Transat AT Inc reported a third-quarter adjusted loss of CAD 2.18 per share, missing consensus estimates of CAD 1.52 by more than 43%, as surging jet fuel prices erased the gains the airline had made across its operations.
Revenue for the quarter ending July 31 came in at CAD 792.7 million, up 3% from CAD 767 million a year earlier but slightly below the CAD 802.1 million forecast. Adjusted EBITDA fell to a negative CAD 1 million from a positive CAD 81 million in the year-ago period, a decline CFO Jean-François Pruneau said was "almost entirely attributable to higher fuel costs."
Jet fuel prices jumped 56% year-over-year to USD 3.74 per gallon, up from USD 2.40. Total reported fuel expense reached CAD 138 million, an increase of approximately CAD 79 million, though a CAD 25 million drawdown from a government liquidity facility partially offset the blow. Cumulative additional fuel costs absorbed since March totalled roughly CAD 175 million.
The net loss widened to CAD 107 million from a CAD 400 million net income a year earlier, which had included a one-time CAD 245 million gain on long-term debt extinguishment. Adjusted net loss came in at CAD 89 million compared with CAD 12 million in the prior-year quarter.
Transat also faced operational headwinds from Pratt & Whitney GTF engine problems, which kept four aircraft grounded during the peak summer period—one more than anticipated. Compensation from Pratt & Whitney contributed CAD 7 million to revenue, but engine issues are not expected to be fully resolved before 2028. Network adjustments tied to Cuba resulted in a cumulative revenue impact of CAD 116 million.
To bolster liquidity, the airline closed a fully drawn CAD 150 million facility under the Government of Canada's Liquidity for Airline Sector Resilience program on July 27. The loan matures in July 2030 and carries interest at 3.91%. The federal government also agreed to extend an additional CAD 250 million loan under the Large Employer Emergency Financing Facility agreement, maturing in 2035 with a rate of 1.22% for the first three years and 3% thereafter.
Cash and cash equivalents stood at CAD 243 million as of July 31, down from CAD 390 million at the end of the second quarter but well above the CAD 165 million recorded at fiscal year-end 2025. Long-term debt and deferred government grants totalled CAD 448 million, leaving a net debt position of CAD 205 million compared with a net cash position of CAD 70 million three months earlier.
Capacity rose 6% year-over-year in the quarter with a fleet of 41 aircraft. Looking ahead, Transat guided for Q4 capacity to rise roughly 2% year-over-year, driven by the removal of Cuba from its network rather than organic growth. Fares on comparable routes are up 6%, and load factor is running 0.6 percentage points ahead of last year. The airline plans no capacity increase for winter 2026-27, redirecting traffic toward Southeast Asia and the Dominican Republic instead.
The new loyalty program, whose beta has surpassed 23,000 members, is scheduled for a full launch by the end of 2026 and is not expected to become a material contributor for roughly three years. Cabin reconfiguration will begin with modernized aircraft entering service in the second half of 2027, with the bulk of capital spending falling in 2028, starting with European routes including Paris, London, Portugal, Athens and Rome.
Shares fell 2.28% to CAD 2.14 in after-report trading. The stock is down 32% over the past year and 13% year-to-date, trading within a 52-week range of CAD 2.10 to CAD 3.10.
