Transat A.T. Inc.

Thank you. Hi, everyone, and welcome to the Transat Conference call for the presentation of the financial results of the Fourth Quarter ended October 31st, 2021.

I'm here with Annick Guérard, President and CEO, and Patrick Bui, CFO. Annick will provide the comments and observations on the current situation, and on the operational and commercial plans for the future, before [Indiscernible] reviews the financial results in more details, we will then answer questions from financial analysis.

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

As usual, our investors ' presentation has been updated and is posted on our website in the investors ' section, Patrick may refer to it as he presents the results. Today's call contains forward-looking statements.

There are risks that actual results will differ materially from those contemplated by these forward-looking statements. For additional information on such risks, we invite you to consult our filings with the Canadian Securities Commission.

Forward-looking statements represents Transat's expectations as at December the 9th, 2021. And accordingly, are subjected 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. by the 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 company's operational performance.

It is likely that the non - IFRS financial measures used by the corporation will not be comparable to a similar measure reported by other issuers, all those used by financial analysts, as their measures may have different definitions. The measures used by the corporation are intended 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 the definition on the reconciliation with the more comparable IFRS measures, are available in our Annual Report and our investors presentation. With that, let me turn the call over to Annick for our opening remarks.

Annick.

Good morning, everyone. I'd like to start by acknowledging the presence of the -- Patrick Bui who has recently joined us as CFO.

I am extremely pleased to have him on board and confident that he will be a great asset for the development of Transat. I would also like to sincerely thank Jacques Simoneau for filling in before Patrick's arrival.

We are concluding the summer with revenues that are still limited, but point in the right direction. At $63 million our revenues for the fourth quarter represent about half of what we saw for the whole year.

That's also more than double the revenue for the same period last year. Our results for the quarter are better than last year's, due to an improvement in [Indiscernible] factors and also partially because of [Indiscernible] element that weighted negatively on the results last year.

They're in line and even slightly better than the objectives we established as part of our restart plan. Most importantly, we have kept the cash burn in check at $50 million per month, despite the cost incurred for the restart of operations since July 30th.

Patrick will comment in more detail on the financial elements. Our operations are now well underway, for winter we expect to operate at global capacity at around 60% of what it was in 2019, starting at 50% and gradually increasing to 75%.

We offer direct flights from 8 Canadian gateways to 22 destinations in the south; 5 in the U.S., and 8 in Europe. Our Transborder offer includes 2 new destinations in Florida, Miami and Fort Myers.

This comparatively solid winter program will constitute an excellent bridge into the summer season, where we foresee a capacity close to our pre -pandemic levels, reaching about 90% of 2019 level. At the height of the season, we will operate to 45 destinations in Europe, to the south, within Canada and in the United States.

From Montreal, a total of 19 European destinations will be accessible via direct service, including a new route to Amsterdam. From Quebec City, a new exclusive route to London is also added to our portfolio and we will restart our service to Paris.

Now, out of Toronto travelers will be able to fly to 15 key European destinations. We will strengthen our position in the United States from Montreal with the addition of Los Angeles, San Francisco, and [Indiscernible] operation to Miami.

Finally, we will offer a selection of our most popular destination in Mexico and the Caribbean, out of Montreal, Quebec City and Toronto, as well as domestic flights between 5 Canadian cities: Montreal, Toronto, Quebec, Calgary, and Vancouver. As you can hear, this is quite a rich offer from Eastern Canada,We are of course, monitoring the situation, especially in connection with the Omicron variant and are ready to adjust our capacity as the situation may require.

But we are quite confident that we are now evolving in the right direction. Thanks to the modernization and simplification of our fleet accelerated through the pandemic, we can better adapt to demand while increasing aircraft utilization and reducing our costs.

We now have, and we'll have for the future, among the simplest and most efficient fleet models in North America, a game changer in our ability to improve our competitiveness. Our operation also allows us to bring our employees back to work; as our fiscal 2022 begin, we had about 2,000 [Indiscernible] employees in Canada, as compared to 750 at the height of the prices in the spring of 2020, and again at the same time this year.

