Air Transat Secures $25M Compensation from Pratt & Whitney

Transat A.T. Inc., trading as Air Transat (TS) and based at Montréal Trudeau Airport, has successfully negotiated a USD25 million (CAD33.6 million) compensation agreement with Pratt & Whitney. This settlement addresses the costs associated with aircraft that were grounded in 2023 and 2024 due to issues with Pratt & Whitney’s geared turbofan (GTF) engines. The agreement, effective from February 1, 2023, to December 31, 2024, is contingent upon certain conditions being met.

During its earnings call on December 12, 2024, Air Transat disclosed that six of its Airbus A321-200NX(LR) aircraft remain out of service because of engine malfunctions. Despite these ongoing issues, the number of grounded planes has stabilized since the third quarter, thanks to Pratt & Whitney’s provision of two additional engines as part of the compensation package. This timely delivery has prevented further aircraft from being grounded, helping to maintain operational stability.

Jean-Francois Pruneau, CFO of Air Transat, clarified that a new compensation agreement will be necessary to cover any aircraft still grounded as of January 1, 2025. “It’s not the end [of the compensation] as we still expect to have aircraft on the ground next year,” Pruneau stated. He emphasized that negotiations with Pratt & Whitney will resume early next year, although no specific figures have been disclosed at this time. “Obviously, we want to get the maximum amount to cover the full cost of the aircraft on the ground, but it is a two-party negotiation,” he added.

Over the past twelve months leading up to October 31, 2024, Air Transat has expanded its fleet by acquiring four new Airbus A321-200NX(LR) aircraft and three Airbus A330-200s. This expansion was part of a strategic effort to compensate for the aircraft grounded due to the Pratt & Whitney GTF engine issues. Despite the fleet growth, the airline does not anticipate any additional aircraft deliveries in 2025.

As of October 31, 2024, Air Transat’s fleet comprises fourteen Airbus A330-200s, two Airbus A330-300s, nineteen Airbus A321-200NX(LR)s, and eight Airbus A321-200s. In the latest financial report, the airline reported an adjusted EBITDA of CAD123.3 million (USD86.2 million) for the fourth quarter. Pruneau attributed this positive performance to increased passenger traffic, lower fuel costs, and the financial compensation received from Pratt & Whitney.

The compensation agreement with Pratt & Whitney is a crucial component of Air Transat’s efforts to mitigate the financial impact of the engine-related disruptions. By securing this settlement, the airline aims to stabilize its operations and continue providing reliable air services despite the challenges posed by the grounded aircraft.

Moving forward, Air Transat plans to establish a new compensation agreement to address any remaining aircraft issues as of January 1, 2025. This ongoing negotiation underscores the airline’s commitment to resolving the impact of the GTF engine problems and ensuring the long-term sustainability of its fleet operations.

Overall, Air Transat’s proactive approach in securing financial compensation and expanding its fleet highlights its resilience and strategic planning in navigating the complexities of the aviation industry. The airline remains focused on maintaining high service standards and operational efficiency, positioning itself for continued growth and success in the competitive market.

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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com