Canada’s Air Transat announces C$43.3mn in Covid state aid

Air Transat (TS, Montréal Trudeau) parent Transat A.T. Inc. has announced additional financial support of CAD43.3 million Canadian dollars (USD33.7 million) from the Canadian government to help it recover from the impact of the Omicron variant of COVID-19.

On an earnings call following the publication of the company’s Q1 2022 results, President and Chief Executive Officer Annick Guérard said: “We’ve seen an impact on our cash burn, and we expect this impact could continue until the summer. To bridge the gap created on our liquidity, we have restarted discussions through the Canada Enterprise Emergency Funding Corporation (CEEFC) with the Federal Government, who has been very receptive about the consequences of the border measures on hardest-hit companies.”

“The deferral of certain terms of our financing under the Large Employer Emergency Financing Facility (LEEFF), as well as the securing of an additional CAD43.3 million for refunding travellers, will facilitate our recovery following the resurgence of the pandemic,” she said in a statement. LEEFF is a programme instituted by the Federal Government and administered by the CEEFC to provide short-term liquidity assistance in the form of interest-bearing term loans to large Canadian employers affected by the pandemic.

Chief Financial Officer Patrick Bui explained that the second tranche of CAD43.3 million would be added to Transat’s CAD310 million (USD241 million) unsecured voucher facility under LEEFF, increasing it to CAD353.3 million (USD275.7 million) at a repayment rate of 1.2%. The funds were to reimburse the company for the more than CAD310 million already refunded to passengers.

Bui said the company had also managed to defer the start of interest rate hikes for 20 months until December 31, 2023, on the CAD312 million (USD243 million) unsecured portion of another CAD390 million (USD304 million) lead facility.

“Our priority is to protect our Treasury and to access liquidity to overcome these unprecedented times. While we are on an upward trend, the impacts of COVID-19 continue, and the geopolitical landscape is evolving since we remain in a cash burn position, and in the context, we want to be very prudent,” he explained.

Guérard said the surge of the Omicron variant in the second half of December had put a temporary dent in recovery. Still, by mid-January and February, Transat had caught up with the November 2021 booking pace that had reflected 70% of 2019 levels.

After the easing of borders restrictions, bookings picked up, which augured well for the coming summer, she said. “Omicron has certainly had a major impact for us, but we have adapted and continued on our way. We have now gathered speed again and are ready for a more satisfying summer,” she said.

In the first three months of 2022, Transat recorded revenues of CAD202.4 million (USD157.8 million), up by CAD160.5 million (USD125.1 million) on the same period in 2021; and an operating loss of CAD73.8 million (USD57.5 million) compared with CAD98 million (USD76.4 million) in 2021, an improvement of CAD24.2 million (USD18.8 million).

Guérard said the leisure specialist would open 69 summer routes, representing most of those it used to operate before the pandemic and some new ones such as Amsterdam Schiphol, Québec, London, and San Francisco, CA.

“The actions undertaken within our plan will enable us to significantly improve our operational performance as early as summer 2022 when we will be operating at 90% of our 2019 capacity with eight fewer aircraft increasing fleet utilisation by 13%. This is a major improvement resulting from our transformation,” she said.

Bui said the company’s cash and cash equivalents totalled CAD343 million (USD267 million) as at January 31, 2022. In total, available financing was CAD820 million (USD639 million), of which CAD678 million (USD528 million) was drawn at the end of the quarter for total unrestricted liquidity of CAD485 million (USD378 million). Following the end of the quarter, the company drew an additional CAD112 million (USD87.3 million) for a total of CAD790 million (USD616 million).

“So with the CAD43 million increase on the voucher facility and when considering CAD885 million (USD690 million) in total unrestricted liquidity, the pro forma unrestricted liquidity stood at CAD528 million (USD412 million) as at January 31, 2022. Lease liabilities stood at CAD943 million (USD735 million), and with the CAD678 million drawn, total debt stood at CAD1.6 million (USD1.2 million), while netting CAD343 million in cash and cash equivalents, our net debt stood at CAD1.3 billion (USD1.01 billion),” he said.