We are constantly recalling staff, and we expect to have around 3,500 by the end of 2022. Our recalls are going well, and despite the labor shortage [Indiscernible], we do manage to fill in our positions.

We had experienced some difficulties with our call center. As the need there proofs steeper than what we had expected.

This provoked some lengthy wait times for our customer, for which we have to offer our deepest apologies. We have put in place a wide area of measures for making it easier for our customers to make modifications online to improving our salary condition and we are now seeing the situation improving steadily.

Our employees are the key to our success. And we are so grateful for programs like [Indiscernible], which have helped keeping them on board during this crisis.

While some of them were no, that's worked for us -- with us for the past 20 months. An impressive proportion of them is willing to come back, though.

And I want to thank them for their engagement and their resilience. I also want to thank those who has stayed on during the whole period, holding the fort and whose extraordinary dedication and hard work now allow us to look towards the future, with much more confidence than ever.

Another important factor in our post-COVID development, and we have pointed it out many times already, will be our capacity to forge alliances to strengthen our network with complementary offers from other carriers. This is key to our growth strategy.

That's why the announcement of a first code-share agreement with WestJet was important for us. And you can also expect other announcements of the same kind in the upcoming year.

In the meanwhile, we have also developed our virtual interline agreements through our connectair by Air Transat service, that conveniently offers interlining options to our customers with minimal system integration and development effort. This now allows us to offer more than 130 extra destination with easyJet in Europe, Avianca in South America, and Vueling in Spain.

Moreover, we are revealing today the upcoming integration of PASCAN Aviation into our partner portfolio. Our passengers will be able to connect a concept slight with the network of this regional airline out of Montreal and Quebec.

As a first step towards a commercial cooperation with them to better serve our regions in Quebec. We trade great importance on social -- corporate, social, and environmental responsibility, which is fully linked to the future of our industry.

The climate emergency is at the center of our concerns. Unfortunately, hybrid and electric aircraft will not be available for several years.

In the arsenal of tools available to us to reduce GHGs, fleet modernization, few efficiency measures, and the use of sustainable aviation fuel are key elements. This year, we became the first airline in Canada to have secured a significant volume of electro -fuel over a long period of time with the signature of a commercial agreement for 90% of SAFC plus consortium sustainable electro -fuel to be produced at its first Montreal plan.

Projects like this will have -- helpfully the aviation industry to a revolution while contributing to the achievement of GHGs reduction target in Quebec and Canada. Before concluding, I would like to acknowledge the contribution of Louis-Marie Beaulieu and Jean-Yves Leblanc to Transat's Board of Directors, as both will be leaving us at the end of this month.

And I am very pleased to announce that?Mr. Daniele Visiabank (ph )?

and?Mrs. Judy Copley(ph )?

has accepted to join the Board and bring their tremendous experience to the table to help Transat develop in this new phase of its history. In a nutshell, we are sharing today results that reflect the best of the COVID crisis on worldwide travel and aviation in general and Transat in particular.

But we are extremely confident that we have everything in place to rebuild and redevelop as a company that will be stronger and more profitable than before the crisis. 2022 will be a demanding year, no doubt.

And we have a lot on our plate, but it will also be the most exciting one of the first year into our strategic plan and renew even more ambitious ERF. Patrick will now give you more details about our financial.

Thank you, Annick. And good morning, everyone.

I'm glad to be sharing our financial results with you. Since the restart of our operations on July 30th, we have witnessed encouraging signs of a recovery as our capacity has ramped up through the fourth quarter, and we are seeing much more robust load factors compared to 2020.

However, and without surprise, our fourth quarter results were again significantly impacted by COVID-19. While we have secured financing for the leap program last April, and while we resumed operations on July 30th, preserving cash has been and remains a top priority.

