Transat A.T. Inc. Reports Results for the Third Quarter of Fiscal 2026

Prolonged fuel cost pressures continue to affect profitability

Third-quarter highlights:

• Revenues of $792.7 million, up 3% from $766.3 million last year
• Negative adjusted EBITDA¹ of $0.9 million, compared to adjusted EBITDA¹ of $81.2 million last year
• Net loss of $106.6 million ($2.60 per share), versus net income of $399.8 million ($9.97 per share) last year, which included a one-time $345.1 million gain on long-term debt extinguishment
• Negative free cash flow¹ of $301.8 million, compared to negative $122.1 million last year
• Cash and cash equivalents of $243.0 million as at July 31, 2026
• $150.0 million Liquidity for Airline Sector Resilience Facility (LASR) now fully drawn, with $125.0 million drawn during the quarter and the $25.0 million balance in September
• Additional $250.0 million in financing secured from the Canada Enterprise Emergency Fund (CEEFC) under the existing LEEFF agreement subsequent to quarter-end

MONTREAL, Sept. 10, 2026 /CNW/ -- Transat A.T. Inc. (TSX: TRZ) reported today its third quarter 2026 financial results ended on July 31.

"Our third-quarter results were significantly impacted by sustained higher fuel prices, which remained elevated well beyond expectations and were the primary driver of lower profitability. While revenues grew with added capacity, competitive market conditions limited our ability to pass these higher fuel costs on to customers, resulting in softer load factors and yields. We appreciate the support received from CEEFC, which provides additional liquidity and financial flexibility as we navigate this challenging environment," said Annick Guérard, President and Chief Executive Officer of Transat.

"We remain focused on restoring Transat's profitability. We continue to take concrete actions to reduce costs and improve productivity, while maintaining focus on two major strategic initiatives: the launch of our loyalty program by the end of 2026 and the modernization of our cabin interiors, which will significantly expand our Premium offering beginning in the second half of 2027," added Annick Guérard.

"The increase in fuel prices was the primary driver of our results in the quarter. On a gross basis, fuel costs increased by $105 million year over year, reflecting a 56% increase in fuel prices, bringing the estimated cumulative impact since the beginning of the fuel crisis to approximately $175 million. We drew $125 million under the LASR facility upon closing and an economic benefit of $25 million related to the loan was accounted for as a reduction of the gross fuel cost increase. Subsequent to quarter-end, we drew the remaining balance to bring the facility to its full $150 million and secured an additional $250 million from CEEFC under our existing LEEFF agreement, further supporting our liquidity," said Jean–François Pruneau, Chief Financial Officer of Transat.

Third-quarter results

For the quarter ended July 31, 2026, revenues reached $792.7 million, up 3% from $766.3 million in the corresponding period last year, despite a $35.0 million decline in revenue due to the constrained suspension of flights to Cuba. The increase in revenues was attributable to a 6% increase in traffic, expressed in revenue-passenger-miles, compared with the corresponding quarter of 2025. For the quarter, across the entire network, capacity increased by 6% compared with 2025, while the capacity for transatlantic routes, the main program during this period, increased by 8%. Airline unit revenues (yield) decreased by 1%. Persistent issues with Pratt & Whitney's GTF² engines continued to weigh on revenue management, along with inefficiencies from the partial redeployment of capacity initially planned for Cuba. Revenue growth was also held back by competition that remains intense and by the broader economic environment. Across all markets, the Corporation reported a load factor of 84.7%, compared with 85.0% in 2025.

Adjusted EBITDA¹ amounted to negative $0.9 million, compared with positive $81.2 million in 2025. This variation resulted primarily from higher fuel prices, the increase in salaries resulting from the new collective bargaining agreement with pilots, and the revenue loss from Cuba, compared with fiscal 2025.

Nine-month results

For the nine-month period ended July 31, 2026, revenues reached $2,691.0 million, up 2% from $2,626.9 million, compared with 2025, despite a $116.0 million decline in revenue due to the suspension of flights to Cuba since February 9, 2026. The variation is attributable to a 4% increase in traffic. Network-wide capacity increased by 4% compared with the same period in 2025. However, the increase in revenue was reined in by persistent issues with the Pratt & Whitney GTF¹ engines, which continued to result in less effective revenue management and increased competition and economic conditions. Airline unit revenues (yield) decreased by 0.4%.

