Q1 2026 Transat AT Inc Earnings Call

March 10, 2026

Operator: Good afternoon, ladies and gentlemen, and welcome to the Transat A.T. Inc. Q1 2026 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, 10 March 2026. I would now like to turn the conference over to Andréan Gagné, Senior Director of Communications. Please go ahead.

Speaker #1: Good afternoon , ladies and gentlemen , and welcome to the Transat A.T. , Inc. , First quarter 2026 Results Conference Call At this time , all lines are mode .

Speaker #1: Following the presentation , we will conduct a question and answer session . If at any time during this call , you require immediate assistance , please press star zero .

Speaker #1: For the operator . This call is being recorded on Tuesday , March 10th , 2026 . I would now like to turn the conference over to Adrian Garnier , Senior Director , Communications .

Speaker #1: Please go ahead .

Speaker #2: Bonjour trimestriel de Transat . Hello everyone , and thank you for joining us for our first quarter earnings call . And the January 31st , 2026 .

Andréan Gagné: Bonjour et bienvenue à cet appel trimestriel de Transat. Hello, everyone, and thank you for joining us for our Q1 earnings call ended 31 January 2026. Annick Guérard, President and CEO, and Jean-François Pruneau, our Chief Financial Officer, will provide an overview of the quarter and comment on the current operational situation and commercial plan. Jean-François will also discuss our financial results in detail. We will then take questions from financial analysts. Questions from journalists will be taken offline after the call. The conference call will be conducted in English, but questions may be asked in French or English. As usual, our supplementary disclosure has been updated and is available on our website in the Investors section. Jean-François may refer to it when he presents the results.

Speaker #2: And Gérard , president and CEO , and Jean-Francois , our chief financial officer , will provide an overview of the quarter and comment on the current operational situation and commercial plans Jean-Francois will also discuss our financial results in detail .

Speaker #2: We will then take questions from financial analysts , questions from journalists will be taken offline after the call . The conference call will be conducted in English , but questions may be asked in French or English as usual , our supplementary disclosure has been updated and is available on our website in the investor section Jean-Francois may refer to it when you present the results Our comments discussion today may include forward looking information regarding Transat outlook , objectives and strategies that are based on assumptions and are subject to risks and uncertainties Forward looking statements represent Transat expectations as at March 10th , 2026 and are therefore subject to change after that date .

Andréan Gagné: Our comments and discussion today may include forward-looking information regarding Transat's outlook, objectives, and strategies that are based on assumptions and are subject to risk and uncertainty. Forward-looking statements represent Transat's expectations as at 10 March 2026, and are therefore subject to change after that date. Our actual results may differ materially from any stated expectations. Please refer to our forward-looking statement in Transat's Q2 news release, available on transat.com and on SEDAR+. With that, I would like to turn the call over to Anik for opening remarks.

Speaker #2: Our actual results may differ materially from any stated expectations . Please refer to our forward looking statement and Transat second quarter news release available on Transat and on Star Plus With that , I would like to turn the call over to Annie for opening remarks Good afternoon everyone .

Annick Guérard: Good afternoon, everyone. Thank you for joining our Fiscal 2026 Q1 Conference Call. Before talking about Q1 results, I would like to comment on Transat's annual and special meeting of shareholders held earlier today. Today's vote delivered a clear mandate to continue executing on turnaround, our turnaround plan and confirm that this board is the right team to guide Transat through the next phase of its strategy. The board elected this morning will bring deep and multidisciplinary expertise with a mix of new and returning directors. Transat is well-positioned to reach new heights. Our focus is unwavering, disciplined execution, strengthen profitability, and sustain long-term value for all shareholders. The mandate obtained today by shareholders provides clarity for employees, customers, plant partners, lenders, and regulators so we can keep executing.

Speaker #2: Thank you for joining our fiscal 2026 first quarter conference call. Before talking about Q1 results, I would like to comment on Transat's annual and special meeting of shareholders held earlier today. Today's vote delivered a clear mandate to continue executing on our turnaround.

Speaker #2: Our turnaround plan, and confirm that this board is the right team to guide Transat through the next phase of its strategy. The board elected this morning will bring deep and multidisciplinary expertise, with a mix of new and returning directors.

Speaker #2: Transat is well positioned to reach new heights Our focus is on discipline , execution , strengthening profitability and sustained long term value for all shareholders The mandate obtained today by shareholders provides clarity for employees , customers , partners , lenders and regulators .

Speaker #2: So we can keep executing , propelled by the strong signal of support . We will continue to build on , on our momentum created by the solid foundation of the elevation program Before moving on , I would like to take a moment to acknowledge a key contributor to Transat journey I would like to personally thank Susan Christmann , who served on Transat Board of Directors since 2014 , including the last three years as chair Susan , let me express sincere thanks for your unwavering support and wise counsel for all these years I want to thank all other directors who served in the recent years .

Annick Guérard: Propelled by the strong signal of support, we will continue to build on our momentum created by the solid foundation of the Elevation Program. Before moving on, I would like to take a moment to acknowledge a key contributor to Transat's journey. I would like to personally thank Sylvie Paquette, who served on Transat's board of directors since 2014, including the last three years as chair. Sylvie, let me express sincere thanks for your unwavering support and wise counsel through all these years. I wanna thank all other directors who served in the recent years while Transat was facing unprecedented challenges. Thank you all for your important contribution. I also welcome all new board members with whom I'll be as dedicated and engaged to work with.

Speaker #2: While Transat was facing unprecedented challenges, thank you all for your important contribution. I also welcome all new board members, with whom I'll be as dedicated and engaged to work with.

Speaker #2: Turning to Q1 results Transat delivered a solid financial performance reflecting sustained momentum from the diligent of our profitable growth strategy . Key initiatives implemented during the last several quarters , including advanced revenue management practices , network diversification , diversification strategy , and increased connectivity , produced .