To this end, we have reduced our monthly cash burn to an average of $50 million per month during the fourth quarter, which is a sequential improvement from our cash burn in the third quarter, which was an average of $20 million per month, on the back of stronger demand in Q4 as compared to our internal plans. Liquidity remains solid with cash and cash equivalents of $433 million and undrawn facilities of a $170 million at the end of Q4, for a total unrestricted liquidity of over $600 million with respect to our debt, we are currently analyzing all options to optimize our capital structure and to ensure we have a strong footing to execute on our strategic plans.

And now, for our Q4 results. Revenue stood at 63 million up from 28 million in 2020.

Compared to last year, higher vaccination rates confidence in traveling is much higher, leading to improve capacity and load factors. Adjusted EBITDA was negative $58 million for the quarter compared to negative $91 million in 2020.

Despite cost control measures, this quarter included expenses relating to the resumption of operations, while last year's quarter included expenses relating to the settlement of fuel hedging contracts put in place before the pandemic for $23 million. Adjusted net loss was $118 million for the quarter compared with $156 million last year.

As per our statutory financial statements, net loss was $121 million, compared to $238 million last year, a $117 million improvement. Of this improvement, $77 million is explained by a decrease in special items as compared to 2020.

This quarter included special items of $20 million composed of essentially impairment of assets of $13 million, which includes the impairment of an aircraft that will no longer be used until it is returned to the lessor and severance expenses of $7 million. This item of $20 million is mostly offset by $15 million of favorable change in the value of our warrants that were issued at the end of the second quarter relating to the LEEFF program and 7 million in FX gains.

Last year, our fourth quarter net loss included the special items totaling 97 million, which mainly consisted in impairment charges totaling $87 million. For the full-year 2021, results were significantly impacted by COVID-19.

Revenues were $125 million, a decrease of 90% compared to last year. Adjusted EBITDA was negative $214 million for the year compared with negative $122 million in 2020.

We recorded an adjusted net loss of $446 million, or $11.83 per share, compared with $355 million, or $9.41 per share, a year ago. And as per our statutory financial statements, we recorded a net loss of $390 million compared with $497 million in 2020.

Now with respect to our balance sheet, the corporation's cash and cash equivalents totaled $433 million as of October 31, compared to $426 million at the end of October 2020. As previously mentioned, the cash burn during the quarter represented an average of $50 million per month.

This amount does not consider the proceeds from borrowings nor the reimbursement to customers. For winter 2022, the cash burn is expected to remain within the range of $15 million to $20 million per month as we continue ramping up our activities.

And as of October 31st, cash in trust or otherwise reserved totaled $140 million, while deposits for future travel stood at $292 million. At the end of November, we had received request for about $460 million of the amount of credits issued and made refunds for 99% of amounts claim the reimbursements made during the summer were partially financed by drawdowns on the $310 million leaf facility.

The difference comes mostly from reimbursements made with cash held in trust as of October 31st, draw-downs on our credit facilities totaled $650 million compared to $585 million last quarter. During the quarter, an additional amount of $20 million was drawn on our $390 million LEEFF facility, and an additional $45 million was drawn on our 310 credit facility relating to customer reimbursements.

This facility is now fully drawn. Lease liabilities stood at $956 million, which includes 10 A321neoLRs, of which four were commissioned during the year.

Off Balance Sheet agreements, excluding agreements with certain smaller suppliers, stood at $550 million, mainly related to 7 Airbus A321neoLRs yet to be delivered as [Indiscernible] October 31st. Finally, as you could read in our press release from this morning, we will not provide an outlook -- a financial outlook for the winter of 2022.

With that said, as mentioned earlier by Annick, we are planning to ramp up capacity across all of our markets over the course of winter 2022, with an average of 60% of the capacity of 2019. But we will remain vigilant to adapt capacity with demand, whether up or down.

At a more granular level, for the sun destinations, our main program for the winter capacity in 2022 represents 55% of 2019 on transatlantic routes, where it is the low season capacity represents 65% of 2019. And finally, on our Transborder roots, capacity represents a 145% of the capacity of 2019.

