Transat A.T. Inc. - Third Quarter 2008 Results - Number of travellers and revenues increase; margin decreases due to fuel price



    
    - Revenues of $859.9 million, up 15.9% from $741.8 million in 2007,
      reflecting increases in selling prices and in the number of travellers
      in Canada and Europe.
    - Margin(1) of $12.8 million, down from $25.9 million in 2007.
    - Net loss of $2.4 million, or $0.07 per share fully diluted, compared to
      net income of $16.1 million, or $0.47 per share in 2007 (net income of
      $0.7 million, or $0.02 per share fully diluted, compared with
      $13.5 million, or $0.40 per share, in 2007 before impact of hedge
      accounting standards).
    - Net income of $28.1 million, or $0.84 per share on a fully diluted
      basis, for the nine-month period, compared with $71.9 million
      ($2.10 per share on a fully diluted basis) in 2007 (net income of
      $43.7 million, or $1.30 per share on a fully diluted basis, compared
      with $63.2 million or $1.85 per share, in 2007, before impact of hedge
      accounting standards and ABCP writedowns).
    

    MONTREAL, Sept. 10 /CNW Telbec/ - Transat A.T. Inc., one of the largest
integrated tourism companies in the world and Canada's holiday travel leader,
posted revenues of $859.9 million for the quarter ended July 31, 2008,
compared with $741.8 million in 2007-an increase of 15.9%. The Corporation
recorded a margin of $12.8 million, down from $25.9 million in 2007, and a net
loss of $2.4 million, or $0.07 per share on a fully diluted basis, compared
with net income of $16.1 million ($0.47 per share on a fully diluted basis) in
2007.
    The unfavourable variance in net income and margin is mainly attributable
to Canadian tour operators having difficulty immediately incorporating the
full value of fuel prices increases into selling prices, given the rapid pace
and magnitude of said increases. The negative impact on the results was
somewhat offset by the good performance of the Corporation's European
subsidiaries.
    "Oil prices have diminished since the end of the quarter, but still, they
have quickly reached unprecedented levels and remain very high. Under these
circumstances, price increases and hedging can merely limit the negative
impact of this situation, as our fuel bill for the quarter was up by more than
$30 million compared with last year. The business environment is demanding and
our results are in line with our most recently released outlook, made at the
end of the second quarter. That said, people continue to travel, in Canada and
Europe," stated Jean-Marc Eustache, President and Chief Executive Officer of
Transat A.T. Inc.

    Highlights for the quarter and nine-month period
    ------------------------------------------------

    The Corporation's revenues rose $118.1 million and $356.9 million for the
quarter and nine-month period, respectively, compared with the corresponding
periods of fiscal 2007. The overall increase in the Corporation's revenues was
driven by revenue growth over the quarter and the nine-month period of 7.3%
and 11.9%, respectively, in North America and 31.4% and 26.7%, respectively,
in Europe. These improvements were mainly attributable to the greater business
activity (following an expanded offering), higher selling prices, increase of
sales of seats to third parties (during the winter season), and to a lesser
degree to the 2007 acquisition of Amplitude Internationale. Compared with the
corresponding periods of the previous year, the volume of travellers was up
7.2% and 20.9% for the quarter and nine-month period.
    Margins expressed as a percentage of revenues narrowed over the quarter
and nine-month period to 1.5% and 3.6% respectively, from 3.5% and 4.9%,
respectively, for the corresponding periods of 2007. The unfavourable variance
in net income and margin is mainly attributable to Canadian tour operators
having difficulty immediately incorporating the full value of fuel prices
increases into selling prices, given the rapid pace and magnitude of said
increases, coupled with downward price pressure due to excess supply and
unrelenting competition in the marketplace, particularly for sun destinations
sold in North America.
    During the third quarter and nine-month period, revenues in North America
were up 7.3% and 11.9%, respectively, compared with the same periods in 2007.
This revenue growth was driven mainly by higher average selling prices and a
1.1% increase in the volume of travellers for the quarter and by a 18.3%
increase in the volume of travellers for the nine-month period compared with
the corresponding periods of 2007. For the quarter, the Corporation reported a
negative margin of 2.3% compared with a positive margin of 2.3% for the
corresponding period of 2007. For the nine-month period, the Corporation
posted a margin of 3.6% compared with 5.6% for the corresponding period of
2007.
    In Europe, revenues and operating expenses were up from the corresponding
quarter and nine-month period of the previous fiscal year. These increases
resulted primarily from greater business activity across all subsidiaries, the
2007 acquisition of Amplitude and the euro's strength against the dollar. The
volume of travellers rose 20.2% and 31.7% for the quarter and nine-month
period, respectively, compared with the corresponding periods of 2007.
Excluding Amplitude Internationale's travellers, the volume of travellers grew
8.3% and 12.1% for the quarter and the nine-month period, respectively,
compared with the corresponding periods of 2007. The Corporation's European
operations reported a margin of $24.5 million, or 7.0%, for the quarter
compared with $15.1 million, or 5.6%, for the corresponding period of 2007.
These improved margins resulted in part from increased profitability at
Canadian Affair, the strength of the euro, and increased number of travellers.
For the nine-month period, the European operations reported a margin of
$23.0 million, or 3.5%, compared with $13.6 million, or 2.6%, for the
corresponding period of 2007.
    Net income for the nine-month period ending July 31, 2008 was
$28.1 million, or $0.84 per share on a fully diluted basis, compared with net
income of $71.9 million ($2.10 per share on a fully diluted basis) in 2007
(net income of $43.7 million, or $1.30 per share on a fully diluted basis,
compared with $63.2 million or $1.85 per share, in 2007, before impact of
hedge accounting standards and ABCP writedowns).
    As at July 31, 2008, cash and cash equivalents totalled $259.6 million
compared with $166.8 million as at October 31, 2007. Cash and cash equivalents
in trust or otherwise reserved amounted to $166.8 million as at the end of the
third quarter of 2008 compared with $168.2 million as at October 31, 2007. The
Corporation's balance sheet reflects a working capital of $33.4 million and a
current ratio of 1.04 compared with $71.5 million and 1.11 as at October 31,
2007. This decline, resulting from the reclassification of our investments in
Asset Backed Commercial Paper ("ABCP") in long-term assets, was partly offset
by the favourable net change in derivative financial instruments.
    The Corporation holds or has access to sufficient available cash to meet
all of its financial, operational and regulatory obligations. Cash in trust,
representing deposits from customers, as well as available cash, are held
either as cash or invested in liquid instruments (mainly cash and term
deposits) with a broad range of large financial institutions and have no
exposure whatsoever to the current ABCP market disruption. Total debt(2) stood
at $367.1 million at July 31, 2008, a decrease of $4.0 million compared with
October 31, 2007. The Corporation's net debt(3) decreased from $62.0 million
at October 31, 2007, to $7.1 million at July 31, 2008.