Annick Guérard: Turning to Q1 results, Transat delivered a solid financial performance reflecting sustained momentum from the diligent execution of our profitable growth strategy. Key initiatives implemented during the last several quarters, including advanced revenue management practices, network diversification strategy, and increased connectivity, produced a 5% revenue increase to CAD 871 million in the quarter, despite some disruption from Hurricane Melissa in Jamaica. Adjusted EBITDA grew 68% to CAD 34 million, driven by higher revenues and ongoing disciplined cost management. Reflecting the benefits of our Elevation Program initiatives. During the quarter, we also reached an important milestone for the ratification of a new five-year collective agreement with our pilots. This agreement will recognize their contribution, brings us closer to industry standards, and introduces meaningful efficiency and productivity improvements.

Speaker #2: A 5% revenue increase to $871 million in the quarter . Despite some disruption from Hurricane Melissa in Jamaica Adjusted EBITDA grew 68% to 34 million , driven by higher revenues and ongoing disciplined cost management , reflecting the benefits of our elevation program initiatives during the quarter , we also reached an important milestone for the ratification of a new five year collective agreement with our pilots .

Speaker #2: This agreement recognized their contribution, brings us closer to industry standards, and introduces meaningful efficiency and productivity improvements. We are pleased with our operating performance in the first quarter of 2026.

Annick Guérard: We are pleased with our operating performance in Q1 2026, highlighted by sustained year-over-year traffic growth and a fifth consecutive quarter of yield improvement. This momentum is reflected across our key operating metrics. Capacity expressed as available seat miles increased by 1%, while capacity for Sun routes, our main program during this season, improved by 4.4%. Our load factor reached 81.5%, up from 80.6% in the same period last year. Finally, traffic expressed in revenue passenger miles rose 2.2%, while yields were 1.4%, 1.4% higher than for the same period last year. Turning to our operations. We have a fleet of 43 aircraft, of which 4 were grounded in Q1 and will remain grounded in Q2 due to ongoing GTF engine issues.

Speaker #2: Highlighted by sustained a year over year traffic growth and a fifth consecutive quarter of yield improvement This momentum is reflected across our key operating metrics .

Speaker #2: The capacity expressed as available seat miles increased by 1% , while capacity for some routes . Our main program during this season improved by 4.4% .

Speaker #2: Our load factor reached 81.5% , up from 80.6% in the same period last year Finally , traffic , express and revenue passenger miles rose 2.2% , while yields were 1.4% , 1.4% higher than for the same period last year Turning to our operations , we have a fleet of 43 aircraft , of which four were grounded in the first quarter and will remain grounded in Q2 due to ongoing engine issues As indicated last quarter .

Annick Guérard: As indicated last quarter, we expect the situation to gradually improve with the number of grounded aircraft projected to decline to 3 by summer, and full resolution anticipated by the end of 2027 or early 2028. As outlined last quarter, we have launched and announced multiple new destinations and expanded service across several regions. Recent additions include new destinations such as Tirana, Albania, as well as Agadir, Morocco, and Dakar, Senegal, which align with our focus on high-potential markets with low seasonality and strong visiting friends and relatives demand. Performance across new routes has been very encouraging, and they are contributing positively to the overall network. Our program development continues to emphasize diversification across Africa, Europe, and South America, supporting a more balanced demand profile throughout the year. We have also expanded connectivity through strategic partnerships, extending our reach beyond our own operated routes.

Speaker #2: We expect the situation to gradually improve, with the number of grounded aircraft projected to decline to three by summer and fall. Resolution is anticipated by the end of 2027 or early 2028.

Speaker #2: As outlined last quarter , we have launched an announced multiple new destinations and expanded service across several regions Recent additions include new destinations such as Girona , Albania , as well as Agadir , Morocco and Dakar , Senegal , which align with our focus on high potential markets with low seasonality and strong visiting friends and relatives .

Speaker #2: Demand performance across new routes has been very encouraging, and they are contributing positively to the overall network. Our program development continues to emphasize diversification across Africa, Europe, and South America, supporting a more balanced demand profile throughout the year.

Speaker #2: We have also expected expanded connectivity through strategic partnerships , extending our reach beyond our own operated routes Overall , these actions strengthen the network and support sustained demand across key markets .

Annick Guérard: Overall, these actions strengthen the network and support sustained demand across key markets as we continue to execute our network strategy. Let me now address the situation in Cuba. Early in Q2, we proactively suspended all flights to Cuba through 30 April due to an anticipated fuel shortage at destination airports, a situation outside of our control. Mindful of the safety and well-being of our customers, we quickly organized repatriation flights to ensure their safe return to Canada. The decision will have an impact on our Q2 results, as Cuba represented approximately 10% of our winter season capacity. To help mitigate this impact, we redeployed a portion of the affected capacity to other Sun destinations where we have observed increased demand. We will continue to closely monitor geopolitical developments and operating conditions to determine when flights to Cuba can safely and reliably resume.

Speaker #2: As we continue to execute our network strategy Let me now address the situation in Cuba early in the second fiscal quarter . We proactively suspended all flights to Cuba through April 30th due to an anticipated fuel shortage at destination airports .

Speaker #2: A situation outside of our control . Mindful of the safety and well-being of our customers , we quickly organized repatriation flights to ensure their safe return to Canada .

Speaker #2: This decision will have an impact on our second quarter results, as Cuba represented approximately 10% of our winter season capacity. To help mitigate this impact, we redeployed a portion of the affected capacity to other sun destinations where we have observed increased demand.

Speaker #2: We will continue to closely monitor geopolitical developments and operating conditions to determine when flights to Cuba can safely and reliably resume We also experienced a brief and localized operational disruption in Puerto Vallarta in February due to local conditions in the state of Jalisco for flights to and from Puerto Vallarta were postponed over a two day period , with the safety of our passengers and crew guiding our decisions , affected customers were contacted and offered flexible options and operations resume promptly .

