Transat A.T. Inc.

Christophe Hennebelle - VP, Corporate Affairs Jean-Marc Eustache - CEO Denis Pétrin - CFO

Mona Nazir - Laurentian Bank Securities Shawn Levine - TD Securities Ahmad Shaath - Beacon Securities Ltd

Thank you. Hi, everyone, and welcome to the Transat conference call for the presentation of the financial results of the third quarter ended July 31, 2017.

I'm here with Jean-Marc Eustache, President and CEO; and Denis Pétrin, our CFO. Denis will review the financial results and we will then answer your questions from financial analysts.

Questions from journalists will be handled offline. The conference call will be in English, but questions may be asked in French or English.

As usual, our investor's presentation has been updated and is posted on our Web site in the Investors Section. Denis may refer to it as he comments.

Today's call contains forward-looking statements. There are risks that actual results will differ materially from those contemplated by the forward-looking statements.

For additional information on such risks, please consult our filings with the Canadian Securities Commission. Forward-looking statements represent Transat's expectations as of September 7, 2017, and accordingly are subject to change after such date.

However, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise other than as required by law. Finally, we may refer to IFRS and non-IFRS financial measures.

In addition to IFRS financial measures, we are using non-IFRS measures to assess the corporation's operational performance. It's likely that the non-IFRS financial measures used by the corporation will not be comparable to similar measures reported by other issuers, or those used by financial analyst as their measures may have different definitions.

The measures used by the corporation are furnished to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures. Additional information on non-IFRS financial measures such as their definition and their reconciliation with the more comparable IFRS measures are available in our quarterly report.

With that, let me turn the call over to Denis.

Thank you, Christophe. Good morning everyone.

We are reporting today our numbers for the first half of the summer, our third quarter, for which, the results are primarily driven by transatlantic market. As usual, I will review the financial results and then share our outlook for the fourth year.

I will also say a few words on announcement made during the quarter and two very important initiatives about strategic plan. As we mentioned in our August 21 press release, our results for the quarter were significantly better compared to the guidance we communicated on June 8.

As per our last guidance, we observed a steady increase in selling prices on transatlantic market, the Corporation's primary market during the summer month, but also in Sun destinations market. In both cases, the variance in unit prices compared to the same period last year was much higher after the beginning of June than it was before that date.

Furthermore, airline costs were lower than expected, a trend reinforced by the combined favorable impact of the USD and the fuel. For Q3, results were as follows for all markets combined.

Revenues of $533 million were 10.5% higher than last year with higher number of travelers due to a strong demand and higher capacity, as well as higher selling prices across all markets. We posted an adjusted operating income of $59 million versus $16 last year.

This increase was driven primarily by higher average selling prices, combined with better load factors and by lower airline cost. Thanks to better utilization of our wide body aircraft.

The adjusted net income, excluding non-operating items was $27 million compared with $3 million in 2016. The net income attributable to shareholders as per financial statement was $27 million compared with $9 million last year.

On transatlantic routes, capacity was 7.2% higher than last year, selling prices were up 3.4%, and our load factor was up 1.2%, all contributing to the improvement of the profitability in Q3. Under the Sun destination program, low season for us during the summer month, capacity was 1.9% higher than in '16.

Selling prices of packages were 10% higher. Our load factor was 94.3%, an improvement of 0.8%, and margin were higher by 5.8% versus last year.

For Ocean Hotel, which we own a 35%, on July 19, we announced that we have reached an agreement to sell our 35% minority interest. I will come back to the significant announcement in a couple of minutes.

Q3 contributed $1.5 million through our quarterly results compared with $2.5 million in 2016. So, all in all, the strong quarter would trend back.

A glimpse at our fourth quarter outlook now; on the transatlantic market when compared with summer '16, global capacity on the market is 5% higher and Transat's capacity is up 8%, currently 80% of that capacity has been sold, our load factor are down 0.7%, our fares are up 3.2% compared with 2016. [After the surge] [ph] since mid June and approaching the back-end of the summer season, prices are now decreasing towards the level of last year, which means still idle.

