's coffers after Transat, like other Canadian  airlines, issued flight credits rather than refunds for trips cancelled due to the COVID-19 pandemic. 

    "This exposes the corporation to litigation and enforcement measures by legislative and regulatory authorities, including class action suits, which the corporation intends to contest in good faith and with good  reason," Transat said.

    Retaining customer cash for services never rendered has bolstered Transat's deposits by $564 million.

    Passengers have filed a handful of proposed class-action lawsuits against airlines and three petitions garnering more than 109,000 signatures that call  for customer reimbursement. Meanwhile Transat has announced it will offer refunds on cancelled winter flights to American sun destinations  in accordance with U.S. Department of Transportation rules.

    Canada, unlike countries including France, Germany and the United States, has held off on sector-specific support for carriers. Instead Prime Minister Justin Trudeau has rolled out financial aid available across industries, including the wage subsidy and loans starting at $60 million for large firms.

    "Nobody is helping this industry. As you know, we're suffering like crazy," said Eustache. "We're not going to be on the same playing field as the others tomorrow."

    The company cautioned that while it’s trying to line up additional sources of financing, it may be blocked from doing so by Air Canada as a result of its pending takeover deal, which is still awaiting regulatory approval.

    With files from The Canadian Press