Thank you, and we will now open it up for questions.

Yes. Good morning, everyone and congrats Patrick for your new role at Transat.

Could you maybe share some of your first impression on Transat, the travel industry, and where would you like to position the company from a financial standpoint?

Hey, good morning, Benoit and good to hear from you and thanks for thanks for the words. Look, I mean, I think the travel industry has gone through a very difficult past few months and years, but everything points in the right direction.

If you look more closely at our numbers, the last quarter was just an indication of that, with our revenues that are double of last year, and we're clearly on a strong, strong footing. And so, no pun intended, sky's the limit.

But from a financial standpoint, obviously there is work to be done. As we alluded in the past on the financing side, and we think there's an opportunity to provide a strong footing for the company and align with the development and the growth of our business.

Okay. That's great.

Thanks for the color. Any timing for such an announcement with respect to refinancing initiatives?

Yeah, that's a great question. As we mentioned in the past, we're looking at all options.

We're looking at no stones unturned. We're looking at all types of instruments and markets.

We think there's an opportunity. There is a window of opportunity now.

We just want to make sure that we do a thorough homework before we proceed with financing. Obviously, there are some clear objectives in that financing.

We want it to be financially accretive to the company on one side, and secondly, we want to reduce risk as well. And for sure, we want that financing to be working hand-in-hand with the business plan that we've announced in the past, and we have a very clear 5-year plan, a very clear strategic path, and we want to make sure the financing is aligned with that.

Okay. And you provide great color in terms of the expectation for cash burn to capacity for this winter, next summer.

I'm just wondering, given that there has been change in the strategy, now you have a much more up to mice fleet, and also the coach sharing agreement. If you just sign any thoughts about where these trends out, margin profile could evolve once you recover to the pre -crisis levels?

Yes. I mean, I appreciate the question Benoit, I think it's a little early to tell.

Obviously, when we look under the hood on our strategic plan, we are strongly -- we're confident that we will return to pre -pandemic margins and beyond, but I think it's a little bit too early to say, Benoit Poirier.

Okay. And last one -- yeah, go ahead.

Sorry, Annick.

Maybe I can comment on that, because that's important for us that we are consolidating our operation, as you know, as we announced in Eastern Canada, where we are extremely well-positioned with solid market shares, and we will be there for next summer. Transat has had the largest market share on almost 75% of its Transatlantic market that has always been profitable for us with 95% of market share out of Quebec, and near 50% out of Ontario.

So with that, and rebuilding that network, I think it's very important to understand that we have a solid base. Now we are putting in place everything that is required to increase our efficiency.

So there's a clearer path to improve overall operational and financial performance. Our fleet simplification, of course, as we've talked in the past, is going from 4 to 2 types of aircraft, entirely compatible with the most efficient aircraft on the Atlantic market, the Airbus A321LR.

We have significantly reduced our number of wide aircraft to increase our agility in the market. And we now have, as I was saying, in the opening remarks, one of the simplest and the most effective, efficient fleet model in North America, and our cost structure is becoming among the most competitive ones as well.

And by consolidating our operation in Eastern Canada, where we are extremely well-positioned with solid market share, I think that we're going to be -- we're going to be very well-positioned for the future and the new fleet has allowed us to redesign to network to significantly reduce seasonality and increase fleet utilization, two main factors that have clearly prevented us from being performance in recent years. So we already have a plan to exceed our historical aircraft utilization by next summer, so it looks very promising for the future, for stability.

And last one for me, with respect to the new bargains, I understand you will be agile, but have you seen any change in the bookings so far?

Overall, we are seeing a definite recovery in demand. The level of booking observed over the last month has been encouraging.

Without any surprise though, demand has slowed down over the last week with the recent uncertainty created by Omicron, and especially with the measures that have been imposed again at the Canadian borders, including the quarantine, but we believe that the impact will not last long with what we're hearing around limited consequences of Omicron already. So we just looked at the numbers this morning.