The implementation of the Feeder program up for Q3 has triggered an increase in our cost. As we speak, the combined effect of fuel costs and currency fluctuations will result in a 1.3% decrease in operating expenses.

Obviously, we are closely monitoring the recent surge in fuel prices. Fuel is an important component of our cost during the summer months, when we mainly sell airline fleets to Europe, where fuel hedging program will reduce the impact on our cost for Q4.

On the Sun destinations market, where it's below season, Transat capacity is up 5%; 73% of that capacity hasn't been sold, load factor are up 5.8%, and prices up 6.5%, all these leading to an increase of 6% in unit margins. However, the hurricane season started strongly this year, with Harvey and Irma, and we are monitoring this instinctively as we may have, as it may have an influence on the end of the summer season for specifically the Sun destination, again which are for us a low season.

Globally, if the current trends hold, the Corporation expects that the fourth quarter adjusted EBITDA will be similar to that of 2015, which was $70.8 million for continuing operation in Q4. But as you know, in our industry, result are much decided with the last seats -- it's for us to sell what's remaining.

Looking at it, here is a few preliminary comments regarding next winter season. As of now, on the Sun destination, when compare with last year, global capacity is up 7%, our capacity is up 8%; 20% of our capacity is sold compared to 18 last year [than we are at] [ph].

Additionally, the dollar compared with the U.S. currency is in a much more favorable position than last year.

During the winter, the U.S. dollar is an important input since a significant portion of our cost are in U.S.

dollar. So, if the Canadian dollar remains at the present level, that will significantly reduce our operating cost next winter having started, if you remember, the last four winters with an increase in cost versus the previous winter season.

Despite these indicators, it is too soon to draw any conclusion obviously at this point on what would be the winter result at the end of the winter. Now for our balance sheet, Corporation's free cash totaled $581 million as of July 31, 2017, an increase of $111 million versus a year ago, and obviously our credit facilities remain unused.

The cash increase is mainly due to the disposal of our operation in France and the higher level of deposit from customers. Those deposits for future travel were $510 million, compared with $440 million at the same date last year, a $70 million increase due to higher reservation and higher selling prices.

Off-balance-sheet agreements stood at $1.4 billion as of July 31, 2017, when including the agreement entered into during the quarter to lease 10 brand new Airbus A321neo LR starting in '19. During the third quarter, we have continued to work on our strategic time initiatives to improve our cost and margin.

We have also achieved two major milestones pertaining to our fleet in our hotels. First of all, on July 11, we announced an agreement to leave 10 Airbus A321neo Long Range aircraft.

The aircrafts are to be delivered between Spring '19 and Fall '20, and we will replace Transat airbus A310 which will be gradually retired from our fleet. The A321neo LR being the only single item just lying there with the range of up to 4,000 nautical mile is a perfectly suited -- it is perfectly suited for our unique combination of routes.

It will perfectly complete our fleet of A330 and Boeing 737, granting us more flexibility in terms of flight commercialization in frequency, lower cost proceeds with its superior cost efficiency and a reduced carbon footprint. And of course, we are proud to be the first airline in North America, and one of the first in the world to operate that particular aircraft.

A few days later, we announced an agreement with H10 for the sale of our minority 35% interest in Ocean Hotels for an amount of $150.5 million. Let me recall the book value of this investment than at CAD101 million as of July 31, 2017 on our balance sheet.

Thus in a short investment made in 2006, more than 10 years ago, it will have allowed us to achieve a very solid return and to gain more insight into the hotel industry. With the experience and after totally examining the pros and the cons, we came to the conclusion that the best move for us was to sell our interest in Ocean and build our hotel investments from the ground up.

Obviously, this transaction as well as the proceeds for the sale of our tour operating activities in the France and Greece last October will support that -- this endeavor. Our vision for this division is to operate more than 5,000 rooms around the end of 2024, some of them own and some of them manage only.

