Ms. Annick Guerard reports

TRANSAT A.T. INC. REPORTS RESULTS FOR THE FIRST QUARTER OF FISCAL 2024

Transat A.T. Inc. has released its results for the first quarter ended Jan. 31, 2024.

First-quarter highlights:

• Revenues of $785.5-million, up 17.7 per cent from $667.5-million last year
• Negative adjusted EBITDA1 of $8.6-million, compared to adjusted EBITDA1 of $3.3-million last year
• Net loss of $61.0-million ($1.58 per share), versus $56.6-million ($1.49 per share) last year
• Positive free cash flow1 of $39.1-million, compared to $144.2-million last year
• Proceeds from the sale of an investment in Mexico applied to reduce secured facilities by $20.7-million
• Record customer deposits for future travel of $1,026.9-million, up 14 per cent from Jan. 31, 2023

"Transat's first-quarter results reflect sustained demand for leisure travel. Revenues grew 17.7 per cent year-over-year, driven by a solid traffic increase. However, the persisting speculation of a strike by flight attendants starting last November clearly affected bookings and yield for the winter season, and we are pleased that the adoption of a new collective agreement in late February removed this uncertainty. As for the operating challenges related to the Pratt & Whitney GTF2 engine issue, costs incurred, including those related to the temporary leasing of additional aircraft, applied pressure on profitability. Finally, while demand remains sound, softer yields indicate heightened consumer price sensitivity in the current macro-economic environment as well as fierce price competition, especially in the Toronto market," said Annick Guerard, President and Chief Executive Officer of Transat.

"In recent months, several industry-wide supply chain challenges, including the Pratt & Whitney GTF engine issue, have resulted in higher costs and the need to make certain capacity modifications going forward. These adjustments should limit capacity expansion to 13 per cent in fiscal 2024, still representing a healthy increase compared to 2023. Accordingly, we now expect an adjusted EBITDA1 margin for the full year 2024 to be at the lower end of the range announced last December. Finally, the refinancing plan remains the organization's top priority and discussions with stakeholders continue," added Jean-Francois Pruneau, Chief Financial Officer of Transat.

First-quarter Results

For the three-month period ended Jan. 31, 2024, revenues reached $785.5-million, up 17.7 per cent from $667.5-million in the corresponding period a year ago. The increase reflects sustained demand for leisure travel driven by a 20 per cent increase in traffic expressed in revenue-passenger-miles (RPM). However, this increase was mitigated by persistent speculations throughout the quarter about a potential strike by the flight attendants. Company-wide capacity was up 25 per cent from last year, while airline unit revenues (yield) was down 3.1 per cent.

Negative adjusted EBITDA1 stood at $8.6-million, compared with an adjusted EBITDA1 of $3.3-million a year ago. The variation is mainly due to higher operating expenses associated with capacity expansion, such as increases in the cost of providing tourism services, wages and benefits, and aircraft-related expenses, the latter also including, among other things, (i) costs related to the operating challenges caused by the Pratt & Whitney GTF engine issue and (ii) an unfavorable year-over-year aircraft maintenance calendar due to the low aircraft utilization during the pandemic. These factors were partially offset by lower fuel expenses reflecting a price decline of 18 per cent compared to last year.

Cash flow and financial position

Cash flow from operating activities amounted to $110.7-million during the First Quarter of 2024, compared with $195.1-million for the same period last year, due to a less favorable net change in non-cash working capital balances and to a greater operating loss this year. After accounting for investing activities and repayment of lease liabilities, free cash flow1 reached $39.1-million during the quarter, versus $144.2-million a year earlier.

As at Jan. 31, 2024, cash and cash equivalents amounted to $453.3-million, compared to $467.7-million at the same date in 2023 and $435.6-million as at October 31, 2023. Cash and cash equivalents in trust or otherwise reserved mainly resulting from travel package bookings improved year-over-year reaching $612.2-million as at Jan. 31, 2024, compared with $523.8-million at the same date in 2023.

Reflecting sound demand, customer deposits for future travel stood at an all-time record level of $1,026.9-million as at Jan. 31, 2024, up 14 per cent from Jan. 31, 2023.

During the quarter, the Corporation completed the previously announced sale of an investment in a hotel in Mexico and proceeds were applied to reduce secured facilities by $20.7-million. Following this repayment, long-term debt and deferred government grant, net of cash, amounted to $352.3-million as at Jan. 31, 2024, down from $375.3-million a year ago and from $380.1-million as at October 31, 2023.

Outlook

Early trends for the summer season indicate bookings and pricing conditions that are largely in line with the same period last year. However, as the Corporation does not foresee the same uplift in yields that was exhibited throughout the summer season last year, it will remain proactive in managing costs under its control, while actively seeking to mitigate the structural cost increases affecting the industry.

Given the current operating environment, the Corporation revised its fiscal 2024 capacity expansion plans to 13 per cent, versus 19 per cent previously.

Reflecting the above, the Corporation now expects its adjusted EBITDA1 margin for the full year 2024 to be at the lower end of the range of 7.5 per cent to 9.0 per cent announced last December. In making these forward-looking statements, the Corporation used the following assumptions for the fiscal year: weak GDP growth in Canada, an exchange rate of C$1.34 to US$1 and an average price per gallon of jet fuel of C$4.00.

Conference call

First-quarter 2024 conference call: Thursday, March 14, 10:00 a.m. To join the conference call without operator assistance, you may register and enter your phone number here to receive an instant automated call back.

You can also dial direct to be entered into the call by an operator:

Montreal: 514-225-7344

North America (toll-free): 1-888-390-0620

Name of conference: Transat

The conference will also be accessible live via webcast: click here to register .

An audio replay will be available until March 21, 2024, by dialing 1 888 390-0541 (toll-free in North America), access code 776189 followed by the pound key (#). The webcast will remain available for three months following the call.

Second-quarter 2024 results will be announced on June 6, 2024.

About Transat

Founded in Montreal 36 years ago, Transat has achieved worldwide recognition as a provider of leisure travel particularly as an airline under the Air Transat brand. Voted World's Best Leisure Airline by passengers at the 2023 Skytrax World Airline Awards, it flies to international destinations. By renewing its fleet with the most energy-efficient aircraft in their category, it is committed to a healthier environment, knowing that this is essential to its operations and the destinations it serves. Transat has been Travelife-certified since 2018. (TSX: TRZ) www.transat.com

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