The bookings were picking up -- have been picking up during the last 2 days as a result of the encouraging news of limited threat of Omicron.

Okay. Thank you very much for the time.

Thank you. Good morning, and congratulations Patrick on the appointment.

Just wondering if you could talk a bit about the approximate timing of the remaining 321LRs that are coming into the fleet. I believe you've indicated that it's by fiscal 20 -- I think its fiscal '23 or calendar '23, maybe you could clarify that.

And then just talk maybe about any indications of timing within that period.

Just to give you an overview of our fleet, in terms of our A321neoLR, we have 10 right now in the fleet and we will have 2 additional ones next spring, so spring of 2022. For a total fleet of 31 aircraft, including 12 A330s and 7 A321neos.

We are expecting the remaining of the A321LRs so 5, because we had a total -- an order total of 17 in spring of 2023 and 2 in spring of summer of -- 2 in spring 2023, and the remaining two ones in spring of 2024. That being said, we will plan additional aircraft for the next 5 years.

These needs, of course, where aircraft will be aligned with our projections of future demand, and we will communicate new leasing in due time.

Okay. Thank you.

My second question, I'm wondering any -- if you can talk about this WestJet code-share agreement, I think looks very exciting for Transat. Can you sort of talk from the perspective of the travelers and where that benefit, that opportunity of the partnership will kind of show up and expand the -- I guess the travel options for Transat customers?

Yeah. So we have different partnerships.

We find the current partnership with WestJet and working on other as well. So the benefit, of course, for our customers, they will have access to an extended network of routes in this nation.

The whole goal of partnership, overall, is to increase the level of passengers through new strings of passengers on our existing network. And for customers, the partnership we have with WestJet, which is a codeshare, allows, once you go booking and check-in from flights operating by the two different airlines.

There's also prediction in case of flight delay and cancellations. so it's a great partnership.

It's the first that we have, first of many to come, and we are very pleased by that. In terms of routes, we said we would announce them because we are finalizing the details of the different routes.

We are finalizing the agreement. But in terms of scope, it will involve some route that's of course, domestic routes that ends a couple of transborder routes that WestJet operates that will connect on to our departures.

And that will feed mostly our European network

Okay, that's great. Thank you.

And then just my final question. Maybe for Patrick, there was a comment about the fourth quarter, I think you can correct me if I'm wrong, but the cash burn being better than you expected.

I'm just wondering if you could talk about specifically what that was. Was it really a function of the pickup in bookings and, therefore cash deposits coming in for future travel?

Or what was the reason behind the better-than-expected cash performance?

Yeah, Tim, I mean, it's frankly a level of activity and bookings that were beyond our internal plans. It was mostly that.

Okay. Thank you very much.

Thank you.

Thanks and good morning everyone. And echo my congrats to Patrick, welcome to the earnings call.

Maybe the first one to ask, I think and I just drop a following up on Tim's question on the bookings. Is there, like there's a seasonality obviously in bookings where you see maybe the first quarter being pretty strong from working capital standpoint and then it winds down.

Given the kind of situation right now, the new variant plus the travel optimism due to vaccinations, etc. How do you see the bookings shaking out with respect to seasonality, do you still expect some of the seasonality as normal, or would it be different this time?

Just to maybe to add some color on what I said previously, what we're seeing right now, first of all, just before the announcement of the new variant, we were seeing solid bookings throughout the winter season as well as little bit during the -- for the next summer season. That being said, we need to take into consideration, and we have mentioned it before, that the booking pattern has significantly changed over the last 18 months, especially in the last 6 months, and the bookings are much more last minute.

So it's a little bit more difficult for us to be able to predict. But so far, what we've been able to put in the market that has kept us at capacity has as proof that we were pretty much correct in terms of demand forecast.

That being said, the impact of Omicron that we've seen over the last week. More importantly last week, less importantly over the last two days is specifically in the short term.

So it affects the bookings for December and January and we of course, receive a lot of calls from customers, who do not understand what are the new travel restriction because it's very complicated to be able to understand the restrictions from our customer point of view, so everybody is asking questions. Should I wait?

