Transat A.T. Inc. · TSX:TRZ
Transat A.T — Investor Presentation (September 2015)
38 slides from Transat A.T's investor presentation, September 2015
Slide 1: Once Again, a Very Satisfying First Half for the Summer
ONCE AGAIN, A VERY SATISFYING FIRST HALF FOR THE SUMMER Investors Presentation September 2015
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE CORPORATION. THESE FORWARD-LOOKING STATEMENTS, BY THEIR NATURE, NECESSARILY INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE
Slide 3: Agenda
AGENDA 1. TRANSAT MARKETS 4 2. KEY FINANCIAL INFORMATION a) SUMMER 2015 5 b) WINTER 2016 11 3. FINANCIAL POSITION 14 4. INVESTMENT PROPOSITION 16 5. ANNEX a) FINANCIAL MARKET HIGHLIGHTS 17 b) HISTORICAL FINANCIAL RESULTS 21 c) STRATEGIC PLAN INITIATIVES 27 3
Slide 4: Distinct Winter and Summer Markets
DISTINCT WINTER AND SUMMER MARKETS 20% 10% 80% November 60% May to October to April 10% 20% South & Ocean Hotels France Transatlantic 4
Slide 5: Key Financial Information – Summer
KEY FINANCIAL INFORMATION – SUMMER 16 5
Slide 6: Transatlantic Market
TRANSATLANTIC MARKET (TRANSAT ROUTES, SUMMER 2015) Netherlands Total sales: 46 % 54 40% European passengers 830,000 seats Ireland Czech Republic France and UK: Belgium 50% of passengers UK Hungary 40 40% of sales % Switzerland In foreign currency 60 55 France % 45 Italy Greece Sales in Spain Canada
Slide 7: Transatlantic Market: Capacity and Market Share
TRANSATLANTIC MARKET CAPACITY AND MARKET SHARE (TRANSAT MARKETS) 1,800,000 +16% Market share – Summer 2014 (Actual) Transatlantic routes, 1,600,000 Summer 2015 (Forecast) TOTAL SEATS Summer 2015 1,400,000 SUMMER 2014 10 1,200,000 3,770,000 7 1,000,000 7 42 800,000 +1% % +7% TOTAL SEATS 14 600,000 -1
Slide 8: Key Financial Information – Summer: Third Quarter Results
KEY FINANCIAL INFORMATION – SUMMER THIRD QUARTER RESULTS 2015 HIGHLIGHTS (vs. 2014) 3RD quarter ended July 31 (in thousands of C$) 2015 2014 2015 vs. 2014 Global results similar due to : • Despite global capacity increase, we improved our margin on Actual Actual $ % transatlantic routes (lion’s shar
Slide 9: Currencies & Fuel Impact on Costs
KEY FINANCIAL INFORMATION – SUMMER CURRENCIES & FUEL IMPACT ON COSTS (2015 VS. 2014) Transatlantic (per passenger) Q3 Q4 Summer Average selling price 2014 (1) $870 $930 $900 % Fuel expense 31% 29% 30% % Other expenses in foreign currencies 24% 26% 25% 2015 average USD / EUR / GBP USD / EUR / GBP USD
Slide 10: Impact on Adjusted EBITDA and Q4 Outlook
KEY FINANCIAL INFORMATION – SUMMER IMPACT ON ADJUSTED EBITDA INCL. OCEAN HOTELS (AS OF SEPT. 10, 2015) Q4 OUTLOOK (vs. 2014) Q3 Q4 Summer Slightly lower global results: • Similar margin on transatlantic routes despite global capacity increase Adj. EBITDA 2014 incl. hotels 48M 76M 124M • Lower margin
Slide 11: Key Financial Information – Winter
KEY FINANCIAL INFORMATION – WINTER 11
Slide 12: Sun Destinations Market: Capacity and Market Share
SUN DESTINATIONS MARKET CAPACITY AND MARKET SHARE (TRANSAT MARKETS) 1,400,000 Market share – +1% Winter 2015 (Actual) Sun destinations, Winter 2016 (Forecast) 1,200,000 TOTAL SEATS Winter 2016 +8% WINTER 2015 1,000,000 4 +3% 3,990,000 18 25 800,000 +12% 600,000 % TOTAL SEATS 22 400,000 -44% WINTER 2
Slide 13: Winter Results 2016
KEY FINANCIAL INFORMATION – WINTER WINTER RESULTS 2016 (AS OF SEPTEMBER 10, 2015) Winter season ended April 30 Perspectives and (in thousands of C$) 2016 2015 2014 Avg. 2011-2015 Initiatives Outlook Actual Actual Actual • 20% of inventory sold REVENUES 1,807,079 1,965,841 1,927,689 • More flexible f
