Transat A.T. (TSE:TRZ) reported improved full-year operating and financial results for fiscal 2025, citing disciplined capacity management, cost controls, and early benefits from its Elevation optimization program, even as the company continued to manage disruptions tied to Pratt & Whitney engine issues.
Fiscal 2025 performance and key themes
President and CEO Annick Guérard said Transat “significantly improved its operating and financial results” in fiscal 2025 while strengthening the foundation of its long-term strategy. Revenue rose 3.5% year-over-year to CAD 3.4 billion, which management attributed to capacity discipline in a volatile economic environment.
Management also addressed labor negotiations, noting Transat reached a tentative agreement with its pilots’ union the prior week. Guérard said the agreement reduced the risk of a strike during the holiday season and will be submitted for ratification.
Fourth quarter results reflect timing of compensation and provisions
For the fourth quarter ended Oct. 31, 2025, total revenue declined 2.2% to CAD 772 million. Management said the year-over-year decrease was primarily due to the timing of Pratt & Whitney compensation: in the prior year, a “significant amount” was received at year-end, while in fiscal 2025 payments were distributed through the year. CFO Jean-François Pruneau said the quarter included CAD 28 million less compensation revenue than the prior-year period, though full-year compensation totaled CAD 32.4 million and was “relatively stable” versus 2024.
Excluding that financial compensation, revenue rose 1.5% in the quarter, which management attributed to higher yields. Transat’s adjusted EBITDA for the quarter was CAD 71 million, down from CAD 128 million a year earlier. Pruneau said the decline reflected lower Pratt & Whitney compensation in the quarter as well as higher-than-expected operating expenses driven largely by unfavorable changes in accounting provisions.
Pruneau said fourth-quarter results were affected by “unfavorable provisions totaling approximately more than CAD 15 million,” including about CAD 10 million related to compliance costs for carbon credits scheduled for payment in 2028, which flowed through fuel expense. Net loss for the quarter was CAD 12 million, or CAD 0.31 per share, compared with net income of CAD 41 million, or CAD 1.05 per share, in the prior-year quarter. Adjusted net loss was CAD 19 million, or CAD 0.42 per share, versus adjusted net income of CAD 32 million, or CAD 0.81 per share, a year earlier.
On provisions, Pruneau told analysts the CORSIA-related carbon offset provision can be volatile due to complex calculations and movements in the market value of carbon credits. He noted Transat’s carbon offset obligation for 2024 was approximately CAD 1.5 million, but the company increased the provision by more than CAD 10 million in 2025. He also described other non-recurring items, including a roughly CAD 2 million provision tied to a vendor default and a long-standing Italian sales tax litigation dating back to 2006 or 2007, for which the company booked a provision after receiving information indicating it was not in a favorable position for settlement.
Operating metrics, fleet, and Pratt & Whitney disruptions
Transat said capacity, measured in available seat miles, decreased 1.8% in the fourth quarter and increased 0.8% for the full year. Load factor was 87% in the quarter and 84.6% for the year, described as relatively stable versus fiscal 2024. Yield increased 2.6% in the quarter and 2.3% for the year.
Guérard said the company is entering fiscal 2026 with 43 aircraft. The number of aircraft grounded due to Pratt & Whitney engine issues fluctuated between six and eight during fiscal 2025, improved toward year-end, and finished the fourth quarter with five grounded aircraft. Management expects the situation to continue improving, with three to five grounded aircraft projected during 2026 and full resolution anticipated by the end of 2027 or early 2028.
Network expansion and partnerships
Management described network development as central to its profitable growth strategy, targeting routes with low seasonality and strong visiting-friends-and-relatives demand. The company announced a new weekly nonstop route between Toronto and Tirana, Albania, starting June 18, 2026, which Guérard said would make Transat the first North American carrier to offer direct service to Tirana.
Transat also pointed to new and expanded routes and partnerships, including:
- New destinations in West Africa, including Accra (Ghana), Agadir (Morocco), and Dakar (Senegal).
- An interline agreement with Turkish Airlines that came into effect the prior month, aimed at enhancing connectivity between Canada and Turkey and onward connections to Asia and the Middle East.
- An interline partnership with GOL Airlines ahead of planned Rio de Janeiro service in February, intended to provide connections within Brazil and South America.
- New seasonal service to Reykjavik from Montreal (mid-June to late September) twice weekly.
- Increased frequency from Montreal to Valencia, Spain, and additional frequencies from Toronto to several destinations.
- Exclusive transatlantic routes between Quebec City and Marseille, and between Ottawa and London Gatwick.
2026 outlook: capacity growth, Elevation program ramp, and lower interest expense
Looking to fiscal 2026, Guérard said demand for leisure travel remains solid, particularly for “South” destinations, and referenced a continued shift away from U.S. leisure markets toward the Caribbean and Mexico—areas where Transat has a strong presence. Management said fewer grounded aircraft and network optimization should support capacity increases of approximately 5% to 7% for the winter season and 6% to 8% for all of 2026.
Guérard said the Elevation Program is now embedded in day-to-day operations and is expected to reach full potential through permanent cost reductions and continued refinement of revenue management. In analyst Q&A, management reiterated the program’s target of generating CAD 100 million of additional EBITDA by mid-2026, adding that Transat is “on track” and is “probably” about halfway to the objective. Management characterized the initiative’s mix as approximately 60% cost actions and 40% revenue management improvements. CFO Pruneau also said some one-time implementation costs—such as consulting support and systems and AI tools—have been incurred and are expected to be non-recurring.
On early booking trends, Guérard said Transat delivered an 11% increase in bookings versus last year during Black Friday and Cyber Monday, calling it a record for that period. She also said the early-December strike threat created uncertainty but that the impact on first-quarter results is expected to be limited, noting bookings picked up after the issue was resolved. At the time of the call, the company said winter 2026 yields were up 1.4% year-over-year, while load factor was 0.8 percentage points lower, driven mainly by second-quarter dynamics, with potential improvement as the season progresses.
Pruneau said Transat expects reduced interest expense in 2026 following Government debt refinancing. He reported cash and cash equivalents of CAD 165 million at Oct. 31, 2025, down from CAD 260 million a year earlier, and said the company repaid CAD 41 million in debt under its Government refinancing agreement. Long-term debt and deferred Government grants were CAD 400 million at year-end, down from CAD 803 million a year earlier. Free cash flow for fiscal 2025 was negative CAD 45 million, improved from negative CAD 122 million in fiscal 2024, and Pruneau said the company anticipates free cash flow turning positive in 2026. In Q&A, he said 2026 capital expenditures should be “relatively stable” compared to 2025 and suggested free cash flow improvement is expected to be driven primarily by higher EBITDA, while working capital movements should continue to reflect normal seasonality.
Transat said it plans to release first-quarter fiscal 2026 results on March 10.
About Transat A.T. (TSE:TRZ)
Transat A.T. Inc is a Canadian company that specializes in the organization, marketing, and distribution of holiday travel in the tourism industry. The company offers vacation packages, hotel stays, and air travel under the Transat and Air Transat brands. The company’s core business consists of tour operators based in Canada that are vertically integrated with its other services of air transportation, distribution through a dynamic travel agency network, value-added services at travel destinations, and accommodations.