Annick Guérard: We also experienced a brief and localized operational disruption in Puerto Vallarta in February. Due to local conditions in the state of Jalisco, four flights to and from Puerto Vallarta were postponed over a two-day period, with the safety of our passengers and crew guiding our decisions. Affected customers were contacted and offered flexible options, and operations resumed promptly. These events temporarily affected consumer confidence, and their impact was felt over the past few weeks. However, bookings to Mexico are gradually returning to expected levels. In January, we announced the framework of our new loyalty program, scheduled to launch in the second half of 2026. This program will feature a co-branded credit card developed in partnership with Desjardins Group and enabled by Visa, offering cardholders enhanced travel benefits and exclusive rewards.

Speaker #2: These events temporarily affected consumer confidence, and their impact was felt over the past few weeks. However, bookings to Mexico are gradually returning to expected levels. In January, we announced the framework of our new loyalty program scheduled to launch in the second half of 2026.

Speaker #2: This program will be a co-branded credit card developed in partnership with Desjardins Group and enabled by Visa, offering cardholders enhanced travel benefits and exclusive rewards.

Speaker #2: Beyond strengthening customer engagement , the program is expected to create a new recurring revenue stream , support improved revenue quality and drive higher load factors , allowing us to gain market share and create long term value for Transat brands Looking ahead to the second quarter of fiscal 2026 , despite the situation in Cuba discussed earlier planned capacity represents an increase of approximately 5% year over year to date .

Annick Guérard: Beyond strengthening customer engagement, the program is expected to create a new recurring revenue stream, support improved revenue quality, and drive higher load factors, allowing us to gain market share and create long-term value for Transat's brand. Looking ahead to the second quarter of fiscal 2026, despite the situation in Cuba discussed earlier, planned capacity represents an increase of approximately 5% year-over-year. To date, Q2 2026 yields are tracking in line with last year's level in a context of increased capacity. Load factors are 1.8 percentage points below the prior year, with the unfavorable variance weighted primarily towards the back end of the quarter. Our network diversification strategy continues to deliver results, with most new destinations performing positively and enhanced connectivity with partners driving incremental passenger volumes across the network.

Speaker #2: Q2 2026 yields are tracking in line with last year's level in a context of increased capacity, with load factors 1.8 percentage points below the prior year.

Speaker #2: With the unfavorable variance variance weighted primary primarily primarily toward the back end of the quarter , our network diversification strategy continues to deliver results , with most new destination performing positively and enhanced connectivity with partners .

Speaker #2: Driving incremental passenger volumes across a network for the full fiscal 2026 , we anticipate capacity growth of approximately 5 to 7% . To wrap up Transat , delivered solid , profitable growth in the first quarter of 2026 , a lighting that our turnaround plan is working .

Annick Guérard: For the full fiscal 2026, we anticipate capacity growth of approximately 5% to 7%. To wrap up, Transat delivered solid profitable growth in Q1 2026, highlighting that our turnaround plan is working. We continue to reap benefits from initiatives put in place to improve our operations and to make sure that service excellence remains an essential part of Transat's DNA. Supported by a seasoned board of directors, Transat's management team can continue executing its growth plan to ensure the company reaches a sustained profitability. This concludes my remarks for today. Jean-François will now review our financial results. Jean-François?

Speaker #2: We continue to reap benefits from initiatives put in place to improve our operations and to make sure that service excellence remains as essential and essential part of Transat DNA , supported by a seasoned board of directors , Transat management team can continue executing its growth plan to ensure the company reaches its sustained profitability .

Speaker #2: This concludes my remarks for today. Jean-François will now review our financial results. Jean-François?

Jean-François Pruneau: Merci, Annick. We are pleased with our first quarter results, which show further revenue growth and profitability improvements. This performance reflects the ongoing execution of our plan, including our elevation optimization program. Looking more closely at our results, revenues reached CAD 871 million, up 5% from last year. The growth was driven by a 2.2% traffic increase and a 1.4% yield improvement. We also recorded compensation revenue of CAD 5 million from Pratt & Whitney related to the grounded aircraft during the quarter versus no such revenue a year ago. These factors were partially offset by continued inefficiencies stemming from ongoing Pratt & Whitney GTF engine issues, as well as by the negative impact of Hurricane Melissa in early November, which led to flight cancellations to Jamaica despite the redeployment of capacity to other destinations.

Speaker #3: We're pleased with our first quarter results, which show further revenue growth and profitability improvements. This performance reflects the ongoing execution of our plan, including our Elevation.

Speaker #3: Elevation optimization program . Looking more closely at our results , revenues reached $871 million , up 5% from last year . The growth was driven by a 2.2% traffic increase and a 1.4% yield improvement .

Speaker #3: We also recorded compensation revenue of $5 million from Pratt & Whitney related to the grounded aircraft during the quarter, versus no such revenue a year ago.

Speaker #3: These factors were partially offset by continued inefficiencies stemming from ongoing Pratt & Whitney GTF engine issues, as well as by the negative impact of Hurricane Melissa in early November, which led to flight cancellations to Jamaica.

Speaker #3: Despite redeployment of capacity to other destinations , adjusted EBITDA reached $34 million in the first quarter of fiscal 2026 , compared to 20 million in the first quarter of last year .

Jean-François Pruneau: Adjusted EBITDA reached CAD 34 million in Q1 of fiscal 2026 compared to CAD 20 million in Q1 of last year. This improvement reflects higher revenue, while rigorous cost management limited the rise in operating expenses to only 1%, as higher costs associated with capacity growth and higher pilot compensation were largely offset by better margins on vacation packages and lower fuel expenses. Both revenues and adjusted EBITDA also benefited from the gain delivered by our elevation initiatives. As a result, the net loss was CAD 29 million, or CAD 0.73 per share in Q1 of 2026, compared to a net loss of CAD 122 million or CAD 3.10 per share in the same period of 2025.

Speaker #3: This improvement reflects higher revenue , while cost management limited the rise in operating expenses to only 1% as higher costs associated with capacity growth and higher pilot compensation were largely offset by better margins on vacation packages and lower fuel expenses .