For the nine-month period, adjusted EBITDA¹ totaled $11.9 million, compared with $199.6 million for fiscal 2025. The decrease was mainly attributable to a marked increase in fuel prices, higher salaries resulting from the new collective bargaining agreement with pilots and a $9.6 million decrease in financial compensation from the original equipment manufacturer of the GTF² engines, compared with fiscal 2025. The disruptions caused by Hurricane Melissa during the first quarter of 2026, combined with those resulting from the repositioning of capacity following the suspension of flights to Cuba, also contributed to the operating loss. Across all markets, the Corporation reported a load factor of 83.6%, which was comparable to the 2025 level.

Cash flow and financial position

Cash flows related to operating activities generated negative $220.5 million during the third quarter of 2026, compared with negative $104.9 million for the same period last year, mainly due to lower profitability this year versus last. After accounting for investing activities and repayment of lease liabilities, free cash flow¹ was negative $301.8 million during the quarter, compared with negative $122.1 million for the corresponding period last year.

As at July 31, 2026, cash and cash equivalents stood at $243.0 million, compared to $164.9 million as at October 31, 2025. Cash and cash equivalents in trust or otherwise reserved mainly resulting from travel package bookings totaled $207.7 million as at July 31, 2026, compared with $430.0 million as at October 31, 2025, reflecting the seasonal nature of operations.

Customer deposits for future travel totaled $847.4 million as at July 31, 2026, compared to $823.3 million as at October 31, 2025 and $821.5 million as at July 31, 2025.

Long-term debt and deferred government grant totaled $447.7 million as at July 31, 2026, compared to $400.0 million as at October 31, 2025. During the nine-month period, the Corporation drew $125.0 million under the new Liquidity for Airline Sector Resilience facility (LASR) and repaid $50.0 million under the revolving term credit facility agreement.

Long–term debt and deferred government grant, net of cash and cash equivalents, stood at a net debt position of $204.6 million as at July 31, 2026, compared to $235.1 million as at October 31, 2025.

____________________________________

² Geared turbofan ("GTF ")

Government financial support

Subsequent to quarter-end, the Corporation drew the remaining $25.0 million under the Liquidity for Airline Sector Resilience facility, bringing total drawings to the full amount of $150.0 million. On September 9, 2026, the new multi-draw $250.0 million government loan was made available under the Large Employer Emergency Financing Facility (LEEFF). Pursuant to this agreement, the Corporation committed to complying with certain conditions, including the implementation of various measures aimed at continuing the optimization of operations and reduce costs beyond the Elevation Program. This financing will mature in 2035 and will bear interest at a rate of 1.22% for the first three years, and 3.00% thereafter.

Given that CEEFC currently holds 3,691,591 convertible preferred shares as well as share purchase warrants exercisable for up to 9,436,772 Class B voting shares, representing approximately 24.2% of the Corporation's outstanding voting shares after giving effect to such exercise or conversion, provided that at no time will the exercise of warrants or conversion of preferred shares result in CEEFC beneficially owning or controlling in excess of 19.9% of the Corporation's voting shares, CEEFC may be considered a related party for the purposes of Regulation 61-101 respecting Protection of Minority Security Holders in Special Transactions ("Regulation 61-101"). The additional $250.0 million in financing secured from CEEFC under the existing LEEFF agreement can therefore constitute a related party transaction, as that term is defined in section 1.1 of Regulation 61-101. Pursuant to section 5.4(1) of Regulation 61-101, Transat is not required to obtain a formal valuation for the additional financing. Furthermore, pursuant to section 5.7(1)(f) of Regulation 61-101, Transat is exempted from seeking minority approval as the additional financing is on reasonable commercial terms that are not less advantageous to Transat than if the additional financing was obtained from a person dealing at arm's length with Transat, and the additional financing is not convertible or repayable (as to principal or interest) in equity or voting securities of Transat (and the additional financing does not impact the number of securities of the Corporation beneficially owned, or controlled, by CEEFC and its affiliates). The additional financing has been unanimously approved by the Corporation's board of directors and all of Transat's directors are at arm's length from CEEFC.

Key indicators

To date, load factors for the fourth quarter are 0.6 percentage points higher compared to the same date in fiscal 2025, while airline unit revenues, expressed as yield, remain broadly in line with last year.

