Transat A.T. Inc.

Bonjour, Mesdames et Messieurs. Bienvenue à la conférence Transat. Good morning, ladies and gentlemen, and welcome to the Transat conference call. Please note that this call is being recorded. I would now like to turn the conference 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 third quarter earnings call ended July 31, 2025. Annick Guérard, 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 financial 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 Investor section. Jean-François may refer to it when he presents the results. Our comments and discussion today may include forward-looking information regarding transact outlook, objectives, and strategies that are based on assumptions and subject to risk and uncertainty. Forward-looking statements represent Transat's expectations as of September 11, 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 third quarter news release available on Transat.com and on CEDAR+. With that, I would like to turn the call over to Annick for opening remarks.

Good morning. Thank you for joining our third quarter conference call for fiscal 2025. Over the quarter, we improved our operating and financial performance with a 4.1% increase in revenue to $766 million and adjusted EBITDA of $81 million. These results are in line with our expectations. That said, the beginning of our summer season produced mixed results. On the one hand, we are pleased by the performance of our south program. Although this was the off-peak season, demand exceeded expectations as traveler preferences shifted away from the U.S. in favor of Mexican and Caribbean destinations. On the other hand, lower industry demand for transborder traveling resulted in a relocation of capacity to transatlantic routes in addition to planned increases. This shift in supply created a more challenging environment for European destinations in our peak season, but we have been able to hold our ground with a relatively stable yield. Looking at our operating matrix, capacity expressed in available seat miles increased 2.4% over last year, with capacity for transatlantic routes up 4.2%. Customer traffic expressed as revenue passenger miles increased 1% over last year, reflecting continued demand for leisure travel. Yield improved 2.6% year-over-year as a result of higher traffic and discipline capacity growth, thus maintaining the positive momentum experienced since the beginning of the year. Our load factor stood at 85% compared to 86.2% in 2024. Turning to our elevation program, benefits began to materialize as anticipated during the quarter. The positive impact of the program combined with higher revenues, rigorous control of operating expenses and lower fuel costs resulted in improved operating profitability. Exactly one year ago, we launched elevation with the goal of generating 100 million in annual adjusted EBITDA by mid-2026. We remain on track to achieve our target and drive results through cost reduction and revenue generation initiatives. Turning to our operations, I am pleased to report a fifth consecutive quarter of improved on-time performance. Our operational discipline rooted in our culture allows us to offer a quality experience to our customers while maintaining tight control over our expenses. We currently have a fleet of 43 aircraft, of which six are grounded due to the ongoing Pratt & Whitney GTF engine issue. We expect that number to gradually improve for the upcoming winter season. Needless to say, this burden has significantly affected our performance for over two years now, even though we are doing everything we can to minimize its impact. As announced last month, we completed a sell and leaseback transaction for two additional spare engines, which were part of the compensation received from Pratt & Whitney for grounded aircraft for 2025. Jean-Francois will provide additional details on the transaction in a few moments. Turning now to our network expansion. Since the last quarter, we announced new non-stop service from Toronto to Istanbul, Turkey, operating twice weekly starting in December. We have also established a partnership with Turkish Airlines to strengthen service between our two countries, offering consumers more travel options to destinations across the Middle East, Asia, and Africa. We also announced new non-stop service to Rio de Janeiro, Brazil, with two weekly flights from Toronto and one weekly flight from Montreal, offering Canadian travelers more opportunities to explore South America. These additions are part of an extended winter offering, which includes 14 new routes. For next winter, we will also be adding frequencies on several existing high-performing routes to the south and across the Atlantic, reinforcing our commitment to strengthening our core network. Altogether, our enhanced winter schedule represents about 5% to 7% capacity increase compared to last year, mainly driven by the gradual return to service of aircraft currently grounded along with higher aircraft utilization. This expansion reflects our ongoing efforts to diversify the network and broaden our international footprint. We will be announcing additional destinations for 2026 in the coming months, further building on this momentum and unlocking new growth opportunities. We are targeting high potential markets with strong VFR demand and low seasonality, which help drive year-round traffic. Importantly, the strong performance observed to date of recently launched routes supports our diversification strategy. Longer haul routes, such as Rio and Istanbul, play a key role in maximizing aircraft utilization and allowing us to optimize fleet efficiency. Finally, I am pleased to report that our brand and customer satisfaction continue to shine. Air Transat has been named the world's best leisure airline at the 2025 Skytrax World Airline Awards for the seventh time. This award is based on passenger satisfaction and reflects the unwavering commitment of our teams to placing the client at the heart of every decision we make. Thanks to our team's openness, attention to detail, and constant desire to go above and beyond what is expected, Transact continues to stand out from its peers. Looking ahead, we anticipate recent trends to continue over the next few quarters, and we remain cautious in light of pressures on consumer discretionary spending. At this time, we are witnessing softness in our two four-load factors, which are down 1.2 percentage points compared to last year. Yields are 3.1% above last year, although they are currently trending downward. As we enter our winter season, we continue to see strong demand for south destination, supported by a shift in consumer behavior away from U.S. travel. That said, given the current environment, it remains difficult to predict how demand will evolve in the coming months. In conclusion, I want to once again highlight the significant progress made in terms of improving our balance sheet, as the refinancing represents a major step forward for the long-term sustainability of transit. We are also pleased with our results after nine months. The results show us that we are focusing on the right thing. But we will continue to remain prudent. going forward, considering economic and geopolitical uncertainty and a more challenging competitive environment. This concludes my remarks for today.