Speaker #3: Both revenues and adjusted EBITDA also benefited from the gain delivered by our elevation initiatives . As a result , the net loss was $29 million , or $0.73 per share , in the first quarter of 2026 , compared to a net loss of $123 million , or $3.10 per share per share , in the same period of 2025 .

Speaker #3: Adjusted net loss was $48 million , or $1.18 per share , versus an adjusted net loss of $75 million , or $1.90 per share , last year Moving to cash flow and financial position , cash flows generated by operating activities amounted to $296 million in Q1 2026 , up from $169 million in the first quarter of last year .

Jean-François Pruneau: Adjusted net loss was CAD 48 million or CAD 1.18 per share, versus an adjusted net loss of CAD 75 million or CAD 1.90 per share last year. Moving to cash flow and financial position. Cash flows generated by operating activities amounted to CAD 296 million in Q1 2026, up from CAD 169 million in Q1 last year. This significant improvement reflects higher profitability and an increase in the net change in non-cash working capital balances. As for investing activities, Q1 CapEx was CAD 14 million compared to CAD 23 million a year ago. The prior year quarter also benefited from CAD 31 million in proceeds from a sale-leaseback transaction involving one Pratt & Whitney GTF engine.

Speaker #3: This this significant improvement reflects higher profitability and an increase in the net change in non-cash working capital balances . As for investing activities first quarter CapEx was $14 million , compared to $23 million a year ago .

Speaker #3: The prior year quarter also benefited from $31 million in proceeds from a sale leaseback transaction involving one Pratt and Whitney GTF engine . After accounting for investing activities and repayment of lease liabilities , free cash flow was $247 million in Q1 2026 , representing a significant improvement over $129 million in Q1 2025 , turning to our balance sheet , cash and cash equivalents totaled $287 million as of January 31st , 2026 , up from $165 million at the end of Q4 2025 .

Jean-François Pruneau: After accounting for investing activities and repayment of lease liabilities, free cash flow was CAD 247 million in Q1 2026, representing a significant improvement over CAD 129 million in Q1 2025. Turning to our balance sheet. Cash and cash equivalents totaled CAD 387 million as of 31 January 2026, up from CAD 165 million at the end of Q4 2025. Cash and cash equivalents and trusts or otherwise reserved, mainly resulting from travel package bookings, amounted to CAD 528 million at the end of Q1 2026, up from CAD 430 million at the end of the previous quarter, reflecting solid travel package bookings during Q1.

Speaker #3: Cash and cash equivalents and trusts are otherwise reserved , mainly resulting from travel package bookings amounted to $528 million at the end of Q1 2026 , up from $430 million at the end of the previous quarter , reflecting solid travel package bookings during the first quarter Long term debt and deferred government grants stood at 375 million as at January 31st , 2026 , down from $400 million three months ago and down from $813,000,000.12 months ago .

Jean-François Pruneau: Long-term debt and deferred government grants stood at CAD 375 million as of 31 January 2026, down from CAD 400 million three months ago and down from CAD 813 million twelve months ago prior to our debt refinancing last summer. The quarter-over-quarter decrease reflects the repayment of CAD 25 million on our revolving credit facility during Q1. In addition, after period end, we repaid an amount of CAD 30 million on our subordinated working capital facility as our cash position was beyond a certain threshold, bringing total long-term debt and deferred government grants to CAD 345 million. This facility remains available as needed.

Speaker #3: Prior to our debt refinancing last summer . The quarter over quarter decrease reflects the repayment of $25 million on our revolving credit facility during the first quarter In addition , after a period end , we repaid an amount of $30 million on our subordinated working capital facility as our cash position was beyond a certain threshold , bringing total long term debt and deferred government grants to $345 million .

Speaker #3: This facility remains available if needed. As a result, Transat had a net cash and cash equivalent position of $12 million at the end of Q1 2026, representing a significant improvement from a net debt position of $335 million.

Jean-François Pruneau: As a result, Transat had a net cash and cash equivalent position of CAD 12 million at the end of Q1 2026, representing a significant improvement from a net debt position of CAD 235 million three months earlier and CAD 424 million a year ago. Looking ahead to Q2, as indicated by Annick, we anticipate that canceled flights to Cuba will affect results, but we have been able to partially mitigate the impact by redeploying a portion of our capacity to other routes. As for the upcoming summer season, Cuba only represents a very small portion of our capacity. At this stage, we do not expect any material effect beyond the current quarter. On the cost side, we will benefit from lower interest charges and from a stronger Canadian dollar versus the US currency.

Speaker #3: Three months earlier, and $424 million a year ago. Looking ahead to the second quarter, as indicated by Anik, we anticipate that canceled flights to Cuba will affect results.

Speaker #3: But we have been able to partially mitigate the impact by redeploying a portion of our capacity to other routes. As for the upcoming summer season, Cuba only represents a very small portion of our capacity at this stage.

Speaker #3: We do not expect any material effect beyond the current quarter on the cost side , we will benefit from lower interest charges and from a stronger Canadian dollar versus the US currency .

Speaker #3: In parallel, benefits from elevation are expected to further ramp up on the fuel expense side. I remind you that we have in place a hedging policy.

Jean-François Pruneau: In parallel, benefits from elevation are expected to further ramp up. On the fuel expense side, I remind you that we have in place a hedging policy according to which we partially hedge our fuel expense against fuel price increases. As a result, our short-term exposure is limited as more than half of our consumption is subject to hedging positions. However, if the situation currently impacting fuel prices should persist, the impact will grow over time unless mitigating measures are implemented. Transat's foundation is stronger and we have a well-defined strategy calling for methodical expansion into high-potential markets. A less levered balance sheet also provides us with more flexibility to carry out our plan. Our achievements this quarter demonstrate that Transat continues to progress in the right direction to create lasting value for our shareholders. This concludes my prepared comments.

Speaker #3: According to which we partially hedge our fuel expense against fuel price increases as a result , our short term exposure is limited as more than half our consumption is subject to hedging positions .