For the fourth quarter of 2026, the Corporation expects a 2% increase in capacity, measured in available seat-miles, compared to 2025.

Conference call

The third quarter 2026 conference call will take place on Thursday, September 10, 2026, 10:00 a.m. To join the conference call without operator assistance, you may register by entering your phone number here to receive an instant automated call back.

You can also dial direct to be entered into the call by an operator:
Montreal: 514 400-3794
North America (toll-free): 1 800 990-4777
Name of conference: Transat
The conference will also be accessible live via webcast: click here to register.
An audio replay will be available until September 17, 2026, by dialing 1 888 660-6345 (toll-free in North America), access code 78793 followed by the pound key (#). The webcast will remain available for 90 days following the call.

(1) Non-IFRS financial measures

Transat prepares its financial statements in accordance with International Financial Reporting Standards ["IFRS"]. We will occasionally refer to non-IFRS financial measures in the news release. These non-IFRS financial measures do not have any meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. They are intended to provide additional information and should not be considered as a substitute for measures of performance prepared in accordance with IFRS. All dollar figures are in Canadian dollars unless otherwise indicated.

The following are non-IFRS financial measures used by management as indicators to evaluate ongoing and recurring operational performance.

Adjusted operating income (loss) or adjusted EBITDA: Operating income (loss) before depreciation, amortization and asset impairment expense, reversal of impairment of the investment in a joint venture, the effect of changes in discount rates used for accretion of the provision for return conditions, changes in market price of CORSIA Eligible Emissions Units (carbon credits), restructuring costs and other significant unusual items, and including premiums related to derivatives that matured during the period. The Corporation uses this measure to assess the operational performance of its activities before the aforementioned items to ensure better comparability of financial results. Adjusted operating income is also used to calculate variable compensation for employees and senior executives.

Adjusted pre-tax income (loss) or adjusted EBT: Income (loss) before income tax expense before change in fair value of derivatives, revaluation of liability related to warrants and preferred shares, gain on long-term debt extinguishment, gain on business disposals, gain on disposal of investment, gain (loss) on asset disposals, gain on sale and leaseback of assets, the effect of changes in discount rates used for accretion of the provision for return conditions, changes in market price of CORSIA Eligible Emissions Units (carbon credits), restructuring costs, write-off of assets, reversal of impairment of the investment in a joint venture, foreign exchange gain (loss) and other significant unusual items, and including premiums related to derivatives that matured during the period. The Corporation uses this measure to assess the financial performance of its activities before the aforementioned items to ensure better comparability of financial results.

Adjusted net income (loss): Net income (loss) before change in fair value of derivatives, revaluation of liability related to warrants and preferred shares, gain on long-term debt extinguishment, gain on business disposals, gain on disposal of investment, gain (loss) on asset disposals, gain on sale and leaseback of assets, the effect of changes in discount rates used for accretion of the provision for return conditions, changes in market price of CORSIA Eligible Emissions Units (carbon credits), restructuring costs, write-off of assets, reversal of impairment of the investment in a joint venture, foreign exchange gain (loss), reduction in the carrying amount of deferred tax assets and other significant unusual items, and including premiums related to derivatives that matured during the period, net of related taxes. The Corporation uses this measure to assess the financial performance of its activities before the aforementioned items to ensure better comparability of financial results. Adjusted net income (loss) is also used in calculating the variable compensation of employees and senior executives.

Adjusted net earnings (loss) per share: Adjusted net income (loss) divided by the adjusted weighted average number of outstanding shares used in computing diluted earnings (loss) per share.

Free cash flow: Cash flows related to operating activities less cash flows related to investing activities and repayment of lease liabilities. The Corporation uses this measure to assess the cash that's available to be distributed in a discretionary way such as repayment of long-term debt or deferred government grant or distribution of dividends to shareholders.

Total debt: Long-term debt plus lease liabilities, deferred government grant and liability related to warrants, net of deferred financing costs related to the subordinated debt - LEEFF. Management uses total debt to assess the Corporation's debt level, future cash needs and financial leverage ratio. Management believes this measure is useful in assessing the Corporation's capacity to meet its current and future financial obligations.

Total net debt: Total debt (described above) less cash and cash equivalents. Total net debt is used to assess the cash position relative to the Corporation's debt level. Management believes this measure is useful in assessing the Corporation's capacity to meet its current and future financial obligations.

