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A winter to forget for Transat AT

After a “winter to forget,” the tour operator Transat AT expects a more difficult since its two main competitors have decided to offer more seats to Europe.
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Combined with terrorist attacks last year on the Old Continent, this additional capacity of 15% prompted carriers to cut prices to fill their planes, said the management of the company operating the airline Air Transat.

“It will be more difficult this summer on Thursday said its president and CEO, Jean-Marc Eustache, during a conference call to discuss second quarter results. We will continue to make money, but it will be a little less. ”

For example, Air Canada and Westjet added 200,000 additional seats – an additional capacity of 20 percent – to the United Kingdom since the two carriers are beginning to serve the London Gatwick Airport.

For its part, Transat AT – which had been the second best in its history last year – has increased its capacity by five percent to London, said Mr Eustace financial analysts.

“There is overcapacity and if you look on the internet you will find that prices remain low even during the high season,” he said.

According Montreal enforcement Hopper, to estimate the price of tickets, the international rates were down by 16 percent compared to last year. As for domestic flights, prices are down about five percent.

Transat AT says its destination in Europe selling prices were down 6.3 percent compared to last year, while to the south, they were up 1.8 percent.

Increased competition fears about Zika and a strike threat by Air Transat pilots have sealed the results of the winter season in Quebec society.

The company plunged into the red in the second quarter, posting a net loss of $ 25 million, or 68 cents per share, compared to net income of $ 24.7 million, or 64 cents per share, a year ago .

Its revenues rose 1.5 percent to $ 888.2 million, but the cost of the company have advanced at a faster pace during the three months ended April 30 last.

Excluding non-recurring items, the adjusted loss of tour operator jumped 77 percent to $ 11.9 million, or 32 cents per share.

“As for sun destinations, it is a winter to forget,” conceded Mr. Eustache.

The slide of the loonie against the greenback has boosted $ 25 million cost packages to sun destinations, and, despite a decline in fuel prices. Increasing packages average selling price has absorbed a portion of the negative impacts caused by fluctuations in the Canadian dollar.

Mona Nazir, of Laurentian Bank Securities, nevertheless considered that Transat AT had been able to pull out of the game during the winter.

“Sunwing, Air Canada and Thomas Cook have also experienced difficulties during this season, especially because of fears surrounding Zika, the risk of terrorist attacks and better weather,” wrote the analyst in a report.

In addition to continuing its cost-cutting efforts, Transat AT (TSX: TRZ) attempt to restore momentum by accelerating the diversification of its activities.

Eventually, the tour operator wants among other improve its hotel offer side sun destinations in addition to break into the US market by acquiring a ticket dispenser.

In the United States, nothing should be finalized before 2017, warned Mr. Eustache, who would like to see the Air Transat planes transporting Americans to the south.

By then, Transat AT, which has accepted the offer of $ 80 million of the giant TUI Group for its subsidiaries Transat France and Tourgreece, await the conclusion of this transaction, expected later this year.

The action of Transat retreated Thursday 26 cents, or 3.3 percent, to close at $ 7.65 on the Toronto Stock Exchange.

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