Speaker #3: However, if the situation currently impacting fuel prices should persist, the impact will grow over time unless mitigating measures are implemented.

Speaker #3: Transat foundation is stronger and we have a well defined strategy calling from calling for methodical expansion into high potential markets . A less levered balance sheet also provides us with more flexibility to carry out our plan , our achievements this quarter demonstrate that Transat continues to progress in the right direction to create lasting value for our shareholders .

Speaker #3: This concludes my prepared comments. We will now open the call for questions from analysts.

Jean-François Pruneau: We will now open the call for questions from analysts.

Speaker #1: Thank you . Ladies and gentlemen , if you'd like to ask a question , please press Star One on your telephone keypad . If you'd like to withdraw your question , press star two .

Operator: Thank you, ladies and gentlemen. If you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, press star two. One moment please for your first question. Your first question comes from Cameron Doerksen from National Bank Financial. Please go ahead.

Speaker #1: One moment, please. For your first question, your first question comes from Cameron Derksen from National Bank. Please go ahead.

Speaker #4: Thanks . Good afternoon . Jean-Francois , you talked a little bit about the fuel hedging . Can you just maybe go into a little more detail on how you're protected ?

Cameron Doerksen: Thanks. Good afternoon. Jean-François, you talked a little bit about the fuel hedging. Could you just maybe go into a little bit more detail on how you're protected? You mentioned, I guess, 50% of short-term needs. I'm just wondering if you can sort of define short term and is there any, I guess, indicator you can give about kind of where you're hedged to like kind of at what level?

Speaker #4: You mentioned , I guess , 50% of short term needs . I'm just wondering if you can sort of define short term . And is there any , I guess , indicators you can give about kind of where you're hedged to , like what kind of at what level

Jean-François Pruneau: Yeah. I will partially answer your questions, in fact.

Speaker #3: Yeah, I will partially answer your questions. In fact.

Jean-François Pruneau: Yeah. I will partially answer your questions, in fact.

Speaker #4: Okay .

Cameron Doerksen: Okay.

Speaker #3: In terms of short term , what we mean by short term is the second quarter . So more than half of the of our consumption is currently subject to hedging positions .

Jean-François Pruneau: In terms of short term, what we mean by short term is Q2. More than half of our consumption is currently subject to hedging positions, like I said. As for the summer, it's lower than half, but it's still providing, you know, a fairly good protection to our fuel price increases. In terms of the levels, unfortunately, I will not be able to disclose the levels at which we are hedged.

Speaker #3: Like I said . As for the summer , it's it's lower than half , but it's still providing , you know , a fairly good protection to our to , to to fuel price increases in terms of levels .

Speaker #3: Unfortunately I will I will not be able to disclose the levels on which at which we are hedged .

Speaker #4: Okay . I know in the past you typically , I guess hedge kind of in conjunction with when bookings come in . Is that is that still kind of the policy .

Cameron Doerksen: Okay. I know in the past, you typically, I guess, hedge kind of in conjunction with when bookings come in. Is that still kind of the policy? You know, I guess if that's the case, it would sort of help us understand where you might have put in those hedges.

Speaker #4: You know , I guess if that's the case , it would sort of help us understand where where you might have put in those hedges .

Speaker #3: That's a fair estimate. Yes.

Jean-François Pruneau: That's a fair estimate, yes.

Speaker #4: Okay . Perfect . And the other thing , I guess I've noticed with , with Transat and with with other Canadian airlines is we have started to see fuel surcharges show up for international flights .

Cameron Doerksen: Okay, perfect. The other thing I guess I've noticed with Transat and with other Canadian airlines is we have started to see fuel surcharges show up for international flights. I'm wondering, you know, how you see, you know, that as an additional protection against the spike in fuel we've seen. You know, I guess any experience in the past about how sticky some of those fuel surcharges have been and how effective they've been in protecting you from fuel price spikes in the past.

Speaker #4: I'm wondering , you know , how you see that as an additional protection against the spike in fuel ? We've seen and I guess any experience in the past about how sticky some of those fuel surcharges have been or how effective they've been in protecting you from , from fuel price spikes in the past .

Speaker #4: Yeah .

Jean-François Pruneau: Yeah. You know that sudden spikes in fuel price are never easy to pass through in the short term. This is historical. We look at the data. Tickets that are already sold can be repriced, of course, and if we raise fares immediately, we see a negative impact on demand. We're always looking at a fair balance. In some actions that we've taken so far, we have increased fuel surcharges on Europe. However, this is, you know, blended in the total price. What we're also doing is currently raising fares on peak travel dates and routes where we see less competition, where we have more flexibility.

Speaker #2: We've got a couple of experience and , you know , that sudden spikes in fuel price are never easy to pass through in the short term .

Speaker #2: This is historical . It's and we've looked at the data tickets that are already sold can be repriced . Of course . And if we raise fares immediately we see a negative impact on demand .

Speaker #2: So we're always looking at a fair balance . So in some actions that we've taken so far , we have increased fuel surcharges on Europe .

Speaker #2: However , this is you know , blended in the the total price . What we're also doing is currently raising fares on peak travel dates and routes where we see less competition , where we have more flexibility and we are looking as well at optimizing and celery revenues , which which , you know , there's a couple of areas where we can we can improve our position depending on how long this is going to last .

Jean-François Pruneau: We are looking as well at optimizing ancillary revenues, which, you know, there's a couple of areas where we can improve our position. Depending on how long this is gonna last, hopefully, it's not gonna last too long. Nobody wants that.

Speaker #2: Hopefully it's not going to last too long . Nobody wants that . We could be pushed to look at different measures , looking even at cutting , cutting capacity .

Annick Guérard: We could be pushed to look at different measures, looking even at cutting capacity if required, but we're not at this point right now. We're really doing everything that we have to do in place, including restricting our expenses across the company to make sure that we're gonna be able to deal with that fuel spike.

