Transat A.T. (TSE:TRZ) reported improved profitability and higher revenue in its fiscal first quarter ended January 31, 2026, as management pointed to progress under its turnaround efforts and continued gains from its Elevation Program.
First-quarter performance: revenue up 5%, adjusted EBITDA up 68%
President and CEO Annick Guérard said the company delivered “a solid financial performance” supported by initiatives introduced over recent quarters, including “advanced revenue management practices,” network diversification, and increased connectivity. Revenue rose 5% year-over-year to CAD 871 million, despite disruption tied to Hurricane Melissa in Jamaica.
On the bottom line, Transat posted a net loss of CAD 29 million, or CAD 0.73 per share, compared with a net loss of CAD 122 million, or CAD 3.10 per share, in the prior-year quarter. Adjusted net loss improved to CAD 48 million, or CAD 1.18 per share, from an adjusted net loss of CAD 75 million, or CAD 1.90 per share, a year earlier.
Operating metrics show continued yield and traffic gains
Guérard highlighted what she described as sustained year-over-year traffic growth and a “fifth consecutive quarter of yield improvement.” Capacity (available seat miles) increased 1% overall, while Sun routes capacity grew 4.4% during the winter season. Load factor improved to 81.5% from 80.6% a year ago, and revenue passenger miles increased 2.2%. Yields were 1.4% higher than the same period last year.
Pruneau added that revenue growth reflected the traffic and yield increases, and also included CAD 5 million of compensation revenue from Pratt & Whitney related to grounded aircraft, compared with no such revenue in the prior-year quarter.
Operational headwinds: GTF engine groundings and Cuba suspension
Transat ended the quarter with a fleet of 43 aircraft. Guérard said four aircraft were grounded in the first quarter and are expected to remain grounded in the second quarter due to ongoing Pratt & Whitney geared turbofan (GTF) engine issues. The company continues to expect gradual improvement, with grounded aircraft projected to decline to three by summer. Guérard said full resolution is anticipated by the end of 2027 or early 2028.
Early in the second quarter, Transat suspended all flights to Cuba through April 30 due to an anticipated fuel shortage at destination airports. Guérard said the company organized repatriation flights to return customers to Canada and noted the suspension will affect second-quarter results because Cuba represented about 10% of winter season capacity. Management said it redeployed part of that capacity to other Sun destinations where demand has increased and will continue monitoring conditions to determine when flights can safely and reliably resume.
The company also cited a short, localized disruption in Puerto Vallarta in February, where four flights were postponed over two days due to local conditions in Jalisco. Guérard said operations resumed promptly and that bookings to Mexico are “gradually returning to expected levels,” though the events temporarily affected consumer confidence.
During the analyst Q&A, management also discussed broader geopolitical developments, including conflict in Iran. Guérard said Transat has not seen a direct operational impact and no broad decline in customer willingness to travel, though she noted “a little bit of softness” over the last two weeks on bookings for Istanbul, which the company serves twice weekly from Toronto. She emphasized that fuel costs are the most significant potential impact.
Network diversification and new routes
Management pointed to new and expanded destinations as part of its strategy to reduce seasonality and balance demand. Guérard cited recently added routes including Tirana, Albania; Agadir, Morocco; and Dakar, Senegal, and said performance on new routes has been “very encouraging” and is contributing positively to the network. She said the company continues to emphasize diversification across Africa, Europe, and South America, and has expanded connectivity through strategic partnerships to extend its reach beyond its own operated routes.
When asked about current booking momentum, Guérard said demand for Europe remains strong heading into the summer season and that the company has flexibility to shift Sun capacity among destinations. She pointed to Dominican Republic and Costa Rica as currently popular, while reiterating that Cuba remains a popular destination and that Transat intends to resume operations when conditions allow.
Cash flow, balance sheet improvements, and outlook items
Transat reported a significant improvement in cash generation. Cash flows from operating activities were CAD 296 million, up from CAD 169 million in the prior-year quarter, reflecting higher profitability and changes in working capital. Capital expenditures were CAD 14 million versus CAD 23 million a year earlier. Free cash flow was CAD 247 million, compared with CAD 129 million in Q1 2025.
Cash and cash equivalents totaled CAD 387 million at quarter-end, up from CAD 165 million at the end of the previous quarter. Cash and cash equivalents plus amounts held in trust or otherwise reserved totaled CAD 528 million, up from CAD 430 million, which Pruneau said reflected solid travel package bookings.
Long-term debt and deferred government grants were CAD 375 million as of January 31, down from CAD 400 million three months earlier and down from CAD 813 million 12 months earlier, prior to a refinancing completed “last summer.” Pruneau said the quarter-over-quarter decrease reflected repayment of CAD 25 million on the revolving credit facility, and he added that Transat repaid CAD 30 million on its subordinated working capital facility after quarter-end because cash exceeded a threshold. He said the facility remains available as needed. Transat ended the quarter with a net cash and cash equivalents position of CAD 12 million, compared with a net debt position of CAD 235 million three months earlier.
Looking to the second quarter, Guérard said planned capacity is expected to rise about 5% year-over-year despite the Cuba suspension. Management said Q2 yields are tracking in line with last year, while load factors are 1.8 percentage points below the prior year, with the variance weighted to the back end of the quarter. For the full fiscal year 2026, the company anticipates capacity growth of approximately 5% to 7%.
On fuel, Pruneau said more than half of second-quarter consumption is hedged, with hedging coverage lower than half for the summer but still providing protection against price increases. He declined to disclose hedge levels. In response to analyst questions, management said sudden fuel spikes are difficult to pass through immediately, noting actions including increased fuel surcharges on Europe, fare increases on peak travel dates and routes with less competition, and efforts to optimize ancillary revenue. Management also said capacity cuts could be considered if fuel impacts persist, though the company is not at that point.
Separately, Guérard reiterated plans for a new loyalty program, first announced in January, featuring a co-branded credit card with Desjardins Group and Visa. She said the program is scheduled to launch in the second half of 2026 and is intended to create a recurring revenue stream, improve revenue quality, and drive higher load factors. She also said Transat estimates that not having a loyalty program “prevents us from 4%-5% market share today.”
In discussing the Elevation Program, management said it remains on track to deliver CAD 100 million in EBITDA by mid-2026. Guérard said roughly CAD 70 million is already embedded in the company’s results and added that Transat continues to pursue additional initiatives on both the revenue and cost sides.
About Transat A.T. (TSE:TRZ)
Air Transat is a leading travel brand voted 2025 World’s Best Leisure Airline by passengers at the Skytrax World Airline Awards. Its program offers access to international destinations, mainly in Europe, the Caribbean, the east coast of the United States, South America and North Africa. Air Transat is recognized for its excellent customer service. Its fleet includes some of the most energy-efficient aircraft in their category. Based in Montreal with major hubs in YUL Montréal-Trudeau International Airport and Toronto Pearson Airport (YYZ), it has 5,000 employees with a common purpose to bring people closer together.
