An Air Transat aircraft stands at the gate of Berlin Brandenburg Airport in Germany. Montreal-based Transat A.T. has received $483.7-million in emergency grants and loans from Ottawa.Fabian Sommer/Reuters
Airline operator Transat A.T. Inc. TRZ-T fell to a loss in the third quarter and borrowed more money from the federal government, as the Montreal-based company faced soaring fuel costs amid the war in Iran.
The operator of Air Transat lost $106.6-million, or $2.60 a share, for three months ending on July 31, compared with a profit of $399.8-million ($9.97 a share) in the same period a year ago. Revenue rose by 3 per cent to $792.7-million, Transat reported before markets opened on Thursday.
Fuel was by far the greatest expense for Transat in the third quarter, totalling $238-million compared with $159-million in the same period of 2025. Fuel costs helped drive up operating expenses by 15.4 per cent to $114-million.
To stay afloat, Transat said it borrowed an additional $250-million from the Canada Enterprise Emergency Fund, which was established in the pandemic. This is on top of the $150-million Transat recently borrowed from a separate federal fund established to help airlines that are struggling with high fuel costs.
Transat also said it received a government grant of $25.3-million from that same fuel bailout fund.
Transat’s fuel costs surge by more than $100 million
All together, Transat said its credit agreements with the government total $483.7-million. Total debt is $1.75-billion, while cash and equivalents are $243,000.
On a conference call with analysts on Thursday, Annick Guérard, chief executive officer of Transat, said the high fuel costs and the loss of Cuba as a destination outweighed strong demand for air travel. Intense competition meant Air Transat was able to raise fares by just 4.8 per cent in the quarter – not enough to offset the 50-per-cent rise in fuel expenses, she said.
“When we introduced the fuel surcharges, demand went down,” Ms. Guérard said. “The whole market – the Canadian market, competitors, everybody – started to launch promotions, and it never ended.”
“We’ve never seen such a highly competitive network,” she said, “which prevented ourselves from passing on the increase in fuel on to the customers.”
Transat said in August that the impact of higher fuel prices has cost it about $175-million since the Strait of Hormuz was closed. Transat lost $116-million in revenue this year when it suspended flights to Cuba after the United States tightened its blockade.
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Financial results were also weighed down by higher salary costs under a new pilots’ collective agreement, unscheduled plane maintenance and the grounding of four aircraft – one more than expected – because of an ongoing engine recall by Pratt and Whitney.
“These events required aircraft substitutions, schedule adjustments and crew reassignments, contributing to higher overtime and other related costs,” said Jean-François Pruneau, Transat’s chief financial officer.
Prices for jet fuel have doubled since late February, when the U.S. and Israel began bombing Iran. Iran then largely closed the Strait of Hormuz, an important waterway for oil and aviation fuel.
Mr. Pruneau said the government aid should be enough to help the airline operate with such high fuel costs, “but you know that situation obviously is dynamic, is volatile, and I don’t know precisely where fuel prices will be in one month, in two months, or a year from now.”
John Gradek, who teaches aviation leadership at McGill University, said the new bailout signals the government is unwilling to let Transat fail.
“Ottawa wants to keep these guys around,” Mr. Gradek said. “I think they want competition. If Transat goes, you’re losing a major competitor in Canada and that furthers solidifies the duopoly” of Air Canada and WestJet Airlines.
National Bank of Canada analyst Cameron Doerksen said the new government funding alleviates the airline’s short-term liquidity concerns. But he said he is surprised the airline has been unable to pass along the higher fuel costs to customers, something Air Canada and some global carriers have largely been able to do.
“Unless fuel prices fall significantly or Transat can find a way to increase fares materially, the company will continue to incur losses,” he said.