Speaker #2: If required. But we're not at this point right now; we're not really doing anything. If we have to, we'll put things in place, including restricting our expenses across the company, to make sure that we're going to be able to deal with that fuel spike.

Speaker #4: Okay . That's that's very helpful . I'll pass it on . Thanks very much .

Cameron Doerksen: Great. That's very helpful. I'll pass the line. Thanks very much.

Speaker #3: Thanks , Kamran .

Annick Guérard: Thanks, Cameron.

Speaker #1: Your next question comes from Benoit Poirier from Desjardins . Please go ahead .

Operator: Your next question comes from Benoit Poirier, from Desjardins. Please go ahead.

Speaker #5: Yeah . Good afternoon everyone . And congrats for the the announcement around the loyalty program . So could you maybe talk about the benefits you expect from this loyalty program down the road .

Benoit Poirier: Yeah. Good afternoon, everyone. Congrats for the announcement around the loyalty program. Could you maybe, Annick, talk about the benefits you expect from this loyalty program down the road and kind of the timing of when you see the things happening?

Speaker #5: And kind of the timing of when you see the things happening?

Speaker #2: Yeah , of course . So we've announced the partnership that we have with Desjardins . So the beginning of of January , for us , it represents a core long term asset for Transat with significant value creation .

Annick Guérard: Yeah, of course. We've announced the partnership that we have with Desjardins, so the beginning of January. For us, it represents a core long-term asset for Transat with significant value creation. You know, if you've looked at the airline industry overall, more often than not, a loyalty program is valued at a value that's even higher than the business, the core business itself. We've developed an innovative design, specifically, around our leisure and VFR customer base. We wanna make sure that there's a strong natural fit with our customer profiles and behavior. For us, the objectives, of course, are to create a new recurring revenue stream, support improved revenue quality. We wanna drive higher load factors.

Speaker #2: You know , if you you've looked at the airline industry overall more often than not , a loyalty program is valued as a gets a value that it's even more higher than the business .

Speaker #2: The core business itself. So we've developed an innovative design specifically around our leisure and VFR customer base. And we want to make sure that there is a strong natural fit with our customer profiles.

Speaker #2: And behavior . For us , the objectives , of course , are to create a new recurring revenue stream , support , improve revenue , quality .

Speaker #2: We want to drive higher load factors based on the analysis that we've conducted. It will allow us to gain market share. We estimate that not having a loyalty program prevents us from a 4 to 5% market share today.

Annick Guérard: Based on the analysis that we've conducted, it will allow us to gain market share. We estimate that not having a loyalty program prevents us from a 4 to 5 market share to date. Again, we want to strengthen customer engagement. We think we have the right tool that's gonna be deployed next fall, to be able to capture all this value.

Speaker #2: And again, we want to strengthen customer engagement. So we think we have the right tool to be deployed next fall to be able to capture all this value.

Speaker #5: That's great. And Nick, you now have a revamped board of directors. What would you expect from your new board members, and what should be their focus in the short term?

Benoit Poirier: That's great. Annick, you now have a revamped board of director. What would you expect from your new board members, and what should be their focus, in the short term?

Speaker #2: Well , I think the there's first of all , I want to thank all the board members that were with us over the last years .

Annick Guérard: Well, I think first of all, I wanna thank all the board members that were with us over the last years. I think they support us very well and made a tremendous effort in stabilizing the company. The last year has been very difficult for Transat, and we're very thankful to the work and the support they have provided the organization. As to moving forward, of course, we are in the process of integrating or finalizing all the initiatives around Elevation Program, so they are gonna be overseeing the value that we need to deliver by mid-2026, the CAD 100 million in EBITDA. That's gonna be one of their key priorities.

Speaker #2: I think I think the the support us very well and made a tremendous effort in stabilizing , stabilizing the company . The last year have been very difficult for Transat , and we're very thankful to the work and the support they have provided .

Speaker #2: The organization . As to moving forward , of course , we are in the process of integrating our finalizing all the initiatives around elevation programs .

Speaker #2: So there are going to be overseeing the value that we need to deliver by mid 2026 . The 100 million in debt . So that's going to be that's going to be one of their key priorities .

Speaker #2: And the other one is that we're working on developing the next phase of our strategic plan, which is extremely important. And we will share in due time.

Annick Guérard: The other one is that we're working on developing the next phase of our strategic plan, which is extremely important, and we will share in due time. That's gonna be part of their job. I would say that's the key main point of focus.

Speaker #2: So that's going to be part of their job. I would say that's the key—main key, main point of focus.

Speaker #5: Okay . That's great . And maybe last question . Obviously it looks like that we we need to be agile these days with the situation in the US , Mexico , Cuba and the Middle East .

Benoit Poirier: Okay, that's great. Maybe last question. Obviously, it looks like that we need to be agile these days with the situation in the US, Mexico, Cuba, and the Middle East. You've talked about it, but what about the latest trend in booking, and where do you see, Annick, the greatest momentum among the regions that Transat serve right now?

Speaker #5: You've talked about it , but what about the latest trend in booking and where do you see the greatest momentum among the regions that Transat serve right now ?

Speaker #2: They're still about well , overall , they're still strong demand on Europe . That's our first market . And all the destinations are performing very well .

Annick Guérard: Well, overall, there are still strong demand for Europe. That's our first market, and all the destinations are performing very well when we look at summer. We're very comfortable with those. The advantage that we have in sun destinations is that we offer a broad range of different destinations. When one suffers, like we see right now in Cuba, we are able to deploy some capacity and move it towards Dominican Republic, for instance. Dominican Republic, Costa Rica are very popular these days. Mexico has been a little tough over the last two days, but it remains a super well-established destination and one of Canadians' favorite. As for Cuba, it is a very popular destination. Our intention is to resume operation as soon as conditions allow.

Speaker #2: When we look at summer , so we're very comfortable with those . The the advantage that we have in South Destination is that we offer a broad range of different destinations .

Speaker #2: So when one suffers, like we see right now in Cuba, we are able to display some capacity and move it towards the Dominican Republic, for instance.