So people -- we've seen a lot of people, not a lot, but a couple of people have been delaying their travel. So they call us, they have planned to go out on vacation in January, calling back to say, "let's postpone for two months ", putting back their travel in March or April.

So we are seeing some postponing, however we are not seeing any movements at this point, around March, April, not for this summer either, so that's no remaining in February. So we haven't reacted, in terms of decreasing the prices, changing the network; because we know this is going to be temporary, and at one point, I think we have much more visibility than we used to have a year back, and we need to be strong on the nerves, and not to react too much and wait to see the -- as we are seeing right now, encouraging news on the limit of threat of new variants.

And of course, Omicron will not be the last, there will be others. So we are getting, I would say a kind of a routine on how to manage those ups and down in the market.

That's very clear and thanks. And then perhaps follow up on the core share agreement with WestJet.

I think it does still being reviewed by the regulators. So if you can provide any color on -- are there any areas of the core sharing agreement where the regulators are showing any concerns at all?

And can you remind us where is this core share going to be applied for mostly [Indiscernible] is it going to be transborder as well?

We haven't received any negative reaction from the authorities so far, so it's going definitely in the right direction. We don't see any roadblocks on that side.

And as I said, we are not able at this point to confirm all the details on which routes will be involved. But of course it will be a combination of WestJet strong present in Western Canada, and our strong present in Eastern Canada on the transatlantic market.

Okay, thanks. And then Patrick, perhaps you might have an answer for this one, on the foretell division side.

So you guys have -- you are looking to divest the hotel division, any updates there? What could be the timing and what could be the magnitude of [Indiscernible]?

Thanks for the question, Konark. We've announced in the past quarters that we were exiting the hotel division.

So you won't be surprised that we are looking at options for the land in Puerto Morelos. But again, too early to say, but we're advancing in the right direction and we're considering our options there.

Great. And a last one for me.

You talked about the capital structure, Patrick, earlier on this call. In terms of the [Indiscernible] plan and the alignment there, what is the best metric to look at when you think about optimizing the capital structure?

Is it the absolute level of net debt you want to look at? Is if some of the metrics?

And does that also entail exiting the government lease program like Air Canada just did recently?

Yeah. I mean, there's a lot of -- all of the above.

I mean. there's a lot of metrics, right?

I mean, obviously, on an absolute level, we do look at leverage metrics and benchmark ourselves compared to other airlines, whether total leverage, including lease on bought liabilities over your profitability, or an EBITDA, or something like that. So we do look at all of that.

But like I mentioned earlier, I mean, ultimately, we want it to be, call it financially accretive to the company, and so specifically, what we mean by that is reduce the financial burden on the company. One thing to note on the LEAP program, there are also warrants included in that financing.

So that also is part of the equation of making it financially accretive, if I could say. And then the other thing that we're looking at is making sure that we further de -risk the capital structure of the business as well, so what that may mean is in terms of maturities, and so on, and so forth.

Does that answer your question?

Thanks for the color. Yeah, I appreciate the time.

Thank you so much.

Sure.

Thanks for taking my question. Good morning, everybody.

Annick, you mentioned that you were seeing, I guess, bookings pick up again in the past few days as headlines on Omicron suggest maybe it's less severe. What are your -- any change in the destination maybe people are looking to book into, or I suspect there might be some hesitancy for some of the more international destinations, given the restrictions versus maybe domestic and transborder where travelers might face fewer restrictions.

I was wondering if you're seeing anything on your end to that effect?

Most of our network, of course, is international. We are seeing in terms of booking trends, what has been strong is all the VFR markets, so between Canada and Paris for instance; or Montreal, Paris; or Toronto, London; Toronto, Montreal; Portugal, as well has been very strong for this winter, so we are seeing the demand remains very strong.

As of the Southwest destination packages, this is where we've seen a little bit more negative impact over the last week. Destinations like Cancun, Dominican Republic, and Cuba, the whole -- not more one than the other, I think it's the south overall.

