Transat A.T. Inc.

Bonjour, Mesdames et Messieurs. Bienvenue à la conférence Transat. Good morning, ladies and gentlemen. Welcome to the Transat conference call. Please note that this call is being recorded. I would now like to turn the meeting over to Andréane Gagné, Senior Director, Communications, Public Affairs, and Corporate Responsibility. Please go ahead, Ms. Gagné.

Bonjour et bienvenue à cet appel trimestriel de Transat. Hello, everyone, and thank you for joining us for our first quarter earnings call ended January 31, 2025. Annick Guerra, President and CEO, and Jean-François Pruneau, our Chief Financial Officer, will provide an overview of the quarter and comment on the current operational situation and commercial plans. Jean-François will also discuss our financial results in detail. We will then take questions from analysts. Questions from journalists will be taken offline after the call. The conference call will be conducted in English, but questions may be asked in French or English. As usual, our Supplementary Disclosure has been updated and is available on our website in the Investors section. You can also refer to it when you present the results. Our comments and discussions today may include forward-looking information regarding transact outlooks, objectives, and strategies that are based on assumptions and subject to risk and uncertainty. Forward-looking statements represent Transat's expectations as of March 13, 2025, and are therefore subject to change after that date. Our actual results may differ materially from any stated expectations. Please refer to a forward-looking statement in Transat's first quarter news release available on Transat.com and on SEDOT's website. With that, I would like to turn over the call to Annick for opening remarks.

Good morning. Thank you for joining us for our first quarter conference call for fiscal 2025. The quarter ended with a better performance compared to the same period last year, with revenue growing 5.6% to $830 million and adjusted EBITDA tolling $20 million. These results were mainly driven by positive yields, reduced fuel costs, and a tight control of operating expenses. Turning to our operating matrix, customer traffic expressed as revenue passenger miles increased 1% in the first quarter of 2025 from Q1 2024, reflecting continued demand for leisure travel. High traffic and a discipline capacity increase resulted in a yield improvement of 1.7% year over year. Our load factor in the first quarter was in line with the same period last year. Finally, available seat miles or capacity was up 0.5% across our global network, reflecting our disciplined planning approach. Early in the second quarter, while our load factor has slightly declined, the steady improvement in yield has upset this impact, driving revenue growth. With regards to our elevation program, as of today, the initiatives already implemented will generate and annualize adjusted EBITDA of approximately 37 million. We remain fully on track for the program to generate 100 million in adjusted EBITDA by mid-2026. As a reminder, the initial phase of the program mainly consists in optimizing our cost structure. On this front, I am very encouraged by the efficiency gains and cost savings that we have been able to achieve so far, especially those generated through the implementation of technology and AI in our operations. In the coming months, we will continue to implement key initiatives with a special focus in the area of revenue management. As anticipated, the impact on our financial results at this stage has been relatively neutral due to the startup implementation cost, but we expect the benefits to begin to materialize more significantly in the second half of fiscal 2025. Turning to our operations, as stated last quarter, we do not have aircraft deliveries planned for this year. Our fleet consists of 44 aircraft for the winter season, including a dry leaf contracted in 2024 and 43 aircraft for the summer season. We continue to actively manage the severe negative impact caused by Pratt & Whitney GTF engine issue. The number of grounded aircraft has fluctuated between six and seven during the last quarter, and we anticipate this level of AOG to persist throughout the year. As previously explained, this situation not only escalates costs, but also introduces a substantial degree of uncertainty and volatility to our operation. We continue to press for the conclusion of an agreement with Pratt & Whitney regarding the grounded aircraft for 2025. Regarding our network, we recently announced an exclusive non-stop route between Toronto and Berlin. The service will start next summer with two weekly flights. Other network expansion initiatives include the introduction of Valencia from Montreal starting in June, a new partnership with Air Europa of Spain to further strengthen our presence in the growing Spanish travel market via their hub in Madrid, We also extended our service to Martinique from Montreal for the summer season as we continue to expand our offering of year-round south destinations. We are well prepared for this summer with a robust program and a modest capacity increase. Our network will also continue to benefit from the value created by our joint venture with Porter. We continue to build on strong organic momentum and forecast a significant increase in additional connecting passengers compared to 2024. On the operational front, we continue to make great progress to deliver strong performance. Our on-time performance in the first quarter improved by more than four percentage points year over year, marking a third consecutive quarter of significant progress. As indicated last quarter, the successful insourcing of passenger and rent services at Montreal Trudeau Airport has played a key role in this improvement. During the major snowstorms in February, our strong operational performance stood out, with remarkable on-time performance showcasing our team's stellar efficiency in challenging conditions. In addition, our customer satisfaction continued to be strong, consistently meeting our targets throughout the quarter. Our solid operational performance as well as our level of customer satisfaction clearly reflect the hard work and dedication of our team and provide a robust foundation for achieving our broader goals moving forward. Finally, we formally opened negotiations with our pilot union in late January to reach a new collective agreement in 2025, and we are encouraged with discussions that have been productive so far. Looking ahead to the second quarter and the summer season, we are closely analyzing any potential impact of US tariffs on our business and consumer sentiment. Transat has limited exposure to the U.S., with only two routes to Florida, representing about 3% of our total ASMs. However, the negative effects of a trade dispute with the U.S. could have multiple impacts, with two key areas of concern. First, the depreciation of the Canadian dollar already underway, directly increase our costs, particularly for fuel and aircraft leasing, which are priced in US dollars. Perhaps even more critical is the broader economic uncertainty that such a dispute is creating, affecting consumer confidence and, in turn, potentially impacting travel demand. We recognize this is a highly volatile environment. We are closely monitoring the evolution and continue to factor in into our decision-making and forecasting processes. In closing, we are encouraged by the yield improvement achieved in a more disciplined capacity environment. Our yield has maintained its steady growth in the early part of the second quarter, which is compensating for a slightly lower load factor. While it is still early, these trends are currently carrying over into the summer season. However, given the current macroeconomic uncertainties, we are taking a cautious stance when assessing the outlook for the remainder of 2025. Our elevation program is progressing according to plan, and we remain on track towards achieving our financial objectives. The refinancing of our debt and the strengthening of our balance sheet remain our priority for 2025. We are continuing to explore all alternatives that will allow us to implement an optimal structure over the long term. In the meantime, work continues at all levels to increase revenues, tighten spending, boost liquidity, and improve overall productivity. All teams are mobilized, and I thank them once again for their unwavering commitment. This concludes my remarks.