Speaker #2: So Dominican Republic , sorry , Costa Rica or a very popular these days , Mexico has been a little tough over the last two days , but it remains a super well established destination .

Speaker #2: And one of Canadians favorite . As for Cuba , you know it . It is a very popular destination . Our intention is to resume operation as soon as conditions allows , but we need to .

Annick Guérard: It's always been our priority to diversify our network in southern destinations so that when it doesn't go well in one, such as, you know, a big hurricane or something, we have the flexibility to bring our customers elsewhere. This is what we're doing right now.

Speaker #2: It's always within our priority to diversify our our network in southeast nation so that when it doesn't go well , anyone such as you know , a big hurricane or something , we have the flexibility to bring our customers elsewhere .

Speaker #2: And this is what we're doing, right?

Speaker #5: And if I remember , Cuba has been seen as the lowest margin region in the past . I don't know if it's still the case , but given the mix that you see , right now , should we expect a benefit in terms of margins or it creates some inefficiencies that .

Benoit Poirier: If I remember, Annick, Cuba has been seen as the lowest margin region in the past. I don't know if it's still the case. Given the mix that you see right now, should we expect a benefit in terms of margins, or it creates some inefficiencies that it's tougher to navigate in the short term?

Speaker #5: Is it tougher to navigate in the short term?

Speaker #2: There very . They're price points products everywhere . When you look at Dominican Republic , when you look at the Mexico . So there's very you know , products for everyone .

Annick Guérard: There are price points, products everywhere. When you look at Dominican Republic, when you look at Mexico. So there's very, you know, products for everyone. The other thing that you need to understand as well, unfortunately, having less demand towards Cuba, while the hoteliers in Mexico and Dominican Republic are increasing their fares.

Speaker #2: The other thing that you need to understand as well , unfortunately , having less demand towards Cuba . Well , the hoteliers in Mexico and Dominican Republic are increasing their fares .

Benoit Poirier: Mm.

Speaker #2: So, that's not helping us necessarily in terms of producing higher margins. But you know, we're trying to find the right balance for our customers at different price points.

Annick Guérard: That's not helping us necessarily in terms of producing higher margins. You know, we're trying to find the right balance for our customers at different price points so that, you know, everybody finds it what they're looking for.

Speaker #2: So that, you know, everybody finds it—what they're looking for.

Speaker #5: Okay , that's great color . Thanks . Any

Benoit Poirier: Okay. That's great color. Thanks, Annick.

Speaker #2: You're welcome

Annick Guérard: You're welcome.

Speaker #1: Your next question comes from Tim James from TD Cowan. Please go ahead.

Operator: Your next question comes from Tim James from TD Cowen. Please go ahead.

Tim James: Thanks very much. My first question, I'm just wondering if you could talk about what your CapEx expectations are for the full year fiscal 2026, and maybe if you can shed any light on what you see for fiscal 2027.

Speaker #6: Thanks very much . My first question I was wondering if you could talk about what your CapEx expectations are for the full year fiscal 26 .

Speaker #6: And maybe, if you can, shed any light on what you see for fiscal '27.

Jean-François Pruneau: Well, in terms of 2027, it's a bit too early to talk about that. In terms of 2026, Q1 specifically, we've spent CAD 10 million less than last year in terms of CapEx. There was some timing issues or timing elements that are explaining the lower CapEx this quarter. There will be some kind of catch-up. If you include that catch-up and you pro forma that for a full year, you'll be very close to what we expect as CapEx spending.

Speaker #3: Well , in terms of 27 , it's a it's a bit too early to talk about that in terms of 2026 . Q1 specifically , we've we've spent $10 million less than last year in terms of CapEx .

Speaker #3: There was some timing timing issues or timing elements that are that have that are explaining the lower CapEx this quarter . So there will be some kind of catch up .

Speaker #3: So, if you include that catch-up and you pro forma that for a full year, you'll be very close to what we expect as CapEx spending.

Speaker #6: Okay. And then just the reference to a bit of weakness late in the quarter, is it fair to assume that's sort of a reference to Cuba and to Mexico?

Tim James: Okay. And then, just the reference to a bit of weakness late in the quarter, is it fair to assume that's sort of a reference to Cuba and to Mexico?

Speaker #2: You're talking about Q2

Annick Guérard: You're talking about Q2?

Tim James: I'm talking about, I believe, Q1. I don't have the text in front of me, but I believe it was a reference to Q1.

Speaker #6: I'm talking about , I believe , Q1 I don't have the text in front of me , but I believe it was a reference to the first quarter .

Tim James: I'm talking about, I believe, Q1. I don't have the text in front of me, but I believe it was a reference to Q1.

Speaker #6: .

Speaker #2: Q1 was mostly affected by the impact of Hurricane Melissa. So, Jamaica—so we had to suspend flights to Jamaica for several weeks.

Annick Guérard: Q1 was mostly affected by the impact of Hurricane Melissa, so Jamaica. We had to suspend flights to Jamaica for several weeks, and the destination never came back to the previous level. About 50% of the hotels are still closed for the season, the whole winter. This has been affected, Q1. Besides that, whatever is around Cuba arrive at the beginning of Q2. It's gonna be affecting Q2 mostly.

Speaker #2: And the destination never came back to the previous level . So about 50% of the hotels are still closed for the season . The whole winter .

Speaker #2: So this has been affected at Q1 , but besides that , whatever is around Cuba arrive at the beginning of Q2 . So it's going to be affecting Q2 mostly .

Speaker #6: Okay . Okay .

Tim James: Okay. Thank you.

Speaker #2: Thank you . Rarely like to express Cuba during summer . We don't have a lot of capacity , so it's not going to be significant .

Annick Guérard: We have very little, like Jean-François also expressed, Cuba during summer, we don't have a lot of capacity, so it's not gonna be significant.

Speaker #6: Right ? Okay . And then I'm just curious . I mean with the developments in the Middle East , the war in Iran , are you .