Slide 14: Financial Position
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Slide 15: Financial Position as of July 31, 2015
FINANCIAL POSITION AS OF JULY 31, 2015 As at HIGHLIGHTS Jul. 31, July. 31, Free Cash: + $18M vs. July 2014 (in thousands of C$, except ratios) 2015 2014 2015 vs. 2014 • Results of the last 12 months, working cap, net of Capex Actual Actual $ % • ABCP tax assessments ($18M) Free cash 515,552 497,072
Slide 16: Transat: The Global Investment Proposition
TRANSAT: THE GLOBAL INVESTMENT PROPOSITION • SUMMER: TRANSATLANTIC MARKET • Lowest-cost producer with strong brand and award-winning service • Invested in our fleet to improve customer experience and expanded our offering through connecting flights strategy (new destinations) • Solid distribution ne
Slide 17: Annex – Financial Market Highlights
ANNEX – FINANCIAL MARKET HIGHLIGHTS 17
Slide 18: Annex: USD/CAD Spot Rate
ANNEX: USD/CAD SPOT RATE THIRD QUARTER 2015 Resistance 1,34 1.34 Winter 2015-16 1.32 hedging program start 1.30 USD/CAD spot rate : 1.12 1.28 1.26 Winter 2014-15 Summer 2015 hedging program start hedging program start 1.24 USD/CAD spot rate : 1.04 USD/CAD spot rate : 1.08 1.22 1.20 1.18 1.16 1.14 1.
Slide 19: Annex: Jet Fuel Market Price (in USD)
ANNEX: JET FUEL MARKET PRICE (IN USD) THIRD QUARTER 2015 3.50 Between November 2012 to September 2014 3.25 Jet Fuel price : $US 2.75-3.00 Winter 2015-16 hedging program start 3.00 Jet Fuel price: $US 2.40 2.75 2.50 Support $US 1.25 $US / gallon 2.25 Winter 2014-15 Summer 2015 hedging program start h
Slide 20: Annex: Jet Fuel Market Price (in CAD)
ANNEX: JET FUEL MARKET PRICE (IN CAD) THIRD QUARTER 2015 Between November 2012 to 3.50 September 2014 Jet Fuel price : $CA 2.75-3.25 Winter 2015-16 hedging program start 3.25 Jet Fuel price: $CA 2.75 3.00 2.75 Support $CA 1.65 $CA / gallon 2.50 Winter 2014-15 Summer 2015 hedging program start hedgin
Slide 21: Annex – Historical Financial Results
ANNEX – HISTORICAL FINANCIAL RESULTS 21
Slide 22: Annex: Winter Financial Results
ANNEX: WINTER FINANCIAL RESULTS (5-YEAR HISTORICAL) Winter Avg. 2004- (in thousands of CAD) 2015 2014 2013 2012 2011 2008 REVENUES 1,807,079 1,965,842 1,912,538 2,041,722 1,911,263 1,482,107 EBITDAR incl. hotels JV(1) 15,494 15,135 26,312 (14,255) 21,238 112,871 EBITDA incl. hotels JV(1) (32,357) (2
Slide 23: Annex: Summer Financial Results
ANNEX: SUMMER FINANCIAL RESULTS (5-YEAR HISTORICAL) Summer Avg. 2009- (in thousands of CAD) 2014 2013 2012 2011 2010 2014 REVENUES 1,786,357 1,735,620 1,672,497 1,742,904 1,645,929 1,687,053 EBITDAR incl. hotels JV(1) 172,023 175,280 123,066 81,465 154,310 132,144 EBITDA incl. hotels JV(1) 123,817 1
Slide 24: Annex: Annual Financial Results
ANNEX: ANNUAL FINANCIAL RESULTS (5-YEAR HISTORICAL) Annual Avg. 2004- (in thousands of CAD) 2014 2013 2012 2011 2010 2014 REVENUES 3,752,198 3,648,158 3,714,219 3,654,167 3,498,877 3,230,889 EBITDAR incl. hotels JV(1) 187,158 201,592 108,811 102,703 180,041 169,190 EBITDA incl. hotels JV(1) 99,929 1
Slide 25: Annex: Winter Financial Position
ANNEX: WINTER FINANCIAL POSITION (5-YEAR HISTORICAL) As at January 31 As at April 30 (in thousands of CAD) 2015 2014 2013 2012 2011 2015 2014 2013 2012 2011 Free cash + ABCP investment (fair value) 393,631 359,596 247,877 291,234 274,009 441,536 404,554 336,148 349,457 356,430 Cash in trust or other
Slide 26: Annex: Summer Financial Position
ANNEX: SUMMER FINANCIAL POSITION (5-YEAR HISTORICAL) As at July 31 As at October 31 (in thousands of CAD) 2015 2014 2013 2012 2011 2014 2013 2012 2011 2010 Free cash + ABCP investment (fair value) 515,552 497,072 389,337 318,692 385,777 308,887 265,818 198,525 260,327 252,973 Cash in trust or otherw
