Stock price does not reflect much better Q1 resultsTRZ continues to trade a significant discount to its fair value. Adding to this mix, management has been triggering their stock options over the past few weeks and dumping into a light holiday market(see Sedi.ca and the Dec15-29 period for the details) after releasing year-end results.
Growth Transat has stated that their capacity is up by 8% in the Sun and 20% in Transatlantic. Most of Canada has been taken over by a deep freeze adding to a favourable economy and positive industry trends, which further increases sales, especially to the sun markets.
This is the opposite of last year when Transat constrained their capacity;
The Corporation posted revenues of $689.3 million, compared with $725.7 million in 2016. The decrease of $36.4 million (5.0%) stems primarily from a decline of 3.5% in the number of passengers on the Sun destinations market (the main market for this period), due to the Corporation's decision to reduce its product supply on that market by 5.2% in the first quarter. The decrease also resulted from the higher proportion of flights sold without a land portion versus all-inclusive packages compared with 2016. On the transatlantic market, product supply increased by 10.1%, which resulted in an increase of 4.4% in the number of travellers. Average selling prices were higher on the Sun destinations market, and lower on the transatlantic market.
Exchange Rate The rates so far are very positive for TRZ. Here are the rates.
US-CAD average Nov-Dec 2017 $1.2770, Close Dec 29 $1.2545
US-CAD average Nov-Dec 2016 $1.3427, Close Dec 30 $1.3389
Last year the exchange impact accounted for about a third of the operating loss.
This result stemmed from the combined effect of fluctuations in the value of the Canadian dollar compared to the U.S. currency and in fuel prices, which resulted in an increase in operating costs of $18.3 million during the quarter Adding to the mix this year, TRZ is holding $150 million US from the sale of Ocean and continues to hedge against currency fluctuations.
Fuel Prices According to IATA fuel prices are up 20.4% from last year.
https://www.iata.org/publications/economics/fuel-monitor/Pages/index.aspx
Last year aircraft fuel was $64 million CAD. In US $ that is about $48 million. Taking into account the increase offset by the lower exchange rate, for the same amount of fuel, costs are $10 million higher. It should be noted that similar to the currency, TRZ hedges its fuel prices.
One-Time Differences With Ocean Hotels now sold, there will be a reduction of $3.6 million in profits compared to last year.
On the other hand, Jonview loses about $4 million in the winter. Further, they will be able to record a gain on the sale of about $29 million in the quarter, pre-tax.