Transat AT Inc. expects to resume operations this summer, but needs to borrow money to stay afloat if Air Canada walks away from its purchase offer, the company said Thursday while reporting its latest financial results.
The Montreal-based operator announced it lost $60 million in the first quarter ended 31JAN, 2021. That compares to a loss of $34 million during the same period a year ago.
Revenues were $42 million, compared with nearly $700 million in Q1 last year. The quarterly loss follows an annual loss of $497-million for the year ending 31OCT, 2020.
“These results are for a quarter where it was once again impossible to operate our business in a sustainable manner. With the arrival of vaccines, we’re now preparing ourselves for a resumption of operations in the summer and particularly next winter,” said Transat chief executive Jean-Marc Eustache in a release.
Transat suspended service at the end of JAN after agreeing to a demand by Ottawa that all of the nation’s airlines stop flying to Mexico and the Caribbean until 30APR.
Its target date for the resumption of service is mid-JUN, but Transat admits that there are unknown variables surrounding the pandemic that could delay that date. It also said that it could take until 2023 before it is able to operate at pre-pandemic levels.
A larger concern for Transat is the fate of Air Canada’s purchase offer for the company. The closing date for the deal, 15FEB, has passed without European Commission approval, which isn’t expected before the first half of the year. That means either company can walk away from the purchase agreement at any time.
“Should the transaction with Air Canada not be completed, the Corporation will have to put in place overall financing totalling at least $500 million in 2021 to ensure continuity of operations,” the company said in a release.
It added that it is in continuing discussions with potential lenders, including federal and provincial governments.
“Such financing could be obtained through an application for the LEEFF (Large Employer Emergency Financing Facility) or through any government assistance program, including sector-specific assistance that could include loans and possibly other types of support announced by the Minister of Transport of Canada,” said Transat.
In the meantime, The Quebec government and the Caisse de Depot et Placement du Quebec pension fund have urged Transat to come up with another plan in case the Air Canada deal collapses.
Quebecor CEO Pierre Karl Peladeau says he still stands by an earlier offer he made for Transat through his investment company. According to Bloomberg, Transat is downplaying the offer pointing out, “No evidence of a binding, fully committed financing has been provided,” and saying it would only enter into discussions with Peladeau if the AC offer is officially withdrawn.
Another potential suitor is WestJet’s majority shareholder, Onex Corp.