Tim James: Right. Okay. I'm just curious, I mean, with the developments in the Middle East, the war in Iran, are you... I realize obviously you don't fly there, but I'm just wondering if there's any sort of impact on your bookings at all, just, you know, travelers being a little bit more nervous about heading overseas. Are you seeing any indication of that impacting your bookings?

Speaker #6: I realize obviously you don't fly there , but I'm just wondering if there's any sort of impact on your bookings at all . Just , you know , travelers being a little bit more nervous about heading overseas .

Speaker #6: Are you seeing any indication of that impacting your bookings?

Speaker #7: Yeah .

Annick Guérard: No. First, we're very sad about, you know, what's going on.

Speaker #2: First , we're very sad about what's going on . Like everybody else that's going on in the Iran and about , you know , the people that are affected by the conflict on our side .

Tim James: Right

Annick Guérard: Like everybody else, what's going on in Iran and about, you know, the people that are affected by the conflict. On our side, there has not been direct impact on our operations per se, besides maybe a little bit of softness over the last two weeks in the booking curve on Istanbul that, you know, that we offer Istanbul. It's only one route, and we go there twice a week out of Toronto, so it's very limited. The main impact for us is gonna be, you know, when we look at the real, of course, is gonna be on fuel overall. We haven't seen a lack of confidence from our customers in their willingness, you know, to travel. Booking trends are still strong.

Speaker #2: There has not been direct impact on our operations . Proceed . Besides , maybe a little bit of softness over the last two weeks in the booking curve on Istanbul that , you know , that we offer Istanbul , but it's only one route and we go there twice a week out of Toronto .

Speaker #2: So it's very limited . The main impact for us is going to be , you know , when we look at the of course it's going to be on fuel overall .

Speaker #2: But we haven't seen a lack of confidence from our customers in their willingness, you know, to travel. So, booking trends are still strong.

Speaker #2: People are traveling south in Europe , Europe first when we're looking at summer . So depending on what's going to happen with the conflict at this point , we believe it's going to be it's going to remain , you know , in a certain perimeter .

Annick Guérard: People are traveling south and Europe first when we're looking at summer. Depending on what's gonna happen with the conflict, at this point, we believe it's gonna remain, you know, in a certain perimeter, and we're not gonna be that affected besides fuel, again, the impact on the fuel cost.

Speaker #2: And we're not going to be that affected. Besides fuel, again, the impact on fuel cost.

Speaker #6: Okay, okay. Thank you. I appreciate the comments.

Tim James: Okay. Thank you, Annick. Appreciate the comments.

Speaker #1: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Alexander Augimeri from CIBC.

Operator: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Alexander Ogiemwonyi from CIBC. Please go ahead.

Speaker #1: Please go ahead .

Speaker #8: Hi, thanks for taking my question. Just looking at your Elevation program, can you maybe quantify how much of the $100 million in adjusted operating income was captured thus far?

Alexander Ogiemwonyi: Hi. Thanks for taking my question. Just looking at your Elevation Program, can you maybe quantify how much of the CAD 100 million in adjusted operating income was captured thus far? I was wondering if you see any opportunities for upside in that CAD 100 million dollar target.

Speaker #8: And I was wondering if you see any opportunities for upside in that $100 million target .

Speaker #3: Yeah , no , we're still on track for the 100 , hundred million dollars target for mid mid 2026 . We're probably close to 70 million .

Jean-François Pruneau: Yeah. No, we're still on track for the CAD 100 million target for mid-2026. We're probably close to CAD 70 million, you know, that is already embedded in our plan.

Speaker #3: You know, that is already embedded in our piano.

Speaker #2: Do you see upside .

Annick Guérard: Do you see upside?

Speaker #3: There's always upside . We're always working on the new initiatives . You know it's not it's it's a new way to work on different projects .

Jean-François Pruneau: There's always upside. We're always working on new initiatives. You know,

Annick Guérard: Yeah.

Jean-François Pruneau: It's a new way to work on different projects. It's a new way to explore for different initiatives that will help on the cost side and on the revenue side. The Elevation Program is not the end of it. We will continue to evolve and find new initiatives.

Speaker #3: It's a new way to explore for different initiatives that will help, on the cost side and on the revenue side. So the Elevation program is not the end of it.

Speaker #3: You know , it's we will continue to evolve and find new initiatives

Speaker #2: Over the last months , we have embedded our ways of working , being much more . I would say diligent in rigorous in engaging people to find opportunities within the organization to either increase revenues or decrease costs .

Annick Guérard: Over the last months, we have embedded our ways of working, being much more, I would say diligent and rigorous in, engaging people to find, opportunities within the organization to either increase revenues or decrease costs. We see some initiatives that are popping up, and that are gonna be promising for the future. With the arrival of AI, which is ongoing, we are looking at every opportunity within the company, either on the efficiency side or on the value creation for customer side. That's gonna be going on, for the upcoming months and upcoming years.

Speaker #2: So we see some initiatives that are popping up and that are going to be promising for the future . And with the arrival of AI , which is ongoing , we're looking at every opportunity within the company , either on the efficiency side or on the value creation for customer side .

Speaker #2: So that's going to be going on for, for the upcoming months and upcoming years.

Speaker #8: Okay , great . Yeah , thanks for answering my questions . I can turn it back

Jean-François Pruneau: Okay, great. Yeah, thanks for answering my questions. I can turn it back.

Speaker #1: There are no further questions at this time. I will turn the call back over to Adrian for closing remarks.

Operator: There are no further questions at this time. I will turn the call back over to Andrée-Anne for closing remarks.

Speaker #9: Thank you, everyone, for attending and asking your questions. As a reminder, our Q2 2026 results will be released in June.

Andréan Gagné: Thank you everyone for attending and asking your questions. As a reminder, our 2026 Q2 results will be released in June. Thank you and have a good day.

Speaker #9: Thank you, and have a good day.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Merci.

Q1 2026 Transat AT Inc Earnings Call

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