Fuel crisis hits Transat hard as airline posts $106.6M Q3 loss

Transat A.T. Inc. posted a $106.6-million net loss in its third quarter, as prolonged high fuel prices took a major bite out of profitability and prompted the Montreal-based company to secure hundreds of millions of dollars in additional financing.

The parent company of Air Transat reported Thursday (Sept. 10) that its net loss for the quarter ended July 31 amounted to $2.60 per share, compared with net income of $399.8 million, or $9.97 per share, during the same period last year.

The 2025 result included a one-time $345.1-million gain related to the extinguishment of long-term debt.

While third-quarter revenue rose three per cent year over year to $792.7 million, Transat said elevated fuel prices remained the primary drag on its bottom line.

On a gross basis, fuel costs surged by $105 million compared with the same quarter last year, reflecting a 56 per cent increase in fuel prices.

Transat estimates that the cumulative impact of higher fuel costs since the beginning of the fuel crisis has reached approximately $175 million.

"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," said Annick Guérard, president and CEO of Transat, in a press release.

"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," 

Fuel costs drive financing needs

The financial pressure has led Transat to tap additional government-backed financing.

The company has now fully drawn its $150-million Liquidity for Airline Sector Resilience Facility (LASR), taking $125 million during the third quarter and the remaining $25 million in September.

Following the end of the quarter, Transat also secured another $250 million in financing from the Canada Enterprise Emergency Fund (CEEFC) under its existing Large Employer Emergency Financing Facility (LEEFF) agreement.

"The increase in fuel prices was the primary driver of our results in the quarter,” stated Jean–François Pruneau, chief financial officer of Transat. “On a gross basis, fuel costs increased by $105 million year over year, reflecting a 56 per cent 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.”

Adjusted EBITDA for the quarter fell sharply to negative $0.9 million, compared with positive $81.2 million a year earlier.

Transat attributed the deterioration primarily to higher fuel prices, increased salaries stemming from its new collective bargaining agreement with pilots and lost revenue associated with the suspension of flights to Cuba.

Cuba suspension costs $35M in Q3 revenue

Despite the pressures, third-quarter revenue increased three per cent to $792.7 million from $766.3 million last year, supported by a six per cent increase in passenger traffic.

That growth came despite a $35-million decline in revenue related to the suspension of flights to Cuba, the airline said.

Network-wide capacity increased six per cent, while capacity on Transat's core transatlantic network grew eight per cent.

But higher capacity did not translate into stronger pricing. Airline unit revenues, or yield, declined one per cent, while Transat's load factor slipped to 84.7 per cent from 85.0 per cent last year.

The company said ongoing issues involving Pratt & Whitney's GTF engines continued to affect revenue management, while the partial redeployment of capacity originally earmarked for Cuba created further inefficiencies.

Intense competition and the broader economic environment also weighed on revenue growth.

Nine-month EBITDA plunges

The impact of higher fuel costs was also evident in Transat's nine-month results.

Revenue for the first nine months of fiscal 2026 reached $2.69 billion, up two per cent from $2.63 billion a year earlier, despite a $116-million revenue hit from the suspension of Cuba flights since Feb. 9.

Adjusted EBITDA, however, dropped to $11.9 million from $199.6 million during the same period in fiscal 2025.

Transat attributed the decline mainly to higher fuel prices, increased pilot salaries and a $9.6-million reduction in financial compensation from the manufacturer of the GTF engines.

Disruptions caused by Hurricane Melissa during the first quarter and the repositioning of capacity following the Cuba suspension also contributed to the operating loss.

Cash flow under pressure

Cash flow also weakened significantly during the quarter.

Operating activities generated negative cash flow of $220.5 million, compared with negative $104.9 million a year earlier. After investing activities and lease repayments, free cash flow was negative $301.8 million, versus negative $122.1 million last year.

Transat ended the quarter with $243 million in cash and cash equivalents, up from $164.9 million as of Oct. 31, 2025.

Customer deposits for future travel stood at $847.4 million as of July 31, compared with $821.5 million at the same point last year.

Long-term debt and deferred government grants totalled $447.7 million, compared with $400 million at the end of fiscal 2025.

Despite the difficult quarter, Guérard said Transat remains focused on improving its underlying performance.

"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 Guérard.

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