Despite reporting revenues of $785.5 million for the first quarter of 2024, ongoing supply chain shortages and GTF engine problems hindered Transat’s performance, with future expansion set to be curbed by the industry-wide issues.
Although revenues for the quarter grew 17.7% year-over-year, reflecting a ‘sustained demand for leisure travel,’ operating challenges arising from GTF problems – including those relating to the temporary leasing of additional profitability – “applied pressure on profitability,” explained Annick Guérard, president and chief executive officer of Transat. He added that “while demand remains sound, softer yields indicate heightened consumer price sensitivity in the current macro-economic environment as well as fierce price competition, especially in the Toronto market”.
Cash flow from operating activities in Q1 2024 was down to $453.3 million from $467.7 million last year. After accounting for investing activities and repayment of lease liabilities, free cash flow for the quarter was down to $39.1 million, compared to $144.2 in 2023.
However, deposits for future booking stood at an all-time high of $1,026.9 million as of January 31 2024, up 14% from 2023. Although booking and pricing conditions for the upcoming summer season are ‘largely in line with the same period last year,’ a reduced expectation of yields will necessitate a ‘proactive’ approach in keeping costs under control. Given the current operating environment, Transat has revised its fiscal expansion plans for 2024 from 19% to 13%. Accordingly, its expected EBITDA margin for FY24 will now be at the ‘lower end of the range of 7.5% to 9% announced last December’.
GTF issues impact ongoing expansion for Transat