Additional Information
The results were affected by non-operating items, as summarized in the following table:

Highlights and non-IFRS financial measures

	Third quarter		Nine-month period
	2026	2025	2026	2025
(in thousands of Canadian dollars, except per share amounts)	$	$	$	$
Operating income (loss)	(63,372)	24,241	(162,187)	9,555
Depreciation and amortization	67,272	62,674	194,455	188,319
Effect of discount rate changes	(1,752)	(3,122)	(11,797)	3,141
Changes in market price of CORSIA Eligible Emissions Units	(1,047)	--	(5,596)	--
Restructuring costs	--	157	220	4,214
Premiums related to derivatives that matured during the period	(2,050)	(2,771)	(3,186)	(5,634)
Adjusted operating income (loss)¹ or adjusted EBITDA¹	(949)	81,179	11,909	199,595
Net income (loss)	(106,588)	399,821	(215,080)	254,405
Effect of discount rate changes	(1,752)	(3,122)	(11,797)	3,141
Changes in market price of CORSIA Eligible Emissions Units	(1,047)	--	(5,596)	--
Restructuring costs	--	157	220	4,214
Gain on asset disposals	--	(14,060)	--	(19,243)
Change in fair value of derivatives	(8,679)	(56,637)	(7,732)	32,142
Revaluation of liability related to warrants and preferred shares	(4,326)	5,107	1,573	2,981
Foreign exchange loss (gain)	34,957	4,869	(738)	(8,658)
Gain on long-term debt extinguishment	--	(345,116)	--	(345,332)
Premiums related to derivatives that matured during the period	(2,050)	(2,771)	(3,186)	(5,634)
Adjusted net loss¹	(89,485)	(11,752)	(242,336)	(81,984)
Adjusted net loss¹	(89,485)	(11,752)	(242,336)	(81,984)
Adjusted weighted average number of outstanding shares used      in computing diluted earnings per share	41,022	42,351	40,777	40,531
Adjusted net loss per share¹	(2.18)	(0.28)	(5.94)	(2.02)
Cash flows related to operating activities	(220,546)	(104,915)	194,168	271,505
Cash flows related to investing activities	(20,715)	31,202	(55,467)	19,624
Repayment of lease liabilities	(60,503)	(48,421)	(134,798)	(141,855)
Free cash flow^1	(301,764)	(122,134)	3,903	149,274

	As at July 31, 2026	As at October 31, 2025
(in thousands of dollars)	$	$
Long-term debt	257,735	200,818
Deferred government grant	189,950	199,182
Liability related to warrants	15,367	14,235
Lease liabilities	1,293,139	1,347,396
Total debt^1	1,756,191	1,761,631
Total debt	1,756,191	1,761,631
Cash and cash equivalents	(243,046)	(164,920)
Total net debt^1	1,513,145	1,596,711

About Transat

Founded in Montreal in 1987, Transat has achieved worldwide recognition as a provider of leisure travel particularly as an airline under the Air Transat brand. Voted 2025 World's Best Leisure Airline by passengers at the Skytrax World Airline Awards, it flies to international destinations. Air Transat's fleet is primarily composed of some of the most energy-efficient aircraft in their category. Based in Montreal, Transat has over 5,000 employees with a common purpose to bring people closer together. (TSX: TRZ) www.transat.com

About CEEFC

CEEFC is a federal Crown corporation, incorporated in May 2020 under the Canada Business Corporations Act and is a wholly owned subsidiary of Canada Development Investment Corporation. CEEFC currently administers the Large Employer Emergency Financing Facility (LEEFF) program, the Large Enterprise Tariff Loan (LETL) facility and the Liquidity for Airline Sector Resilience (LASR) facility.

CEEFC intends to hold the convertible preferred shares and the share purchase warrants for investment purposes. Depending on market conditions and other factors, including Transat's business and financial condition, CEEFC may dispose of some or all of the securities of Transat that it owns. As part of the ongoing review of its loan to Transat and its holding of convertible preferred shares and share purchase warrants, CEEFC and its representatives may engage with management and/or representatives of the board of Transat or other parties from time to time concerning Transat's business, management, operations, capitalization, financial condition, governance, strategy and future plans, including any of the matters referred to in paragraphs (a) through (k) of Item 5 of National Instrument 62-103F1.

