Razor-Thin Margins Hit Transat Quarterly Results
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Transat A.T. Inc. says intense competition and a strong Canadian dollar had a negative impact on its latest quarterly financial results. The Montreal-based travel giant saw its net income fall to $6.2 million for the three months ended April 30th, down from $42.2 million in the year-earlier quarter.

Transat’s revenue also fell, but not as dramatically, to just under $1.1 billion – a decline of $69 million from the second quarter of last year.

“Both the quarter and the first six-month period have seen intense competition, which continues to squeeze margins and benefit the consumer. Our operating expenses are under control and our cost-reduction efforts have been successful,” said Jean-Marc Eustache, President and Chief Executive Officer. “In addition, we recorded unexpected costs of $4 million as a result of volcanic activity in Iceland.”

Revenues from North American business units, generated by sales in Canada and abroad, decreased by $27.5 million, or 3.0%, compared with the same period in 2009. The decrease is attributable to a decline in average selling prices, partly offset by an increase in the number of travellers. North American business units posted a margin of just 1.5%, compared with 4.2% in 2009.

When you look at the first six months of Transat’s year, margins are even more razor-thin. Transat posted a margin of 0.6%, compared to 2.4% in 2009. The company attributes the decline in margin to lower selling prices resulting from excess supply and intense competition in the marketplace, and the fact that Transat was unable to fully capitalize on the strength of the dollar against the US currency, due to the Corporation’s hedging transactions.

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