    Non-operating items
    -------------------

    The Corporation did not recognize any additional writedown in respect of
its investments in ABCP during the three-month period ended July 31. The total
provision at July 31, 2008 represents 30.2% of the initial value on ABCP
holdings of $143.5 million.
    The Corporation recorded non cash losses related to the change in the
fair value of the forward contracts it uses to manage fuel price fluctuation
risks of $4.7 million ($3.1 million after tax) in the third quarter of 2008,
compared with gains of $3.9 million ($2.6 million after tax) in the third
quarter of 2007.
    Excluding the impact of the ABCP write-down and the non-cash
gains/losses, the Corporation recorded the following operating results
compared to the prior year.


    
                         Impact of non-cash charges
    -------------------------------------------------------------------------

    Third quarter                           2008                       2007
                        -------------------------------------------
    (In thousands
     of dollars,                               Impact of
     except                        Impact of      ABCP
     per-share              As       hedge       write-
     amounts)            reported  accounting     down    Adjusted   Adjusted
    -------------------------------------------------------------------------
    Income (loss)
     before taxes and
     non-controlling
     interest in
     subsidiaries'
     results              (5,845)     4,661          -     (1,184)    18,592
    Net income (loss)     (2,449)     3,146          -        697     13,491
    Diluted earnings
     (loss) per share      (0.07)      0.10          -       0.02       0.40
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    First Nine months                       2008                       2007
                        -------------------------------------------
    (In thousands
     of dollars,                               Impact of
     except                        Impact of      ABCP
     per-share              As       hedge       write-
     amounts)            reported  accounting     down    Adjusted   Adjusted
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries'
     results              45,513    (14,314)    32,137     63,336     91,134
    Net income            28,135     (9,796)    25,330     43,669     63,206
    Diluted earnings
     per share              0.84      (0.29)      0.76       1.30       1.85
    -------------------------------------------------------------------------


    Dividend
    --------

    On September 9, 2008, Transat's Board of Directors approved a quarterly
dividend of $0.09 payable to holders of Class B Voting Shares and Class A
Variable Voting Shares. It will be payable on October 15, 2008, to
shareholders of record as at September 30, 2008.

    Outlook
    -------

    Bookings for the rest of the 2008 summer season are generally higher than
for the prior year at the same date. Selling prices are generally higher on
the transatlantic market, and lower on the Canada-South market. Competition is
intense, and given the price-sensitivity of demand, the Corporation's margins
remain exposed to the unpredictable fluctuations of aircraft fuel prices. For
the fourth quarter, the Corporation anticipates higher revenues than in 2007,
and similar margins on a consolidated basis, with lower margins in North
America and higher margins in European operations.
    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
    ---------------

    Third quarter 2008 conference call: Wednesday September 10, 2008,
10.00 a.m. Dial 1-866-299-6657 or 514-861-1681. 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 3269909 pound sign, until October 10, 2008.

    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.

    -------------
    (1)Revenues less operating expenses (non-GAAP financial measure used by
       management as an indicator to evaluate ongoing and recurring
       operational performance)).

    (2)Debt plus off-balance sheet arrangements (non-GAAP financial measure
       used by management to assess the Corporation's future liquidity
       requirements).

    (3)Total 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 revenues will be higher and margins
similar when compared to 2007. In making these statements, the Corporation has
assumed that the trends in reservations will continue throughout the remainder
of the season and that fuel prices will remain high. If these assumptions
prove 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 energy
prices, 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, 2007, 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.
    %SEDAR: 00002758EF




For further information:

For further information: Media: Jean-Michel Laberge, (514) 987-1616,
ext. 4662; Financial analysts: François Laurin, Vice-President, Finance and
Administration and Chief Financial Officer, (514) 987-1660; Source: Transat
A.T. Inc., www.transat.com


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