An early warning report will be filed by CEEFC in accordance with applicable securities laws and will be available on SEDAR+ at www.sedarplus.ca or may be obtained directly from CEEFC upon request from CEEFC's Vice President, Legal at [phone].

Caution regarding forward-looking statements

This news release contains certain forward-looking statements with respect to the Corporation, including those regarding its results, its financial position and its outlook for the future. These forward-looking statements are identified by the use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "will," "would," the negative of these terms and similar terminology, including references to assumptions. All such statements are made pursuant to applicable Canadian securities legislation. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements.

The forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, economic conditions, changes in demand due to the seasonal nature of the business, extreme weather conditions, climatic or geological disasters, war, political instability, measures taken, planned or contemplated by governments regarding the imposition of tariffs on exports and imports, real or perceived terrorism, outbreaks of epidemics or disease, consumer preferences and consumer habits, consumers' perceptions of the safety of destination services and aviation safety, demographic trends, disruptions to the air traffic control system, the cost of protective, safety and environmental measures, competition, the Corporation's ability to maintain and grow its reputation and brand, the availability of funding in the future for the Corporation including its debt refinancing, the Corporation's ability to repay its debt and settle its liabilities from internally generated funds or otherwise, the Corporation's ability to maintain an adequate level of liquidity for its working capital requirements, the Corporation's ability to adequately mitigate the Pratt & Whitney GTF engine issues, fluctuations in fuel prices and exchange rates and interest rates, the availability and continuity of fuel supply at each airport served by the Corporation, the Corporation's dependence on key suppliers, the availability and fluctuation of costs related to our aircraft, information technology and telecommunications, cybersecurity risks, changes in legislation, regulatory developments or procedures, pending litigation and third-party lawsuits, the Corporation's ability to reduce operating costs through, among other things, the Elevation Optimization Program initiatives, the Corporation's ability to attract and retain skilled resources, labour relations, collective bargaining and labour disputes, pension issues, maintaining insurance coverage at favourable levels and conditions and at an acceptable cost, and other risks detailed in the Risks and Uncertainties section of the Management's Discussion and Analysis included in our 2025 Annual Report, filed on SEDAR+ at www.sedarplus.ca.

The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect any of the Corporation's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements.

The forward-looking statements in this news release are based on a number of assumptions relating to economic and market conditions as well as the Corporation's operations, financial position and transactions. Examples of such forward-looking statements include, but are not limited to, statements concerning:

• The outlook whereby the Corporation will be able to meet its obligations with cash on hand, cash flows from operations, drawdowns under existing credit facilities or by other means.
• The outlook whereby, for the fourth quarter of 2026, the Corporation expects a 2% increase in capacity, measured in available seat-miles, compared to 2025.
  
• The outlook whereby, the launch of the loyalty program by the end of 2026 and the modernization of the cabin interiors, will significantly expand the Corporation's Premium offering in the beginning of the second half of 2027.

In making these statements, the Corporation assumes, among other things, that the standards and measures for the health and safety of personnel and travellers imposed by government and airport authorities will be consistent with those currently in effect, that workers will continue to be available to the Corporation, its suppliers and the companies providing passenger services at the airports, that credit facilities and other terms of credit extended by its business partners will continue to be made available as in the past, that management will continue to manage changes in cash flows to fund working capital requirements for the full fiscal year, that fuel supplies will continue to be available on terms generally consistent with those currently being offered, that fuel prices, exchange rates, selling prices and hotel and other costs remain stable, that the Corporation will be able to adequately mitigate the Pratt & Whitney GTF engine issues, and that the initiatives identified to improve adjusted operating income (adjusted EBITDA) can be implemented as planned, and will result in cost reductions and revenue increases. 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. The Corporation considers that the assumptions on which these forward-looking statements are based are reasonable. These statements reflect current expectations regarding future events and operating performance, speak only as of the date this news release  is issued, and represent the Corporation's expectations as of that date. For additional information with respect to these and other factors, see the Management's Discussion and Analysis for the quarter ended July 31, 2026 filed with the Canadian securities commissions and available on SEDAR+ at www.sedarplus.ca. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable securities legislation.

(www.transat.com)

SOURCE Transat A.T. Inc.