Transat A.T. Inc. - Third Quarter 2009 Results



    
                        Margin improves substantially
                thanks to reduced costs and lower fuel prices

    - Revenues of $819.4 million, down 4.7% from the $859.9 million in 2008;
      decline attributable to lower volumes and selling prices.
    - Margin(1) of $27.2 million, compared with $14.6 million in 2008, an
      increase of 86% attributable mainly to a reduction of operating costs
      and lower fuel prices.
    - Net income of $31.0 million ($0.94 per share fully diluted), compared
      with a net loss of $0.9 million (loss of $0.03 per share, fully
      diluted) for the corresponding 2008 period.
    - Net income of $7.0 million or $0.21 per share fully diluted, compared
      with $2.1 million or $0.06 per share in 2008, before impact of non-cash
      items (adjusted net income).
    

    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 $819.4 million for the quarter ended July 31, 2009,
compared with $859.9 million for the corresponding period of 2008 - a decrease
of $40.5 million or 4.7%. The Corporation recorded a margin(1) of $27.2
million, up from $14.6 million in 2008, or 86%, and net income of $31.0
million ($0.94 per share on a fully diluted basis), compared with a net loss
of $0.9 million ($0.03 per share on a fully diluted basis) in 2008.
    "These results, posted during a quarter marked by an economy in
recession, a flu outbreak and continuing abundant supply, are satisfactory
under the circumstances. Prudence and rigour remain the watchwords, but the
tourism market is proving to be relatively resilient," stated Jean-Marc
Eustache, President and Chief Executive Officer of Transat A.T. Inc.
    Transat posted revenues of $2,825.7 million for the first nine months of
fiscal 2009, compared with $2,722.4 million for the corresponding period in
2008, an increase of $103.3 million. The margin decreased to $57.8 million in
2009 from $104.6 million in 2008. Net income stood at $43.7 million, or $1.32
per share fully diluted, versus $33.0 million ($0.99 per share fully diluted)
in 2008.
    As at July 31, 2009, the Corporation's cash and cash equivalents totalled
$215.2 million, compared with $259.6 million as at July 31, 2008 and $145.8
million as at October 31, 2008.

    
    Highlights of the third quarter
    -------------------------------
    
    Revenues of North American subsidiaries, which stem from sales made in
Canada and abroad, were down $31.4 million (6.2%) during the third quarter,
compared with the same period in 2008. The decrease was attributable to a drop
in average selling prices and to a 6.5% decrease in the volume of travellers,
the latter largely attributable to a decline of sales in Europe for Canadian
destinations. Transat's North American subsidiaries reported a margin(1) of
1.1%, compared with an operating loss of 2.0% in 2008.
    Revenues of European subsidiaries, which stem from sales made in Europe
and in Canada, decreased by $9.1 million (2.6%) during the third quarter,
compared with the corresponding period of 2008, despite a 4.7% increase in
traveller volume. The increase in volume came from Canadian Affair, which
sells in the United Kingdom and in Canada, partially offset by lower volumes
in France, especially in the long-haul market segment. The Corporation's
European subsidiaries reported a margin of $22.0 million, or 6.5%, for the
quarter, compared with $25.0 million (7.1%) in 2008. The unfavourable variance
in margin is due in part to fuel-hedging operations.

    
    Highlights of the nine-month period ended July 31
    -------------------------------------------------
    
    For the first nine months, revenues of North American subsidiaries, which
stem from sales made in Canada and abroad, were up $62.1 million (3.0%),
compared with the same period in 2008. The increase was driven by a 2.4% rise
in the volume of travellers, fueled in part by a 17.7% increase in the number
of Canadian travellers to the Caribbean and Mexico during the winter season.
North American subsidiaries reported a margin(1) of 2.1% compared with 3.9% in
2008. The unfavourable variance in margin is mainly due to downward pressure
on selling prices during the winter season, caused by excess supply and the
ensuing strong competition on the Canadian market, mainly for Caribbean and
Mexico destinations.
    Revenues of European subsidiaries, which stem from sales made in Europe
and in Canada, increased by $41.2 million (6.3%), compared with the
corresponding period of 2008. The increase in both revenues and operating
expenses was due to the strength of the euro against the dollar, among other
factors. European subsidiaries posted an increase in traveller volume of 5.5%
compared to the same period in 2008, largely fueled by an increase of Canadian
Affair's sales in Canada. The margin stood at $12.5 million, or 1.8%, for the
period, compared with $23.7 million (3.6%) in 2008. The unfavourable variance
in margin is due in part to higher air costs during the 2009 winter season, as
well as fuel-hedging operations.

    
    Non-cash and non-operating items
    --------------------------------
    
    Based on updated assumptions, the Corporation increased its provisions
for writedowns on asset-backed commercial paper (ABCP) by $6.9 million ($6.6
million after tax) during the quarter. The total provision for writedowns of
$64.3 million as at July 31, 2009, represents 47.8% of the new nominal value
on ABCP holdings of $134.6 million.
    The Corporation recorded a non-cash and non-operating gain of $44.4
million ($30.6 million after tax) during the third quarter of 2009, compared
with a non-cash and non-operating loss of $4.7 million ($3.0 million after
tax) in the third quarter of 2008, representing the change in the fair value
of the forward contracts it uses to manage fuel prices fluctuation risks.

