Transat revenues drop by 99 per cent, with 2,000 layoffs expected
Transat AT Inc. expects to permanently lay off at least 2,000 Canadian employees after revenues fell 99 per cent last quarter, when the travel company operated flights for just one week.
The layoffs would reduce the tour operator's workforce by about 40 per cent and likely come after the end of the federal wage subsidy -- currently scheduled to expire Dec. 19 -- "if the situation does not improve rapidly," CEO Jean-Marc Eustache said on a conference call.
Two-thirds of Transat's 5,000 workers in Canada are already temporarily laid off, he said.
The announcement Thursday came alongside dire financial results, as the company saw net losses surge to $45.1 million in its third quarter from a loss of $1.5 million a year earlier.
The Montreal-based carrier grounded its planes between April 1 and July 22, leaving only nine days for flights to occur at the tail end of the quarter, unprecedented in Air Transat's 34-year history.
"The situation is especially difficult in Canada. Restrictions at the border are particularly stringent, with the closure to foreigners and mandatory quarantine for Canadians coming back from any other country at least until Sept. 30," Eustache said, echoing other airline CEOS.
"We are frustrated."
The $720-million deal for Transat's acquisition by Air Canada looks increasingly uncertain, the company suggested.
Airlines across the globe have reduced capacity, leaving a transformed market that could impact regulatory approvals, "especially regarding the appropriate package of remedies aimed at obtaining those approvals," the company said in its release.
The additional financing Transat now seeks could also be an issue, as the covenants reached under its agreement with Air Canada restrict Transat's ability to obtain new loans and may require Air Canada's prior consent.
"Although the agreement provides that Air Canada's consent may not be unreasonably withheld, there is no certainty that Air Canada will consent to the obtaining of additional sources of financing by the corporation," the company said.
European regulators are expected to reach a conclusion on the deal by Dec. 12. The Trudeau government has not yet announced a decision, which "may come at any time," Eustache said.
Transat operations remain severely curtailed. It is now flying out of 18 airports in Europe, the Caribbean and domestically in Montreal, Toronto, Calgary and Vancouver.
The company bled about $1.7 million in cash per day in the quarter ended July 31.
It lost $1.20 per share in the quarter compared with a loss of four cents per share a year earlier, while revenue totalled $9.5 million, down from $698.9 million.
On an adjusted basis, Transat said it lost $3.70 per share for the quarter compared with an adjusted profit of 16 cents per share in the same quarter last year.
This report by The Canadian Press was first published Sept. 10, 2020.
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