We will of course trying to locate them in our most popular destinations in the south. The closing of this transaction is expected to take place by November 2, 2017.

This transaction is binding plus obviously subject to certain usual condition. Sale price is subject to adjustments at the time of closing the transaction, and after if necessary.

In conclusion, our Q3 results are extremely satisfying. The outlook for Q4 is encouraging despite the recent surge in fuel price and subject to the impact from the hurricane on the Sun destination program.

The result we can therefore expect for the season is particularly satisfying considering all the capacity added on transatlantic and Sun destinations market in the recent years. The leasing of A321neo LR announced during the quarter is a major step towards the future configuration of our fleet.

We have made the decision to sell our interest in Ocean and execute on it, opening the path for our upcoming hotel unit, and we have reached a level cash that will allow us to deliver on our projects while entering stability. We will now proceed with your questions.

Bear in mind that we have very little information today on the impact that the hurricane may have on the rest of the season on our summer route and on next winter obviously. We will therefore not be able to comment on this at this stage.

So, we will proceed now with your questions.

Good morning. Congratulations on a great quarter, and thank you for taking my questions.

My first question just has to do with the guidance that you are providing for Q4. Have you factored in the increase in cost or lost revenue potential related to the hurricane and that's including the 20 flights that you recently sent down, or is that before all of that?

Mona, we have said that with the information that we have in hand, results for Q4, the EBITDA level should be similar to those of 2015. We have factored everything that could be factored.

As you know, we have put some flights to Dominican Republic and Cuba, as we speak, and Florida little later this week in order to bring back all our customers. This is an operation that obviously add cost to our operation, but again, the Sun destination program is coming at the end of the season [it's really the] [ph] backend -- September and October, and anyway in our forecast, we have made many of those flights in a way to bring back the passenger at the end of the season there, as we speak, and like I said a few minute ago, we don't want to comment on the impact on each of the -- that the hurricane will have on each of them, we don't know.

But it's the end of the season, then it's not -- as we speak, we are not talking about major dollars impact on our -- on the EBITDA of Q4, that -- [it's factored] [ph] to what we know.

Okay, that was helpful. And I am not going to go into the financial implications or of that, but just looking at the path of Irma and then your winter 2016–2017 destination mix, which is on Page 17 in the presentation, just from adding up Dominican, Cuba, the Caribbean, and rough calculation show that it's nearly 60% of your Sun destinations impacted, would that be a fair assessment just looking at the geographic area?

Again, defining what impacted mean today is very, very difficult…

Okay.

- most of our volume are like -- you know, in Canada, people are traveling to -- most of the traveler are traveling to Dominican Republic, Mexico, and Cuba, then those one are the significant one in term of volume, not to say that the other one are not -- [that's not up there] [ph] are important, but these are really places where people go. We are going to those destination, but this is really where people -- most of the people are taking their holidays -- it's difficult to say more than this today.

Okay. And then, just a question in regards your Ocean Hotel divesture, is there any clause relating to disasters in which H10 could opt out, or any change in the agreement?

There is always those…

Clause.

…always find those clauses in contract.

Okay.

Yes, which is normal. Yes.

Yes, okay. And then just lastly from me; just turning to your summer performance and kind of the volatility in the earnings that we've seen over the last three years from 2015 to '16 to '17, and going from $0.70 to $0.07 and then back up, I am just trying to get an idea of the certainty that we could place in next summer performance, and I know it's still a lot ahead, but was there any fundamental change in the market that gives you greater confidence or in the stability of next summer's performance?

I think the result we have delivered during the summer month were quite good in the last years. Making a comment on summer '16, no -- you have to remember that in summer '16, the increase in capacity was huge.

I think it was like 14%, and it was really, really higher for the transatlantic to absorb all this capacity, where just in a single season. If remember that there was also the Brexit then, and oh, honestly, there were many, many factors contributing to maybe some imbalance between demand and capacity.

