Transat notches first full-year profit since 2018, brushes off hit from strike threat

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MONTREAL — The head of Transat A.T. Inc. says fallout was “limited” from a strike threat by its pilots and that the company continues to benefit from Canadians’ turn away from U.S. travel, paving the runway for growth in the new year after the tour operator turned its first annual profit since 2018.

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“Demand for leisure travel remains solid, particularly for south destinations driven by the continued shift away from U.S. leisure markets towards the Caribbean and Mexico,” said chief executive Annick Guerard on a conference call with analysts Thursday.

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The number of Canadians returning from overseas — rather than America — rose nearly 12 per cent year-over-year to 1.1 million in November, according to preliminary figures from Statistics Canada. Meanwhile, return trips by air from the United States dropped more than 19 per cent.

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Air Transat flies mainly to destinations in Mexico, the Caribbean and Europe, with only two destinations in the U.S.: Orlando and Fort Lauderdale, Fla.

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The company lost $12.5 million in its fourth quarter and its planes are slightly emptier so far this winter than a year ago. But Guerard stressed that yields — a metric gauging the average revenue an airline garners per paying passenger for each mile flown — are up, with bookings still “healthy.”

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The CEO also noted that Transat has renegotiated all major collective agreements through 2027 and beyond.

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Last week, the Montreal-based company narrowly avoided a costly work stoppage when it reached a last-minute tentative deal with the union representing Air Transat’s 750 pilots that boosted their wages by more than 50 per cent over five years.

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The company said it cancelled just 18 flights and contained the potential blow to its business.

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“It was a pretty short period and we were able to get back on our booking curve very quickly,” Guerard said.

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The strike threat also arrived after its Black Friday and Cyber Monday promotions, “a key sales moment for us” that drove an 11 per cent year-over-year spike in bookings in that period, she added.

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As demand for flights to Florida, Las Vegas and other stateside spots continues to plummet, the airline has sought out destinations farther afield.

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Transat announced several new routes in recent months, including to Accra in Ghana, Agadir in Morocco, and Dakar in Senegal, as well as one on Thursday between Toronto and Tirana, Albania, as demand for cheaper getaway spots ticks up.

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The company is aiming for a jump in capacity of between six and eight per cent next year.

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However, it faces increased competition from Air Canada and other carriers that have also responded to the drop in demand for U.S. visits with a beefed-up presence on transatlantic and Caribbean routes.

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“We have some concerns about a more competitive environment in the coming quarters,” said National Bank analyst Cameron Doerksen in a note to investors.