Slide 27: Annex – Strategic Plan Initiatives
ANNEX – STRATEGIC PLAN INITIATIVES 27
Slide 28: 2015-2017 Strategic Plan
2015-2017 STRATEGIC PLAN $100-million cost reduction and margin improvement program Improvement of the offering Evolution of our distribution strategy and ecosystem Market development and integration 28
Slide 29: Recap of the 2012-2014 Cost Reduction Plan
RECAP OF THE 2012-2014 COST REDUCTION PLAN (In millions of dollars) 2012: Achieved targeted costs reduction of $20M, mainly through headcount adjustments and general expenses. 55 2013: Achieved targeted costs reduction of $15M, stemming in part from new operational processes at Air Transat, includin
Slide 30: Cost and Margins Initiatives 2015-2017
COST AND MARGINS INITIATIVES 2015-2017 (In millions of dollars) 2015 2016 2017 100 COST REDUCTIONS (in millions) Narrow-body flexible fleet 18 20 20 Reduction in the number of flight attendants 2 5 6 75 Buy-on-Board (sun destinations) 3 3 3 Optimization of hotel costs (sun destinations) 2 9 12 Optim
Slide 31: Fleet Strategy
FLEET STRATEGY AIR TRANSAT PROJECTED FLEET BY SEASON WIDE-BODY W15 S15 W16 S16 W17 S17 Air Transat Base Fleet 21 21 21 21 21 21 Less:Temporarily withdrawn(1) (6) - (6) - (6) - Less:Sub-Lease (1) - (3) - (3) - Total 14 21 12 21 12 21 1) Thanks to improved leasing terms, three A330s are withdrawn from
Slide 32: Connecting Flights Strategy
CONNECTING FLIGHTS STRATEGY Expansion of destinations offered in Toronto, Montreal, Vancouver and Quebec City through connecting flights to our Toronto or Montreal hubs, synchronized with a wide range of European destinations with return direct or open jaw 32
Slide 33: Densification of 3 Airbus A330-300
DENSIFICATION OF 3 AIRBUS A330-300 30 additional seats in eco on three A330-300 From 345 to 375 seats No compromise on customer experience (same pitch) Dedicated to London and Paris from Toronto and Montreal on a yearly basis Investment of $2M, expected annual margin of $4.7M 33
Slide 34: Ancillary Revenues
ANCILLARY REVENUES (In millions of dollars) 58 60 55 49 Grow ancillary revenues to $60M by 2017 (on same basis as today) Introduction of the Datalex software to facilitate the sale of optional services New cargo agreement 2014 2015 2016 2017 34
Slide 35: Sun Destinations: Exclusivities and Collections
SUN DESTINATIONS: EXCLUSIVITIES AND COLLECTIONS Strategy of securing rooms and differentiating product through exclusive deals LUXURY Improved collections, in-sync with customer 21 resorts in 2015, 30 in 2017 expectations Grow Ocean Hotels from 2,200 to 5,000 rooms DISTINCTION 27 resorts in 2015, 40
Slide 36: A Renewed Distribution Strategy and Ecosystem
A RENEWED DISTRIBUTION STRATEGY AND ECOSYSTEM Create a fully-integrated distribution ecosystem comprised of a new Transat Travel website, connected to our call centers and travel agencies Make online tools fully responsive to mobile devices Enhance offering with third-party products so as to nurture
Slide 37: Transat Travel
TRANSAT TRAVEL By 2017, we will have migrated our corporate travel agencies under the Transat Travel brand 59 Cumulative number of The brand change comes Transat Travel agencies with a revamping of agencies 34 Results so far are very positive: • More sales 14 • More new customers • More sales of Tra
Slide 38: Thank You
THANK YOU ONCE AGAIN, A VERY SATISFYING FIRST HALF FOR THE SUMMER
Transat A.T. — Investor Presentation (September 2015) on 6ix