And it's not that the demand was not there, I think it's really because the capacity was increased by just too fast to absorb all this then. This summer, again, comparing to '15 and '16 are kind of similar, and I mean, demand very strong, capacity seems to be -- or is in line with that, and lots of people are traveling between Canada and Europe and from both sides for all kind of reason, but the market is really, really strong -- has been strong for certain number of year now and is very strong also in '17.

It's tough to say what would be the -- those factors in 2018, let's just say that we know nothing that should change the market except this is -- its capacity is increasing fast and -- but we are not aware of any of this as we speak.

Okay. Thank you for your answers.

Thank you.

Hi, good morning. I know it's early on the winter, but for the flights and the bookings that you've made so far, do you have an indication as to how the pricing is compared to last year?

We don't think that it's very, very significant at this point to say where the pricing is, because it's really the beginning having sold 20% of the inventory. And there is strategy for everyone to -- it's important to sell those aircraft and to maximize the yield at the end, and one could say today is that with the capacity that was added including us, we are happy to see that we have more bookings, and even percentage-wise when we look at load factor, we are ahead versus last year.

And it's a positive sign, one of the signs that we follow, and a positive sign. Pricing will be important this winter obviously, but the impact of the USD will also be very, very important.

With stronger Canadian dollars, it means that all the components that we are putting together [indiscernible] in US dollar will be less expensive for us. Then pricing is important, but margin will be more important anyway when taking this into a consideration.

Then we will get back you to -- we will make more comments on December on this one. As we speak, booking ahead and if you acknowledge that where it is today, I mean the cost will be down, which are a positive sign, but it's too early we need to say we are at the end of the -- what will be result at the end of the winter.

Okay. Thanks.

But it's…

Okay. Thank you.

Secondly, just on the hurricane; is there any rumor flexibly in the schedule for people who are initially going down there to -- you know, [indiscernible] other areas that wouldn't be as effective, so they can keep their vacations or anything like that, is there any room for that?

Well, if the people wants to -- let's say that the people leave this weekend, and for sure, they will not go to Dominican Republic, but they want to go to Mexico, we will accept that; no problem at all as long as we have space, or we will say to them, you know, travel, you got one year to travel with credit, the amount, and you will travel some -- in another time of the year. So, we will be very flexible for that, but at the end, there will be no [really crust] [ph] for us because we are not going to send the plane this weekend to Dominican Republic.

So, at the end of the day, and you know, and so it's not -- financially it's not a huge problem, but for sure, if you got hurricane every four days or every days or every seven days for all the season, you know, at the end of the day, there will be some crust, no [indiscernible] least September, October are very, very little month for Transat. So, at the end of the day, it's not a -- but we want to be careful, we don't know what will be the result for the hotel, because those hotels will be there and for the month of December or not, pretty sure, because it's not the first time that we see hurricane like that, I remember five years ago there was a really tough reason for hurricane, and at the end of the day, it wasn't -- everything was there, we sent the customers.

So, we will see.

Okay, thanks. And just a last one from me; looking at the transatlantic, what are your indications in terms of what your strategy might be?

It looks like London is getting some more flights heading there. So it's going to be either an increasingly credit market there, so I'm not sure if you continue to do what you are doing there, or divert to some others, where do you think there is some opportunities?

No, not at all; the only thing that we know right now that would be headed from Gateway to Toronto will be three flights of British Airways next summer. So Transat will be there as we have been all the time before everyone, Air Canada, who is now WestJet now, we don't know that WestJet would have not more planes in 2018.

So, depending on what they do, but [indiscernible] are coming in 2019. So there is no concern with that.

And [indiscernible] with three flights, so we will continue, it's the seventh biggest market of Transat. We have been there for the past 30 years.

So, we will be there strong as ever, and some markets where we make good money, because we are really strong in the U.K. Why?

Because we own a tour operator there and his name is [indiscernible] that was the strongest, and is still the strongest tour operator from U.K, plus we did something last year that we split the workforce between the tour operator and airline. So, now Air Transat has an airline is there, the presence is there with employees working just for the airline and not just for the airline and the tour operator, and we did the same thing in France when we sold the operation in France, just before that we split the workforce.

