Earnings call transcript: Transat AT Inc Q2 2026 reveals larger-than-expected losses

Transat AT Inc. reported disappointing financial results for the second quarter of 2026, revealing a significant earnings miss. The company posted an earnings per share (EPS) of -1.94 CAD, far below the forecasted -0.07 CAD. Revenue also fell short, reaching 1.003 billion CAD against an expected 1.07 billion CAD. Following the announcement, Transat’s stock price fell by 1.25%, reflecting investor concerns over these results and ongoing operational challenges.

• Guidance for future quarters remains cautious, with continued challenges anticipated.

The challenging outlook aligns with recent analyst sentiment, as InvestingPro data reveals that 3 analysts have revised their earnings downwards for the upcoming period, with net income expected to drop this year. According to InvestingPro Tips, analysts do not anticipate the company will be profitable this year. Investors seeking deeper insights can access 4 additional ProTips on the platform, along with comprehensive financial health scores and expert analysis.

Transat AT Inc. faced a challenging second quarter, with operational disruptions and external factors contributing to a substantial financial shortfall. The company reported a net loss of 79 million CAD, a significant increase from the 23 million CAD loss in the same quarter last year. Adjusted EBITDA turned negative at -21 million CAD, compared to a positive 98 million CAD in Q2 2025. These results highlight the impact of increased fuel costs, operational disruptions in Cuba, and reduced compensation from Pratt & Whitney.

Transat’s EPS of -1.94 CAD was a substantial miss compared to the forecasted -0.07 CAD, representing a surprise of -2671.43%. Revenue also missed expectations, coming in at 1.003 billion CAD against a forecast of 1.07 billion CAD, a 3.74% shortfall. This marks a significant deviation from previous quarters, where the company had managed to meet or exceed forecasts.

Following the earnings release, Transat’s stock fell by 1.25%, closing at 2.4 CAD. This movement reflects investor disappointment with the earnings miss and concerns over the company’s ongoing operational challenges. The stock has declined 14% over the past year and currently trades near $1.70 USD, within its 52-week range of $1.51 to $2.32. Despite recent weakness, InvestingPro analysis suggests the stock appears undervalued based on its Fair Value assessment, placing it among companies on the Most Undervalued list. The company’s market capitalization stands at approximately $69 million.

Transat provided cautious guidance for the coming quarters, with EPS forecasts remaining negative through FY 2027 Q1. The company anticipates challenges from elevated fuel costs and operational disruptions to persist. However, strategic initiatives, including network expansion and partnerships, aim to mitigate these impacts and support long-term growth.

CEO Annick Guérard emphasized, "The second quarter was particularly challenging due to unprecedented operational disruptions. We are committed to addressing these challenges through strategic partnerships and network diversification." CFO Patrick Bui added, "While financial performance was below expectations, we have taken decisive actions to strengthen our balance sheet and enhance operational efficiency."

• Liquidity concerns persist with a current ratio of 0.71, as short-term obligations exceed liquid assets.

For investors seeking a complete picture of Transat’s financial position, the company is among 1,400+ US equities covered by InvestingPro’s comprehensive Pro Research Reports, which transform complex Wall Street data into clear, actionable intelligence through intuitive visuals and expert analysis.

During the earnings call, analysts focused on the impact of fuel costs and operational disruptions on future performance. Questions also addressed the company’s strategic initiatives to enhance network diversity and partnerships to mitigate ongoing challenges. Executives reiterated their commitment to operational efficiency and strategic growth initiatives.

Sylvie, Conference Call Moderator: Good morning, ladies and gentlemen. Welcome to the Transat conference call. Please note that this conference call is being recorded. I would now like to turn the meeting over to Andréan Gagné, Senior Director, Communications, Public Affairs, and Corporate Responsibility. Please go ahead, Ms. Gagné.