But however I, as I said, it's been picking up over the last few days, so that's very encouraging. Just before the announcement, just before the media or the news around the Omicron, the bookings for some of this nation was going pretty well.

We have opened a lot of destination. For this summer we have about 22 -- for this winter, I'm sorry.

We have about 22 in some destination and they have picked up in terms of velocity. They have gone very well.

So we want to wait and see a little bit. I think that it's encouraging to see that the bookings have picked up over the last few days.

And we remain very confident that the demand will still be there. The vaccination continues to progress, our children's being progress, children's on their 12 as well being vaccinated.

That's going to help, you know, to support family who are looking to travel.

That's great color. Thank you very much.

And I can just ask, maybe a further out question. But if I think back to pre -pandemic, and you pursued this hotel strategy, which are obviously dissolving given the pandemic.

I think the argument was: that was where you could anchor a competitive advantage that being -- not having that hotel asset disadvantaged your network and your product offering versus some of the larger established carriers you go up against. When you look at whatever it is, 3, 4, 5 years, we're kind of through the worst of the pandemic and travel returns.

What do you think your competitive advantages are going to be if it's not this hotel -- giving you the band of this hotel strategy. Just at a high-level, I can't imagine reduced seasonality, getting some A321LRs, is always going to take, so I suspect there's more to this strategy than -- I'd be interested in knowing whether you think you carve out a competitive niche versus some of your competitors?

Yes. So maybe just to go back on what we've decided in 2021.

We launched the new Transat, or the Transat 2.0, which refocuses the business around airline activities. We really aim at becoming the best sustainable leisure airline in the world.

And I think we were not very far from that. but of course it will depend on the recovery that we're going through right now.

So this involves several structural changes that have started to take place, of course a change in the Company's governance, the closing of the hotel division. We cannot be -- we've decided to move away from the vertical integration business model, as we realized that we cannot be everything to everybody.

We cannot be first or second or best in all the different fields. And it involves as well a clear path to improve the overall operational financial performance as well, of course, ambitious targets towards decarbonization.

In terms of competitive advantage, as I said earlier, we are consolidating our operation in Eastern Canada where we are extremely solid, well positioned with our market shares. So that's really important for us.

We don't -- I don't want to say [Indiscernible], but we ranked first on market share on more than 75% on all the routes we operate through the Atlantic market, through Europe. And on the south we have the largest market share on 50% to 57% of our routes.

That's 77% in Quebec and 42%. The problem that we have is that we have great market share but we didn't have the right cost structure.

And as [Indiscernible] as well, that the revenue management was lacking behind. So as I said, the new brand -- the new fleet has allowed us to redesign the whole network, reduce our costs.

And we are very well-positioned to take advantage of their recovery, of their leisure and traffic and DFR market. This is our target customer and in the long run, we will be less impacted than the average market by the loss of business traffic revenues, which, I think represent 20% of the legacy carriers customers, but count for 80% of the revenue.

We have among the highest brand equity and service reputation. We have the best leisure airline in the world.

We ranked -- we have -- we rank among the best leisure companies and the rollout, actually. We have the beneficiary online company and we have been ranked with 4 stars by the Skytrax award.

The only other Canadian airline having this ranking is Porter. When we look at all the assets we have, the market shares, the best fleet in North America; we will be highly competitive.

We believe that when we look at the market, the Canadian market, the Transborder market, and the European markets, we will have the leanest structure overall to able to compete in the market. And in parallel, we are working of course, to improve our revenue management.

So we are implementing a new RM system, one of the best in the airline industry. So this will allow us to increase our efficiency, especially in the existing context of the development of our airline partnerships.

So overall, as we get out of this crisis and we compare ourselves with our competitors, we think that we're going to be much more competitive than what we used to be pre-COVID, and that's it.

No, that's great color. That's very helpful.

Thank you very much. Best of luck as you execute on that, and congratulations, Patrick, on the appointment as CFO.