So, we have a full team in France selling the airline. And what is the difference between a year and a half ago and today?

Even in Canada, we have now people dedicated only for the airlines and not just for the tour operator. So, this is from everywhere.

So that's why -- that's one of the reason why we are selling better in Canada and overseas than before. It's one of the reason.

The second reason is we change the way we were doing revenue management than before. So now we have the team working differently also, and we have 1% coming from Air France, it's a lady that will be in Transat next week, starting next week, and she is a specialist of the revenue management, she has been the head of this airline for revenue management.

So, we are changing the way we are doing business as in airline than before, and all those change you can see what's happening now. Even if the summer was good for the last five years, one year was a little bit lower than it was last year, but before that, we were doing more than $100 million EBITDA every year.

Last summer we did $62 million. And we did something else.

Now we have [XX] [ph], it's a computer, it's an instrument that we can sell by Internet, and it's fully integrated in every country where we are selling the seats. So, not just Europe, but also now we are selling seats, something that we were not doing before, we are selling seats from the Caribbean and Mexico to Canada.

So, we did three things that we change the way we are working; one was the [XX] [ph], the other thing was the organization -- sales organization, which is completely different than what it was even a year ago, and also now we are changing the revenue management that what we are doing before and that's why you see those numbers.

Okay, thank you. Thank you.

That's very helpful.

Hi, good morning. I'm just wondering if you can provide an update on the hotel portfolio expansion initiative and how the search for a key leadership there is going.

Okay. So, it's too early to tell the plan.

We are working on it, and we will tell that at the Annual Meeting in March. So, we are doing a lot of things.

First, we want to be sure that to have the cash that I want to be sure that on the beginning of November, I will have the cash of H10 to be sure that we have all the cash necessary. We are looking right now for a President for the hotels.

We are searching for someone. This should be announced in the next few months.

We have already some people working to look at hotel for sale, land for sale that we could develop and hotel that we could manage or idea is to have approximately 5,000 rooms in the next seven years. The area will be Caribbean, and Mexico, and Dominican Republic, Cuba, [America] [ph], and Jamaica, plus also maybe strong managed hotel in Cuba, the hotel will be on inclusive 4.5, 5 star resort, and the new look of the hotel, we will invest between $1 billion -- $1 billion to -- in the hotel business in those years, and half of that, or almost half of that will come from Transat and rest will come from local partner, when we were doing the transaction with H10 because as you know, our first idea was to buy and not to be sold, or -- but finally it didn't happen.

So, we decide we have to take a decision, we cannot continue like that, so we had an agreement with the partner that we could buy our shares at a price that was already fixed. And that's what we're doing.

But when we were looking to buy within our cash on hand, so we went to see local lenders, and we found that we could have all the money necessary to do that buy. So, we would continue in the next phase, and we will start [long] [ph] hotel chains to be sure that we know the local now -- partner that we could have, and they know us, we know that they will give us the money necessary.

So, that's the plan. The plan will be more clear, like I said, in the next few months.

At the Annual Meeting we will present the strategy plan of Transat for 2018, 2020, and in the same time we will put together the hotel chain development plan and we will present that through the shareholders. So, we are there, we want to make those investments.

The money that is coming in Transat will be used for that. That's why we sold also our tour operating activities in France and Greece throughout the money to do that knowing that we are not doing too much money with those operation, and to build the new Transat, and we will see at that time that Transat will be completely different than what it is, and we are making change after change after change, like I said, and [indiscernible] will be part of that.

Okay, thanks. And sorry, what was the value of the investment that you anticipate putting into the -- I guess, growing the rooms to 5,000 by 2019, you said $1 billion?

It's between $1 billion, $1.2 billion.

Oh, $1 billion to $1.2 billion. Okay, thank you.