Andréan Gagné, Senior Director, Communications, Public Affairs, and Corporate Responsibility, Transat: [Foreign language] Hello, everyone, and thank you for joining us for our second quarter earnings call ended April 31st, 2026. Annick Guérard, President and CEO, and Jean-François Pruneau, Chief Financial Officer, will provide you an overview of the quarter and comment on the current operational situation and commercial plans. 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.

Our comments and discussion today may include forward-looking information regarding Transat’s outlook, objectives, and strategies that are based on assumptions and subject to risks and uncertainties. Forward-looking statements represent Transat’s expectations as at June 11, 2026, and are therefore subject to change after today. Our actual results may differ materially from any stated expectations. Please refer to our forward-looking statement in Transat’s second quarter news release, available on transat.com and on SEDAR+. I would like to turn the call over to Annick for opening remarks.

Annick Guérard, President and Chief Executive Officer, Transat: Thank you, Andréan. Good morning. Thank you for joining our conference call for the second quarter of fiscal 2026. Following a solid first quarter that continued the positive momentum of fiscal 2025 and reflected the tangible benefits of our strategic initiatives, second quarter results were significantly below our expectations as factors beyond our control severely impacted profitability. With prices remaining high due to prolonged closure of the Strait of Hormuz, fuel costs increased operating expenses by about CAD 70 million in March and April, and the impact persisted in May. Additionally, the sudden halt of our operations to Cuba further impacted results by about CAD 25 million. Together, these two external factors resulted in a negative impact of about CAD 95 million on adjusted EBITDA.

During this period of intense volatility, we’ve implemented specific measures to mitigate adverse effects, such as fuel surcharges on new bookings and targeted adjustments to network capacity, which was reduced by 6% from May to October 2026. Fuel surcharges had a marginal impact on our second quarter results since most reservations for this period had been booked prior to the start of the conflict in the Middle East. We anticipate surcharges will gradually mitigate the effect of higher fuel costs, with full offset only expected toward the end of the year. We welcome the introduction by the Government of Canada of the Liquidity for Airline Sector Resilience facility, which recognized the significant fuel cost pressures currently facing Canadian airlines.

Transat intends to apply to the facility, which will provide meaningful support as we navigate the current environment with a continued focus on disciplined cost management, operational execution, and delivering for our customers. In the context of an industry-wide fuel crisis that caused operational disruptions and network adjustment, we experienced downward pressure on key metrics in the second quarter. Our yield declined 0.7 percentage points after five consecutive quarters of growth, while our load factor was 83.8% compared to 84.6% in the second quarter of 2025. Capacity expressed in available seat miles grew by 4.8%, while capacity for south routes, our main program during this period, rose by 1.7% despite the suspension of Cuba. It should be recalled that following the initial cancellation of flights to Cuba in mid-February, the short notice only allowed for a partial redeployment of that capacity to other destinations.

Finally, traffic expressed in revenue passenger miles rose 3.9% in the second quarter, reflecting strong demand. Out of a fleet of 42 aircraft at the end of the second quarter, five were grounded due to GTF engine issues, compared to three initially anticipated. This ongoing problem continues to drive operating inefficiencies, increase scheduling variability, and negatively impact revenues. Since the beginning of this supply chain crisis, Pratt & Whitney has not been able to provide us with clear visibility on a detailed resolution plan. The situation remains highly volatile for Transat. We still expect three aircraft to be grounded this summer, and full resolution is not expected before early 2028. Moving to our network, several new routes were recently unveiled as part of the next winter program, alongside the extension of European routes to year-round service.

These include new connections to south destination in Europe, as well as the annualization of key transatlantic routes such as Toronto-Paris and Montreal-Barcelona. This reflects continued progress on network diversification and a focus on reducing seasonality through a more balanced year-round offering. We also announced recently the introduction of a year-round non-stop service between Montreal and Istanbul starting in October. This addition builds on the existing Toronto-Istanbul route, whose strong performance has confirmed solid demand for travel to Turkey and beyond through the collaboration with Turkish Airlines. Partnerships remain a key pillar and cor