Transat talks with Ottawa over new financing ‘well advanced’: executives

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Transat A.T. Inc. is continuing discussions with the federal government to secure additional financing that will help the Montreal-travel based company bridge the gap until demand has rebounded to pre-pandemic levels.

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Negotiations with Ottawa are “well advanced,” chief financial officer Patrick Bui told reporters Wednesday after the company’s annual shareholder meeting. He declined to provide specific figures, saying only that the total amount will probably be smaller than last year’s $700-million aid package.

Under new chief executive Annick Guérard, who took over in May, Transat is completing the first part of a three-year transformation that aims to refocus the company on its main airline business while lowering unit costs and boosting revenue.

New routes, such as Montreal-Los Angeles and Montreal-San Francisco, have been added, and a drive to acquire hotels has been scrapped. Air Transat also simplified its fleet by keeping only two types of aircraft: the Airbus A330 wide-body jet and the fuel-efficient A321neoLR narrow-body, which can fly transatlantic.

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Transat forged ahead with the standalone strategy after Air Canada, the country’s biggest carrier, abandoned plans last year to buy the company when it became apparent the transaction wouldn’t receive European Commission approval.

Flight capacity this summer will represent about 90 per cent of 2019 levels, Guérard said Wednesday during a media briefing. By next year, Transat expects to have its rebuilt its route network to pre-pandemic levels, and free cash flow should turn positive by 2024, she added.

Despite increased competition from established carriers such as Air Canada and ultra-low-cost upstarts, Transat is “cautiously optimistic” about booking trends for the upcoming summer travel season, the CEO said.

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“Even though it’s still early, we are seeing good demand, with maybe a little bit more of a wait-and-see attitude” from customers, Guérard said. “Sales are occurring later than in the past.”

As Transat expands its network, the company is continuing to recall staff. It now has about 3,400 active employees, and will probably end the year with 4,500, Guérard said. At the lowest point of the health crisis, staffing plunged to about 900 from 5,800 before the pandemic.

Most flight attendants, mechanics and pilots have been recalled, though staff shortages persist for the last two categories, Guérard said.

Customer service, which has been hampered by a lack of staff, should return to normal this summer if hiring proceeds as planned, Guérard said. While the CEO said Transat normally aims to answer calls within one minute, a banner on the company’s website currently warns customers that they should expect longer-than-normal wait times. Such service issues are common in the airline industry, the CEO insisted.

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Frequent changes in global travel restrictions have created confusion among passengers, Guérard said. What’s more, customers are increasingly waiting until the last minute to book due to uncertainty over new COVID-19 waves developing.

“Travelling is complex, and people need to be reassured,” she said. “These are volumes that we have never experienced in the past. Service today is acceptable, but it’s not where it should be.”

Transat is currently adjusting fares to account for rising jet fuel prices, Guérard said, declining to be specific. A fuel surcharge — varying between $20 and $40 per flight segment — has been implemented, and will probably be increased if energy prices don’t stabilize, she said.

Thanks to teleworking, Transat has reduced its office footprint by about half since the start of the pandemic. The company now occupies six floors of the tower that houses its Montreal headquarters, down from 12 previously, Guérard said. Office employees represent about 30 per cent of the company’s workforce.

When activity volumes return to pre-pandemic levels next year, the company will probably need 10 per cent to 15 per cent fewer employees than it did previously, the CEO said.

“The crisis has allowed us to review how we operate,” she said. “Our structure is lighter.”

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CORRECTION: An earlier version of this story had the wrong model name for one of the Airbus jets. The correct model is A321neoLR.