And then just one more question on the decline in the maintenance expense for the quarter 14% in the MD&A that was attributed to the impact of FX, but by our math that would only account for some of the decrease, I'm just wondering what are some of the other factors were behind the decline. If I remember correctly in Q3 last year there was a one-time non-recurring breakdown of an engine, so would that represent the delta?

Variance in Q3 versus last year, some of the items are one-timer, but one-timer in 2016, and not this year; the numbers for this year really improve really on the unusual items went up by increasing volumes, and if that volume was increased mostly with the same fleet than last year than -- from efficiency, because of that. And also the program, all the initiative that was put together in the recent year, and really starting to kick in [indiscernible] impact then will end up this summer by having a -- I would say, reduce our cost even on the unit basis than increase those cost versus the one-off last year.

Okay, thanks for your time.

Okay.

Yes, good morning gentlemen, and thank you for taking my question. So, maybe just a quick start on the hotel strategy; is it fair to say that the recent investment in Rancho Banderas could be the first asset of the hotel development plan, or should we see this investment as separately from this initiative?

Well, that's part of it, but that's a small thing. This is what really we want to do.

That was the opportunity to invest $12 million to a hotel, the hotel had already 49 rooms, and we are going to build the other room to 263. And the land was there, it was someone that we know very well.

So, we decide to go with it, and it was not big money to invest. The rest of the cash will be local cash to build the hotel.

So, it was an opportunity, but it's not something the way we're going to do the hotel chain. The hotel chain will be driven by Transat, will buy some hotels, or we'll buy small chain of hotel, we will build some hotels, we will build a hotel chain, like I said 4.5, 5 Star Hotel, you know, with new look and with professional, we're looking at the President, the President will have a team, and it will be a really complete hotel division of Transat; something like we did 30 years ago with the airline, so not -- Banderas was -- as you said, an opportunity.

Okay, okay, thank you. And maybe a quick question on pricing on room in the transatlantic business, you mentioned that the pricing were decreasing slightly, so I was wondering if it's something like -- that related to market condition or more like seasonally…

It's seasonally because when you are in the lower season, May and June, prices start to go up. Really the price of top levels are July and August, and beginning of September.

And after that, prices are going down. So you don't have the same margin in, I would say, from 15 of December, September to 31 of October, than you are in July and August.

So, stock market condition is the normal trend of the prices. Why we did that indication is to be clear that the people say if you still continue up $100 and more for the rest of the season, it will be fantastic, but it's impossible.

So that's why we gave that guidance to be sure that everybody can make this in a match about that at all. But it's normal.

There's no -- nothing happening, sales are good, they are coming, prices are good right now. So, the days -- nothing; even when you have the -- and it was not funny for anyone when we had the terrorist attack on Spain, as usual, you see the sales going down for five, seven, 10 days; after that, sales are going back and now sales are back to Spain like they were before.

Same thing on the U.K; when that happened in the U.K, at the beginning, sales were going down and the people, I don't know, they've decided after that to go back, and sales went back up to Great Britain, and [indiscernible] because sometimes even people don't remember that there was a terrorist attack on Great Britain. So, at the end of the day, the sales are very good right now in Great Britain, we are in advance from last year, so it's no problem at all.

Okay, perfect, thank you for the color. And may be on the Sun destination market, how is the -- I know that's not a high season, but are you seeing the capacity going -- this market?

Well, as you know, the capacity is up by 7%; it's not bad, it's not 14% like Europe was last year. So, 7% we can take that.

We have 10% because we are now not going to go down; we are heading more with the capacity. Anyways, it doesn't work and every time we are trying to be rational.

Other people are not rational. So let's finish this.

So we'll go back where we were before, and like Denis said, 20% sold on the last year 18%, plus we had approximately 70,000 seats. And on those 70,000 seats that we have packages.

Half of them are already sold. So it's a good trend.

Prices are similar, little bit down, but margin are better -- so -- right now, but it's too early, with 20% you cannot say we are going to have a good winter, but things look good. And hotel are not putting their price higher, there's no raise or increase of the rates of hotel.

