Transat AT Inc Q1 2020 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : So first of all, on the IFRS 16 impact. Just wanted to make sure I see the numbers correctly. So I see your net debt number declined by $53 million as of October 31, 2019. Is that the correct assessment?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Sure. Yes. Absolutely. Yes. Okay. And then secondly, you mentioned the reserve cash for future bookings that you still have to deliver. Can you remind us what that number is on the reserve cash? And can that change or can that come down as bookings are canceled or fewer bookings are made?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Yes, I think you mentioned some restricted cash or reserved cash, right, of $400 million or something.

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : I see. Okay. So that $682 million is free cash, like it's not earmarked for something. I mean you can use it for CapEx and you can use it for other kind of investments. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 12, 2020 / 6:30PM, TRZ.TO - Q1 2020 Transat AT Inc Earnings Call

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Yes. Okay. That makes sense.

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. Okay. And then on the Air Canada transaction, I just wanted to confirm one thing. So I think the original terms -- when the bid price or the offer price was $13 per share, the terms in those agreements were if there's any material adverse effect that happens, then the purchaser, or Air Canada, in that case, or you guys, Transat, can cancel the deal or terminate the deal or change the deal. So I think the definition for the material adverse effect is pretty wide and there's a lot of things like virus outbreaks, share price changes and those things. So we are seeing some of those events here where coronavirus has happened, and your stock price plus Air Canada's share price has also collapsed significantly. Does that allow or does that enable the transaction to go into renegotiation again? Or how do you think about that in terms of the impact on the transaction?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. It makes sense. And any thoughts on -- as Air Canada continues to do their due diligence and, obviously, there might be some impact you might see from weakness in Europe and transatlantic, is there any sense on your covenants or your kind of balance sheet, which might be part of a discussion with Air Canada in the next couple of months because of these changes?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay, that makes sense. And is it -- do you think the process is happening on time? Are there any delays because of the economic outlook changing and Competition Bureau or Transport Canada are not able to kind of work on the deal as fast as you expected? Or do you think it's going ahead okay?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. And lastly for me, can you quantify your exposure to Italy in terms of how much capacity typically goes through Italy in the summer months?

Question: Cameron Doerksen - National Bank Financial, Inc., Research Division - Analyst : You sort of partially answered my question, I guess, earlier, but I just wondered about your ability to ground aircraft with relatively limited expenses. I think you mentioned that the 4 A330s that maybe are on some more favorable lease terms. Is that really the kind of the extent of it? Or are there some other aircraft out there that have some favorable lease terms that you can park and not have significant costs associated with those?