Pierre Karl Péladeau, shown giving remarks at Quebecor's annual meeting in May last year, had called for board changes at Transat after criticizing its performance.Christopher Katsarov/The Canadian Press
Quebecor Inc. chief executive officer Pierre Karl Péladeau lost his bid to take control of the board of Transat AT Inc. TRZ-T at the airline operator’s annual meeting on Tuesday.
Mr. Péladeau, who controls 9.5 per cent of Transat through Financière Outremont Inc., nominated three directors to the board, including himself, and proposed cutting the number of directors to six. Mr. Péladeau has said he is unhappy with the company’s operational and financial performance.
However, Transat said preliminary ballot results showed shareholders rejected Mr. Péladeau’s nominees and his plan to reduce the size of the board. Results were to be made final later on Tuesday.
Shareholders approved the board’s eight nominees, including Transat chief executive officer Annick Guérard.
The board had the support of major shareholders Fonds de solidarité des travailleurs et travailleuses du Québec and La Caisse de dépôt et placement du Québec, which own 16 per cent of Transat’s shares. The company’s slate was also recommended by two major proxy advisory firms, ISS and Glass Lewis.
Transat operates tours to resort destinations in the Caribbean and Europe, and has a fleet of 43 Airbus planes. The company’s stock price fell about 1 per cent on the Toronto Stock Exchange on Tuesday. Shares have risen by 40 per cent in the past 12 months.
Mr. Péladeau’s defeated nominees were André Brosseau, vice-chair of Quebecor; and Jean-Marc Léger, founder of market research company Leger.
Susan Kudzman, the outgoing chair of the board of directors, said she welcomed the involvement of shareholders who are dissatisfied with the company’s direction but said the “cost and distraction” of the proxy fight were a burden for the company.
Mr. Péladeau is also unhappy with Transat’s move last year to renegotiate its $762-million bailout debt owed to taxpayers in a deal that gave Ottawa a 20-per-cent ownership stake.
The company campaigned against Mr. Péladeau’s claims, saying it is on track to improve profitability and reduce its debt.
Ms. Guérard, on a conference call with analysts, said the shareholders’ support provides a clear mandate to push ahead with the airline’s turnaround plan, which includes new destinations and a partnership with Porter Airlines.
Opinion: Why Péladeau is right – this time – about solutions to Transat’s financial woes
Daniel Desjardins, a re-elected independent director, said, “In public markets, proxy contests provide a democratic process for resolving different views. Shareholders are the ultimate decision-makers and the clarity they have provided today will enable governance uncertainty to recede and allow Transat to focus on executing against the expectations of shareholders and the market.”
Still, Transat signalled its financial troubles are not behind it. On Tuesday the company posted a first-quarter loss of $29.5-million or 73 cents a share, compared with a loss of $122.5-million or $3.10 in the same period a year ago. Revenue for the three months ending on Jan. 31 rose by 5 per cent to $871-million.
Traffic, measured by revenue-passenger-miles, rose by 2 per cent in the quarter, and planes were 81.5-per-cent full, compared with 80.6 in the year-earlier quarter.
Transat is facing a steep rise in fuel costs as the war in Iran reduces oil production and chokes off a key shipping lane.
Jean-François Pruneau, Transat’s chief financial officer, said the carrier has a hedging strategy that covers about half of its fuel consumption in the short term. “However, if the situation currently impacting fuel prices should persist, the impact will grow over time unless mitigating measures are implemented,” he said. These measures include fuel surcharges on airfares, and higher ticket prices for some European routes, Ms. Guérard said.
“What we’re also doing is currently raising fares on peak travel dates and routes where we see less competition,” she said.
Transat recently cancelled flights to Cuba amid a fuel shortage caused by a U.S. blockade. The island nation accounts for 10 per cent of Transat’s winter seat capacity. Flights are scheduled to resume on April 30. Transat redeployed the planes to other markets, but will see an impact on financial results, Ms. Guérard said.