So that's good for us. That's going to be a decrease during the winter, because as we are fighting all the time to get better rate.

Well, that's good for us. And when you see the trend -- when you see what's happening and when you see also the dollar because [indiscernible] of our expenses during the winter is not the few, even if the few is in U.S.

dollar, but still room, we are in U.S. dollars.

So at the end of the day, the difference between that huge impact, and for the first time for the past four years, we are starting positive and not negative. Last year we started negative, the year with approximately almost $40 million.

So, this year it'll not be the same. So, even if the tour operators give back part of that, they will still some money there.

So, today it's okay, we'll see -- when we give results of the fourth quarter in the -- I think 14 or 15 of December, for sure, there will be more color on that, because we will have sold more packages and air only. And when I see the sales of the [indiscernible] something it's new for us, we started really last year.

We are going to continue this year. We are selling more and more air only, and we are selling air only not just from Canada, like I said, also from the Sun destination on Mexico from Dominican Republic et cetera.

So, at the end, we are selling more than last year's. So [indiscernible] seems good, but it's too early.

Okay, perfect. Thank you very much for your time, and congratulation on the quarter.

Thank you very much.

Good morning, everyone. Most of my questions have been answered, but just wanted a little bit more clarity on the winter tailwind that you guys are seeing, the 55 million, that's based on current levels right now $49 million WTI and about 22 FX?

Yes.

Okay, thank you.

These are based on numbers as we have seen that's like few days ago. As you know, for us, the U.S.

dollar is more important than the winter season than the fuel. And then they reflect the numbers of few days ago.

Since then the Canadian dollars is even -- they are stronger than it was when we [indiscernible], and the fuel is slightly up. Canadian dollars and U.S.

dollar is really a major input for our winters. Yes.

Yes. Okay, thank you.

That's all from me.

Hi, guys. Congrats on the good quarter.

Question about the sale of the Ocean Hotel, I remember when you announced that it was valued at 190 million Canadian, now with the financials, there is 180 million Canadian, and with the move in the FX, are you guys doing any hedging for that exposure, or you are just waiting for the close and you'll take whatever conversion rate at that time?

During the winter period, we need tons of U.S. dollars to pay for rooms and to pay for fuel and to pay for all of other expenses, maintenance, and rent.

And the amount that we will receive from this transaction will be used for next winter to cover our need for U.S. dollar then.

Technically speaking, quite honestly, there is perfectly natural hedge between receiving that cash and using that cash next winter to pay for our expenses. And that's why we didn't put any specific hedging in place in order to protect the original value that we announced, but anyway, we need those U.S.

dollar for next winter operation.

Perfect. That's very helpful.

And just I know you guys try not to give any quantitative colors too early for the winter season, I guess, would frame it in a way like what would it take for us to see a breakeven at least on the winter season in terms of demand? I know tailwinds are very good FX for the cost side, but in terms of demand, what would like to see in order to see -- to achieve a breakeven quarters in the winter season, if you can give any color?

If we could reach the same kind of load factor that we have last year and being able to benefit from stronger U.S. dollar, if we could like maintain the prices where they were last year, it will mean for us breakeven -- will make for us breakeven.

Then maintaining the price, we're not very, very high last winter, and keeping the Canadian dollar where it is today versus the U.S. dollar.

And again I repeat that that will bring us to breakeven EBITDA by combining those factors. Load factor, it's not the most important thing in the winter.

It's really the margin that generate -- maybe not like on transatlantic where if you have an empty seats, you lose the revenue. On Sun destination program, if you have an empty seat, obviously you lose the revenue, but you don't have to pay for any hotels, which is a very big component of your award variable cost during the winter period.

And if we could simplify [indiscernible] load factor keep the price where they are and with the U.S. dollar where it is today, that will do the job.

Okay. That's very helpful.

Thanks a lot, guys.

Thank you.

So we thank you everyone. And let me remind you that our fourth quarter results will be released on December 14 2017.

Thanks, a have a good day.