Thank you, everybody.

Thank you.

Thanks. Good morning, everyone.

I guess maybe first question for me is really more of a clarification, Annick, you mentioned, I guess in your prepared remarks, looking ahead to the summer, I think you said that you were planning to fly to 90% of the destinations. I just wanted to clarify that was the case, 90% of the pre -pandemic destinations, I just want to make sure that wasn't 90% of pre -pandemic capacity.

No that was 90% of pre pandemic capacity. And that's for the overall season.

Because when we look more at -- that's a little bit lower when we look at peak season during July and August, But overall, as we plan to increase our craft utilization, we are increasing capacity in low periods or smaller season in spring and next fall, the following fall. So overall, it's reaching 90% capacity versus -- of the 2019 levels.

Okay, so yeah. My next sort of follow-up question was going to be, we've got much smaller fleets.

But I guess the answer to how you're going to get to 90% is that you'll be operating those aircraft in, I guess more in the shoulder seasons and the off-peak seasons that get you to that 90% of 2019.

Yes, we are achieving this program, of course, with less aircraft, with 8 aircrafts less, and that's why we are able to increase our aircraft utilization for next summer compared to summer of 2019 by 10%. That's just the first step, as we're planning even more for the upcoming years.

This is the beauty of the A321neo long-range. I don't think that a lot of operators can say the same.

Being able to deploy such an efficient aircraft on both our mission, south destination and European destination, it's a perfectly well-adapted aircraft to our mission.

Okay. That makes a lot of sense.

I guess maybe question on the winter, you've talked about the bookings a lot. But I'm wondering if you can discuss what pricing looks like, and I guess, maybe compare it to maybe the 2019 winter season.

How are things looking from a pricing perspective on those sun destination routes?

The pricing depends on the routes, of course, where there's more capacity deployed the pricing is more aggressive when there's less. And we -- for instance when we look at the Dominican Republic, where we are very strong and have strong market share, we are able to generate pricings that are similar to 2019 levels.

Where we see more competition, such as Mexico, for instance, the price war is a little bit higher. However, since we have less capacity in the market, we are able to count on [Indiscernible] factors.

Which really a balance of low factor of course, and price per passenger. But overall we think -- we believe that we're going to be able to achieve decent results.

Okay. No, that's helpful.

And maybe the last question for me. I guess maybe more around the strategy of how you're going to deploy aircraft onto new routes in the future.

I was intrigued by two of the new routes you've announced for next summer to the U.S., LA and San Francisco. To me, those would be non-traditional markets for Transat, especially in the summer time.

So maybe you can talk a little bit about why those route, we look to the future route additions. I mean, what kind of markets are you looking for?

What kind of characteristics are you looking for as far as new route additions, especially on some of the U.S. Transborder stuff.

What we're looking at in terms of Transborder are really 2 parts. First, to increase our market share on the market that is very dynamic, which is Florida, so that's the east part.

Besides that, on the East part of the U.S., we don't plan to deploy our own capacity. We plan to develop the Eastern part of the U.S., but it will be done through alliances.

As for the Western part of the U.S., which is very important for us because there's clear opportunities, in terms of offer and demand, demand that is not being served, so we've conducted all analysis, and there's definitely a space for us to [Indiscernible] between -- especially between Montreal and destinations such as San Francisco, Los Angeles, Phoenix, Seattle. This is a market that we are looking at right now, there's not that much competition right now, and we believe, with the A321neo Long Range, that we're going to be able to deploy a lot of frequency on these markets and be able to catch our revenues and be profitable in those markets.

So we're starting next summer gently, with 2 destinations, but eventually, in the years to come, we will grow, especially -- on our own, with our own network to the western part of the U.S.

Okay. No, that's very helpful.

That's all I had for the questions. So thanks very much.

You're welcome.

Thanks, everyone. And let me just remind you that our first quarter results will be released on March the 10th, 2022.

And with that, let me wish you a nice day and a wonderful holiday season.