Transat AT Inc Q4 2024 Earnings Call Transcript

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

Question: Konark Gupta - Scotiabank GBM - Analyst : Thanks. Good morning, everyone. My first question, I think is for the Pratt & Whitney compensation. I wanted to understand the engines you got as well as the compensation you got the cash, is there anything outstanding from Pratt & Whitney side of things? I mean, are you expecting any more compensation that spending in terms of either cash or engines? And does the compensation received so far, does it conclude on the settlement?

Question: Konark Gupta - Scotiabank GBM - Analyst : Okay. That's great. And you probably don't have a figure right now for the future compensation because it's a moving target maybe.

Question: Konark Gupta - Scotiabank GBM - Analyst : Okay. Great. Thank you. On the balance sheet side, I guess, it seems like you guys are continuing to negotiate maybe with your lenders on the government as well. Any progress update you can share with this at this point in terms of what exactly are you looking for? And when in terms of timing, can we expect some conclusion on the financing?

Question: Kevin Chiang - CIBC Capital Markets - Analyst : Hey, thanks for thanks for taking my question and good morning everybody. Maybe just on customer behavior is my first question, obviously, a big move in the FX rate here. Just wondering if you're seeing any change in traveler behavior just given the weaker Canadian dollar.

Question: Kevin Chiang - CIBC Capital Markets - Analyst : Right. That's obviously positive for yields going forward. Maybe just my second question. And if I look at your partnership with Porter, I think one of the key benefits strategically is it extends both your networks. And I'd say, from Porter's perspective, it gives them access to transatlantic and destination markets that they themselves don't have to fly point to point. I guess how do you balance that partnership and the long-term strategic benefits of effectively extending out your respective networks versus managing your yield and you're going to grow capacity relatively modestly this year. Just I guess, how do you balance that? Because I suspect your partner, and correct me if I'm wrong, would prefer if you flew to more places, it gives their customers options as they move on from Porter to Transat, but you're also trying to manage your capacity relative to the yield environment today.

Question: Kevin Chiang - CIBC Capital Markets - Analyst : Okay. That's very helpful. And maybe just my last question and a follow-up to Konark's question around, I guess, as you look to create the capital structure that you think is more optimal for Transat. I appreciate things are fluid and you can't give me a specific time. But I guess maybe Jean-Francois, from your perspective, a lot of this debt starts becoming current as we get through 2025 and the unsecured one specific, I think, goes current -- I guess, when we get to April of next year. Like would your preference be for there to be a solution this long-term debt shows up as a current liability. Would that be a preference? Or does that not matter to you guys?

Question: Kevin Chiang - CIBC Capital Markets - Analyst : Yeah. That makes sense. All the best as you execute against this and happy holidays, everybody.

Question: Cameron Doerksen - National Bank Financial - Analyst : Yeah. Thanks. Good morning. I just wanted to follow up on the engine compensation question from earlier. And I'm just wondering if the compensation you received so far, I guess, which covered 2023 and 2024, actually reflects the costs that you incurred? I guess the question maybe is what is -- obviously, you took kind of two years' worth of compensation in fiscal 2024. So I'm just wondering what the actual costs might have been in 2024 for you so we can get a gauge of what the underlying margin would have been.

Question: Cameron Doerksen - National Bank Financial - Analyst : Okay. No. That's helpful. But do you have, I guess, maybe with that in mind, a rough number of what you think the EBITDA margin might have been in 2024 had you not had these aircraft on the ground. Is that something you can calculate?

Question: Cameron Doerksen - National Bank Financial - Analyst : Okay. Fair enough. Just a second question on the Elevation program. You've highlighted that 40% of the $100 million going to be coming from revenue initiatives. I just wonder if you can just walk us through what the biggest drivers of the revenue enhancements are going to be? And you provide a little bit of information in the prepared remarks. But if you could just maybe reveal a little more detail what the biggest components of that 40% coming from the revenue.

Question: Cameron Doerksen - National Bank Financial - Analyst : Okay. No, that's really great detail. Within the 40%, is there anything, I guess, for growth with the Porter relationship in that? Or is that something separate from the revenue enhancements from the Elevation program?

Question: Michael Kypreos - Desjardins Capital Markets - Analyst : Thanks, and good morning. Taking into consideration all those improvements you just mentioned on the revenue side as well as a more disciplined industry and a positive indicator in the first quarter that your yield is positive, do you expect yields for the year in 2025 to be positive or more towards flat?

Question: Michael Kypreos - Desjardins Capital Markets - Analyst : Perfect. That's helpful. And maybe just on the CapEx, I know 2024 was a heavy year in terms of maintenance of your fleet. Should we expect something less in 2025 similar in your same ballpark?

Question: Tim James - TD Cowen - Analyst : Thank you very much. Good morning. I just had one question actually. Thinking about your initiative to come up with the optimal capital structure, is that dependent to dollar or is there any consideration around what's the optimal strategy and the optimal operating structure for the company. I'm just wondering if -- obviously, your capital structure in part determines or enables the business strategy. Is the business strategy and the operating plan fixed at this point? This is really just a question around capital structure, or it could be those other parts of the business be altered or tweaked or adjusted depending on where you land in terms of the capital structure.

Question: Tim James - TD Cowen - Analyst : No. That's everything for me. Thank you.