Transat narrows loss, expects to be back in black this year

Shares in Transat A.T. jumped Thursday after the company said it narrowed its loss during the second quarter and handily beat analysts’ expectations.

The country’s largest travel tour operator also said it was aiming to return to the black in 2013 as it continues its restructuring efforts.

Investors reacted favorably to the results with its shares jumping nearly 10% in early morning trading to $5.84 a share on the Toronto Stock Exchange as of 9:55 a.m.

The Montreal-based company reported a net loss of $22.8-million, or 59¢ a share, compared to $13.2-million, or 35¢ a share.

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However, stripping out one-time items, including a fuel hedging charge of $18.5-milion during the quarter, the company delivered an adjusted loss of $1.4-million, or 4¢ a share, compared to an adjusted loss of $24.5-million, or 64¢ a share last year.

That was well ahead of the 33¢ a share loss expected by analysts.

“We reached our cost-reduction targets, and despite a challenging winter selling prices were higher than last year, hence the improvement in our results,� said Jean-Marc Eustach, Transat chief executive in a statement.

“The summer is looking fairly good and we expect to be back to profitability this year,� he added.

Returning to profitability in 2013 would a considerable achievement for the company, which hasn’t turned in annual profit since 2010.

But the company increased its restructuring targets as well on Thursday, saying it was now aiming to improve its margins by $75-million between 2011 and the end of 2014, up from $50-million previously.

Revenue during the second quarter fell by 9% to $1.1-billion, from $1.2-billion a year ago, as the company scaled back its capacity in order to fly more profitably.

As a result, the company said across all markets selling prices and margins had improved during the quarter compared to the same period 2012.

For the summer months, when Transat aims the bulk of its capacity across the Atlantic, the company said it would be scaling back its capacity once again by 12% compared to last year.

With roughly two-thirds of the summer schedule sold, Transat said its planes were flying with 2% drop in load factor but selling prices that were about 5% higher.

The company said it expected its results in the second half to be better than a year ago.

Ben Vendittelli, Laurentian Bank Securities analyst, said the results were a “significant improvement� for the company.

“The upside to the story lies in the restructuring of Transat’s winter operations, which seem to be taking shape,� he said in a note to clients.

Article source: http://www.canada.com/Transat+narrows+loss+expects+back+black+this+year/8519815/story.html