-Revenues of $877.3 million, up 11.4% from $787.4 million in 2008, reflecting increases in the numbers of travellers in Canada and Europe.
-Operating loss of $8.5 million, down from a margin(1) of $19.3 million in 2008, stemming from downward pressure on selling prices due to intense competition and excess supply in Canada.
-Net loss of $29.4 million or $0.90 per share fully diluted compared to net loss of $7.9 million or $0.23 per share in 2008.
-Net loss of $11.8 million or $0.36 per share fully diluted, compared with net income of $3.4 million or $0.10 per share in 2008, before impact of non-cash items.
-Transat announces the suspension of its quarterly dividend, in order to conserve cash in light of the current economic situation.

Transat A.T. Inc., one of the largest integrated tourism companies in the world and Canada’s holiday travel leader, posted revenues of $877.3 million for the quarter ended January 31, 2009, compared with $787.4 million in 2008—an increase of $89.9 million or 11.4%. The Corporation recorded a negative margin of $8.5 million, down from a margin of $19.3 million in 2008, and a net loss of $29.4 million, or $0.90 per share on a fully diluted basis, compared with a net loss of $7.9 million ($0.23 per share on a fully diluted basis) in 2008.

The unfavourable variance in net loss is attributable to lower margins on packages sold in Canada to southern destinations in Mexico and the Caribbean and to the impact of hedge accounting standards. The latter represented a non-cash loss of $28.5 million ($20.7 million after tax) compared with a non-cash loss of $2.0 million ($1.2 million after tax) in 2008.

“Canadians continue to travel to sun destinations in numbers despite deteriorating economic conditions, and market conditions for tour operators remain challenging due to intense competition and high costs,” stated Jean-Marc Eustache, President and Chief Executive Officer of Transat A.T. Inc.
 
First quarter highlights

The $89.9 million or 11.4% increase in revenues is due to expanded business activity in both America and Europe, with a 10.5% quarter over quarter increase in travellers. The Corporation’s consolidated margin decreased from 2.4% in 2008 to a loss of 1.0% in 2009.

In America, revenues increased by $64.1 million, or 9.5%, compared with the corresponding period in 2008. The increase in revenues was largely due to the 11.1% increase in the number of travellers over 2008, offset by a decrease in average selling prices on travel packages to sun destinations. Margins in all major Canadian gateways have been adversely impacted by the additional capacity added by tour operators on southern routes. Consequently, in America, margins decreased from 3.9% in 2008 to 0.2% in 2009.

Revenues of European subsidiaries increased by $25.8 million, or 23.0%, due to increases in volume at Look Voyages and Vacances Transat (France) and to the impact of the stronger euro. The Corporation’s numbers of European travellers during the quarter increased by 6.0% and selling prices were higher than the prior year. In Europe, the Corporation reported a negative margin of $9.8 million compared with a negative margin of $7.3 million in 2008.

As at January 31, 2009, the Corporation had $184.1 million in cash and cash equivalents, compared with $145.8 million at October 31, 2008. Total debt² stood at $469.0 million at January 31, 2009 an increase of $18.6 million compared with October 31, 2008. The Corporation’s net debt³ decreased from $218.0 million at October 31, 2008, to $193.6 million at January 31, 2009.

During the quarter, the Company entered into an unsecured subordinated financing agreement with one of its shareholders of the Corporation for a $60 million facility that further increases the amount of credit facilities available for corporate purposes.

Non-cash and non-operating items

Based on new assumptions and in consideration of funds it has recovered, the company has reduced its provisions for writedowns on Asset Backed Commercial Paper (ABCP) through a non-cash revaluation gain of $3.8 million ($3.1 million after tax) and by $6.0 million ($4.1 million after tax) in income received and receivable, compared to a non-cash loss of $14.2 million ($10.1 million after tax) in the first quarter of 2008. The total provision for writedowns of $50.4 million at January 31, 2009 represents 36.0% of the new nominal value on ABCP holdings of $141.7 million.

The Corporation recorded an additional non-cash and non-operating loss of $28.5 million ($20.7 million after tax) in the first quarter of 2009 compared to a non-cash loss of $2.0 million ($1.2 million after tax) in the first quarter of 2008, representing the change in the fair value of the forward contracts it uses to manage fuel price fluctuation risks.

Dividend

On March 11, 2009, Transat’s Board of Directors has suspended until further notice the quarterly dividend to holders of Class B Voting Shares and Class A Variable Voting Shares, so as to conserve cash during this period of uncertain and challenging economic circumstances.
 
Commercial agreement with Canjet

On February 13, 2009, Transat announced that it had entered into a 5-year commercial agreement with Canjet to charter Canjet narrow-body aircraft flying out of more than 20 Canadian cities to approximately 20 sun destinations. 

Outlook

For the winter season, Transat expects demand and volumes to be higher than in 2008 on all markets. However, in Canada, heightened competition and excess capacity continue to exert pressure on selling prices and margins. For the summer, Canadian bookings to Europe are similar to those of the previous year and European bookings to Canada and other destinations are slightly behind 2008.

Transat A.T. Inc. is an integrated international tour operator with more than 60 destination countries and that distributes products in over 50 countries. A holiday travel specialist, Transat operates mainly in Canada and Europe, as well as in the Caribbean, Mexico and the Mediterranean Basin. Montreal-based Transat is also active in air transportation, accommodation, destination services and distribution. (TSX: TRZ.B, TRZ.A)

Conference Call

First quarter 2009 conference call: Wednesday March 11, 2008, 2.00 p.m. Dial 1-866-223-7781 or 514-392-1478. Name of conference: Transat. Webcast www.transat.com. The archived call will be available at 1-800-408-3053 or 514-861-2272 access code 6236188 pound sign, until April 10, 2009.

Non-GAAP measures

Transat prepares its financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”). We will occasionally refer to non-GAAP financial measures in the news release. These non-GAAP financial measures do not have any meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. They are furnished to provide additional information and should not be considered as a substitute for measures of performance prepared in accordance with GAAP.

¹Revenues less operating expenses (non-GAAP financial measure used by management as an indicator to evaluate ongoing and recurring operational performance)).
²Debt plus off-balance sheet arrangements (non-GAAP financial measure used by management to assess the Corporation’s future liquidity requirements).
³Total debt less cash and cash equivalents (not in trust or otherwise reserved), temporary investments and investments in ABCP’s (non-GAAP financial measure used by management to assess its liquidity position).

Caution regarding forward-looking statements

This news release contains certain forward-looking statements regarding the Corporation’s expectation that the assumptions used in the valuation of the ABCP securities will materialize, that travel reservations will continue to be higher than 2008 for the remainder of the winter season, that reservations from Canada to Europe in the summer can be maintained at similar levels as the prior year and that European reservations will be slightly lower than the summer of 2008. In making these statements, the Corporation has assumed that the trends in reservations will continue throughout the remainder of the season. If this assumption proves incorrect, actual results and developments may differ materially from those contemplated by the forward-looking statements contained in this press release. Factors that could lead actual results to differ also include general economic conditions, competition, extreme weather conditions, disease outbreaks, war, terrorism, and other risks detailed from time to time in the Corporation’s continuous disclosure documents.

These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. The Corporation considers the assumptions on which these forward-looking statements are based to be reasonable, but cautions the reader that these assumptions regarding future events, many of which are beyond its control, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Corporation. For additional information with respect to these and other factors, see the Annual Information Form and Annual Report for the year ended October 31, 2008, filed with Canadian securities commissions. The Corporation disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.