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Transat's Q3 results fall well below expectations

Published: 14:03 08 Sep 2011 BST

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Transat A.T. (TSE:TRZ.B) disappointed investors on Thursday, as it swung to a loss in its third quarter on higher fuel prices, battered by Street estimates. The holiday tour operator also said it expects its fourth quarter results to come in below those from a year ago.

For the three months ending July 31, the Montreal-based company, which mainly markets holiday travel services in package and air-only formats in the Americas and Europe, posted a net loss of $2.88 million, or $0.08 loss per share, compared to a profit of $20.93 million, or $0.55 per share, a year ago.

Adjusted for fuel hedging and other one-time items, net income was $5.12 million, or $0.07 per share, down 88% compared to $41.90 million, or $0.70 per share, in the year-ago period.

Revenues rose little more than 8% to $936.97 million. Analysts had anticipated 51-cents per share in adjusted earnings, and $949 million in revenues.

"These disappointing results are mainly attributable to fuel prices and market conditions, which had a negative impact on margins," said president and CEO, Jean-Marc Eustache.

Transat said it expects rising fuel prices to continue, leading to its expectations of a lower fourth quarter than what was reported last year.

Still, revenues in the third quarter rose as the number of travelers on the transatlantic market increased. The shrinking Canadian dollar, compared to the Euro and Pound Sterling, also added to revenues as currency translation had a positive impact.

The North American business, generated by sales in Canada and abroad, increased by 14.8% on a higher number of travelers, partially offset by lower selling prices and rising fuel costs, the company said.

The European business segment, generated by sales in Europe and Canada, decreased 3.3% on fewer travelers, with the exception of the Vacances Transat in France.

In other news, the company announced the departure of both COO Nelson Gentiletti and president of Transat Tours Canada, Michael DiLollo.

Transat said their exit is an attempt by the company to reduce direct and operating costs, to optimize management, and to simplify its organizational structure in Canada to accelerate decision-making and execution.

Transat’s shares in Toronto were unchanged in morning trading. They have shed over 50% year to date.

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