Baby boomers buoy Transat sales, no sign of slowdown, CEO says

MONTREAL — Baby boomers have shed their pandemic reticence around travel as they increasingly fly abroad again — a boon for Transat AT Inc., its CEO says.

“People from 60-plus — the baby boomers — have resumed their pre-COVID travel pattern, which was not the case in 2022,” Annick Guérard said Thursday.

“It represents a good proportion of our clientele. And they have significant disposable wealth and the time to travel and spend,” she told analysts on a conference call, noting that older Canadians spend 15 to 20 per cent more than the average Transat customer.

“This is really important for us. And they are expected to be much more resilient than younger consumers in the face of higher prices and high inflation, which we know will continue in the upcoming year.”

Despite those economic clouds, Guérard said that “we don’t see signs of a slowdown” in bookings on the horizon — for summer or winter. “Demand is holding despite higher fares and higher inflation.”

The clearer skies mark a welcome forecast for the travel company, which on Thursday reported its 14th straight quarter of losses. Nonetheless, it shrank them by more than twothirds year over year, trouncing analysts’ expectations amid a major sales boost propelled by lofty leisure travel demand on top of pricier tickets.

Transat revenues more than doubled year over year, while it reported a second-quarter loss of $29.2 million versus $98.3 million a year ago.

The red ink stems partly from the interest on Transat’s $1.92 billion in total debt — including $1.05 billion in aircraft lease liabilities at a company that owns none of its fleet — following the financial devastation of the pandemic.

“Net debt remains too high in our view, sitting at $1.3 billion versus a market cap of about $170 million,” National Bank analyst Cameron Doerksen said in a note to investors.

However, the company has extended the maturity on its secured loans by a year to April 2025, providing more financial flexibility, he added.

The urge to fly drove up prices by 15 per cent at the outset of the quarter and nearly 24 per cent by the end — April 30 — compared with 2019, Guérard said, yielding much more cash per customer.

She also cited more efficient use of planes, with the company deploying 20 fewer aircraft over the winter compared with 2019 while keeping seat capacity roughly on par.

Transat plans to furnish 89 per cent of its seat capacity this summer relative to 2019 levels, with the vast majority bound for Europe — destinations range from Athens to Zagreb. More than 60 per cent of those tickets are already sold, Guérard said.

Nonetheless, the company is exercising “discipline” on growth, she added, “in case the economic slowdown will affect overall demand — but so far we don’t see that in our indicators.”

Passengers across the continent have continued to scratch the travel itch that built up over two years under COVID-19 restrictions.

Air Canada eked out a quarterly profit of $4 million in the first three months of the year and for only the second time since 2019.