    
             Highlights and impact of non-cash items on results
                            (in thousands of CAD)

    -------------------------------------------------------------------------
                                        Third quarter      Nine-month period
                                  -------------------------------------------
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    REVENUES                        819,354    859,880  2,825,685  2,722,427
    -------------------------------------------------------------------------
    MARGIN(1)                        27,187     14,587     57,819    104,576
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ADJUSTED INCOME(2)               13,664        771     28,114     70,224
    -------------------------------------------------------------------------
      Impact of fuel hedge
       accounting                    44,409     (4,661)    53,325     14,314
    -------------------------------------------------------------------------
      Impact of ABCP revaluation     (6,903)         -     (8,310)   (32,137)
    -------------------------------------------------------------------------
    REPORTED INCOME before income
     taxes and non-controlling
     interest in business units'
     results                         51,170     (3,890)    73,129     52,401
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ADJUSTED(3) NET INCOME            7,002      2,086     15,877     46,920
    -------------------------------------------------------------------------
      Impact of fuel hedge
       accounting                    30,589     (2,981)    35,583      9,962
    -------------------------------------------------------------------------
      Impact of ABCP revaluation     (6,600)         -     (7,719)   (23,907)
    -------------------------------------------------------------------------
    REPORTED NET INCOME              30,991       (895)    43,741     32,975
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ADJUSTED NET EARNINGS PER
     SHARE(3)                          0.21       0.06       0.48       1.40
    -------------------------------------------------------------------------
      Impact of fuel hedge
       accounting                      0.92      (0.09)      1.08       0.30
    -------------------------------------------------------------------------
      Impact of ABCP revaluation      (0.20)      0.00      (0.23)     (0.71)
    -------------------------------------------------------------------------
    DILUTED NET INCOME PER SHARE       0.94      (0.03)      1.32       0.99
    -------------------------------------------------------------------------


    Agreement with credit card processor
    ------------------------------------
    
    Transat signed an amending agreement for the processing of credit card
transactions with its primary credit card processor in Canada. This amending
agreement takes effect immediately and will run to August 2012. Pursuant to
the amending agreement, transaction proceeds will be segregated in a separate
account, in Transat's name, for 30 days before being transferred to Transat's
trust account in compliance with the applicable Canadian provincial
legislation. However, under the amending agreement, Transat will not be
required to comply with any other financial requirements. A substantial
portion of Transat's Canadian sales are processed through credit cards, with
the remaining sales being processed through cash based transactions. The
amending agreement will have no significant impact on Transat's operations.

    
    Outlook for the fourth quarter
    ------------------------------
    
    With regard to Canada-Europe travel, which represents an important part
of the Corporation's business in the fourth quarter, reservations from Canada
to Europe are higher than the 2008 levels whereas reservations from Europe are
trailing. The prices should be lower but these should be partially offset by
the lower fuel costs and potentially by higher load factors.
    Reservations and the passenger load factor for travel to sun destinations
from Canada are similar to 2008. Lower prices could be offset by lower fuel
costs and the positive impact of lower airline seat costs.
    In France, medium-haul travel is tracking higher than in 2008, whereas
long-haul travel continues to trail behind. In France, a reduction in selling
prices may not be fully compensated by a reduction in fuel costs.

    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)

    
    NOTES

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

    2. ADJUSTED INCOME: Income before income taxes, non-controlling interest
       in business units' results, impact of fuel hedge accounting and ABCP
       revaluation.

    3. ADJUSTED NET INCOME: Net income before impact of fuel hedge accounting
       and ABCP revaluation.

    Conference call
    ---------------

    Third quarter 2009 conference call: Thursday, September 10, 2009, 10 a.m.
Dial 1-877-922-4773 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 5585273 pound sign, until October 9, 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. All
amounts are in Canadian dollars unless otherwise indicated.

    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, and that travel reservations will follow
the trends. In making these statements, the Corporation has assumed that the
trends in reservations, fuel prices and other costs will continue throughout
the remainder of the season and that the margins (EBITDA) in dollars will be
affected by competition and an economic slowdown. 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 include, among
others, extreme weather conditions, war, terrorism, market and general
economic conditions, disease outbreaks, demand fluctuations related to
seasonality in the travel industry, ability to reduce operating costs and
workforce, labour relations, collective agreements and labour conflicts,
issues related to pensions, exchange rate, interest rates, future funding,
evolution of legal environment, introduction of unfavourable regulations,
lawsuits and legal challenges, 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 securities laws.
    %SEDAR: 00002758EF




For further information:

For further information: Media: Jacques Bouchard, (514) 987-1616, ext.
4662; Financial analysts: Nelson Gentiletti, Acting Chief Financial Officer,
(514) 987-1660; Source: Transat A.T. Inc., www.transat.com


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