AC and TRZ Agree to Terminate Arrangement

[rudder]

================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (foreign language) (Operator Instructions) First question is from Kevin Chiang with CIBC Capital Markets. -------------------------------------------------------------------------------- Kevin Chiang, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Analyst [2] -------------------------------------------------------------------------------- Maybe this one's for Denis. Good job on reducing the fixed costs from $60 million pre-COVID to $10 million to $15 million a month since the shutdown. I guess just wondering a couple of things. One, when you think of your daily cash burn, would it effectively be that $10 million to $15 million you're seeing on a monthly basis plus any CapEx? Or are there other cash outflows we should be considering? And then two, when you look at your, I guess, your unencumbered cash on your balance sheet, what do you think the minimum cash you'd like to keep on the balance sheet in terms of just running the operations? When I look at the $734 million you have -- you had at the end of fiscal Q2. -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [3] -------------------------------------------------------------------------------- As we said, suspension of activities of flights took place on April 1. And lots of measures were put to reduce fixed costs, not to incur more expenses. And like I explained, more disbursement related to those fixed costs to continue. I think we've done everything we could in order to stop that. Now we also have to -- when looking at our cash required for the company, we're -- also have to manage the account payables that were there at the time where we stop our flights and also the deposit from clients. Then very difficult to put in numbers per day that we'll make -- or per week or per month that where we will continue to pay that amount over a period of time because the total of our -- of what will affect our liquidity today is cash flow related to fixed costs, okay? Explain; second, reimbursement to client, if we have to; third, payment to supplier. And with supplier, we have not stopped payment, obviously. We want those suppliers to be in good shape when we will restart. And those one have collaborate with us for many, many years. Then it's also our role to make some payment for it, everyone around us to stay in operation and ready for the restart that Annick was just referring to for the end of July. Then we consider that our cash position is where it should be. Like Jean-Marc said, very happy to have had a solid balance sheet at the beginning. Let's all remember that we have sold assets and participation in different companies a few years ago, and all of that cash, we have -- not been reinvested in hotels and things like that up to now, then solid position to start. Now not a lot of visibility. And because of that -- that's why we are having discussion with bankers and having discussion with government to see if there is a program that could or something that we could put in place that will give us more assurance for the coming months. Then that's -- I will answer your question. -------------------------------------------------------------------------------- Kevin Chiang, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Analyst [4] -------------------------------------------------------------------------------- If I could just ask a clarification on that. I think in the past, and I know these are under more normal circumstances, I think you had indicated that you'd always looked at about $150 million as kind of the minimum cash you needed to run your operations. Just wondering if that's still a good way to think about the amount of cash you would like to hold as you work your way through the recovery here? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [5] -------------------------------------------------------------------------------- Obviously, we would like to have a lot more than $150 million at this point in time because $150 million is when you're having new bookings and when you're having activities and all your assets are fully used, like we were pre-COVID. Now during the COVID period, you need more than that, absolutely. Just looking at the amount of deposit, the amount accounts payable, fixed costs. We like where we are today, and we're very happy to restart the operation slowly in July, but to -- for the operation to be ramped up in the fall then -- and that's why we will not hesitate if through discussion with banks and government, we could add some to this or surely not hesitate. -------------------------------------------------------------------------------- Kevin Chiang, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Analyst [6] -------------------------------------------------------------------------------- My second question, and then I'll jump back into the queue here. The Canadian Government has opened up the large employer, I guess, financing option, so not airline specific. But for, I guess, larger employers, such as yourself, given your pending transaction with Air Canada, are you precluded from applying for the LEEFF program or is that something that you're still evaluating today? -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [7] -------------------------------------------------------------------------------- We are, like we said, we are in discussion with different partners, bankers, government. We are looking at all the programs, we have discussion with everybody. We will bring the cash to the company when it's necessary, we will do everything to continue, and we hope to really to do it with Air Canada. It will be a stronger airline Transat and Air Canada like we said at the beginning, but as we said -- as I said, today, nobody knows what's going to happen tomorrow. Can you tell me when the borders would be opened? Can you tell me the people will travel, will go on the plane? Tell me what's going to happen, and I'm going to tell you what's going to happen from Transat. But for sure, Transat, like they did for the past 42 years, when there was a crisis, as always, a little bit of cash and went through all the crisis because of that and took all the measures to go through crisis like that. And again, in this one, we had a little bit of cash in the bank account, we took all the measure to go through this terrible crisis, and we will take all the measures, we continue, like we did all the time. Nothing new for us. We're used to that, and we will go through. And our employees are supporting us in that crisis. And if you want to ask questions about Air Canada, you should ask Air Canada because me, I cannot answer it for Air Canada, to be clear. I can answer for Transat, so you know the name of the people of Air Canada, you talk to them very often, please ask them the question. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- (foreign language) Our next question from the line of Konark Gupta with Scotiabank. -------------------------------------------------------------------------------- Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [9] -------------------------------------------------------------------------------- So my first question is on the refunds. So the customer deposit liability was down in Q2, obviously, which is kind of seasonal, but I think it was slightly more than what we have seen in the last 2 years. Can you talk about the cash refund trends you would have seen for March, April and May, perhaps? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [10] -------------------------------------------------------------------------------- Like you said, it's really a question of seasonality. When during the -- when the -- when we get to April, essentially, what we have in our deposit for transatlantic normally because that's what we are having as activities during the summer month. What really happen in the deposit from clients since mid-March is that we have not collected, as you could imagine, lots of deposit for future travel. And because we didn't have flight during the period, that means that the amount that we were having in end remains roughly where they are at the time. Then we have issued travel credit voucher for every flight cancel. And that's the position that we are having still today then for flight that have been canceled, automatic credit travel voucher have been issued to all our customer, something to be able to have them on board as soon as possible and restarting the activities on July 23. -------------------------------------------------------------------------------- Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [11] -------------------------------------------------------------------------------- Okay. So just to be clear, Denis, was there any cash refund at all since mid-March? Or everything you refunded was 100% in the form of credits? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [12] -------------------------------------------------------------------------------- I would say essentially in the form of credit, no real reimbursement were made up to now. No significant amount. -------------------------------------------------------------------------------- Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [13] -------------------------------------------------------------------------------- Okay, perfect. And on the fixed cost, I just want to follow-up on Kevin's question. So I think you mentioned the fixed cost is now down -- during the shutdown phase, it's down to like $10 million to $15 million. Can you break it down in terms of what's salaries, what's rent and what's the other portion of that? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [14] -------------------------------------------------------------------------------- No, I'm not in a position to really give you detail for each of those. But I would just say that we have been able to negotiate with less or to postpone payment, not a lot of what remains are 4 aircraft. And obviously, we are maintaining minimum numbers of our employees. We said 85% of our employees were temporary lay off. Then, obviously, remains some of it. And there's also a minimum, so not that we are investing in CapEx, obviously, but there's also some other costs that we are incurring. That's why at the end, cash flow-wise, $10 million to $15 million. That's what we are incurring right now. -------------------------------------------------------------------------------- Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [15] -------------------------------------------------------------------------------- Okay. And is that net of the CEWS subsidy payments as well? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [16] -------------------------------------------------------------------------------- Absolutely. -------------------------------------------------------------------------------- Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [17] -------------------------------------------------------------------------------- Yes, okay. That makes sense. Okay and then last one for me before I get back in queue. So considering that there are no flights until July 22, and you are planning to resume operations with less than 20% of the capacity you had last year in the summer, is it fair to expect that the operating cash flows could be negative in the third quarter? And if that is the case, when do you expect the cash flows to turn positive again? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [18] -------------------------------------------------------------------------------- The (inaudible) of what you said it's to have -- would be a cash flow negative for Q3 because of this operation. The operation is not the level of last year. To get to 20%, the impact will not be so big, but there are some investment to make in order to restart the engine. When cash flow will turn positive, will really depend on when the activities will come at a level where it will be, say, higher than this because it's not with 20% that we could envisage the future. We're all hoping that next winter, more of our plane will be at work, more of our employees will come back, and it's only at that time that we could expect cash flow to be -- to return back to positive. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- (foreign language) Our next question, by Benoit Poirier with Desjardins Securities. -------------------------------------------------------------------------------- Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [20] -------------------------------------------------------------------------------- If we look at the flight that will start back on July 23, could you talk a little bit about the number of seats available, and how it would compare to the numbers that you've seen from the industry so far? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [21] -------------------------------------------------------------------------------- In the way we are looking at this right now, we are around minus 80% of the original program. We are making still some adjustments, and we will adapt as well as we see demand evolve over the next weeks since we've launched -- since we've announced the program today and as well when the borders will reopen. So we expect to be around minus 20%, it could be less than this moving forward. And we are -- as for next winter, we are working on different scenarios as well to ramp up the business and be able to use more of our aircraft and be less negative versus 2019. -------------------------------------------------------------------------------- Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [22] -------------------------------------------------------------------------------- Okay. And in terms of fixed costs, as you restart operation close to July 23, how should we be looking at the fixed costs and also additional costs to deal with the pandemic in terms of extra measures that you're taking into action? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [23] -------------------------------------------------------------------------------- I think a good way to look at fixed cost, it's really to start with what we were having pre-COVID, $60 million that we -- where we have give you the detail for salary, rent and other costs. Obviously, the -- for the employees, it's kind of personal to the activities that we will have. More flights will be added, more people would come back. For the rent, a bit different. We have mostly negotiated deferral up to now. At one point in time, we'll have to pay back those -- the owner of the plane, who is lessor. We're still looking at terminating some of the lease sooner than what we have in the contract, but will depend on the demand and the evolution of COVID over the next few months. For the rest, it's also kind of proportional to the activities, things like marketing, IT. It end up by being -- even if there are fixed costs to being somehow they are related to the level of activities that we will achieve at that (inaudible). -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [24] -------------------------------------------------------------------------------- I would add to that, however, that we are looking at increasing efficiencies internally. And in the way we synchronize the ramp-up of activities, we will make sure that we decrease our fixed cost compared to last year for similar level of activities. So we are looking at that from a people perspective, from product and services perspective as well from different processes, from fleet utilization as well to maximize as much our assets without increasing -- by decreasing our unique (inaudible) versus last year. -------------------------------------------------------------------------------- Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [25] -------------------------------------------------------------------------------- Okay, excellent. And with respect to the Canadian Minister of Transport, could you make an update on when you expect the decision? And also, what gives you confidence about the regulatory approvals? -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [26] -------------------------------------------------------------------------------- Really, to be clear, we don't know. We are, right now, Air Canada and us, discussing with the regulatory authorities, having good discussion. But at the end of the day it's the Minister who are going to take the decision or will bring his decision to the cabinet and the cabinet will take the decision. So in normal circumstances, we were expecting -- answered, I would say, before the politician goes on holidays. So I mean, before the end of the month of June, today, with what's happening, it's same thing, I suppose, for the government, they are very busy. So when the Minister will give his decision, we have really not an ideal. We hope it will come soon, but we don't control at all this part of the decision. It's really the decision of the government. -------------------------------------------------------------------------------- Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [27] -------------------------------------------------------------------------------- Okay, perfect. And last question on the booking activity. Could you provide some color about the booking activity so far? It might be early, but when should we expect to get more color about the booking activity for August, September and October, I think? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [28] -------------------------------------------------------------------------------- Well, it's -- and this is what pushed us as well in terms of assessing demand. We estimated demand through our current working trends. What we're seeing -- what we've been seeing over the last week is that we receive more bookings than cancellations. So that's already positive. And we expect that this trend should be increasing goes in the right direction starting today with confirming firm programs as well as when the announcement of the borders will be made, which we expect in the upcoming weeks. So we are confident that a decent number of consumers will be interested to fly on our aircraft in the upcoming months. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (foreign language) Our next question comes from the line of Tim James with TD Securities. -------------------------------------------------------------------------------- Tim James, TD Securities Equity Research - Research Analyst [30] -------------------------------------------------------------------------------- Denis, I'm just wondering if you could confirm the accounting treatment for the $12.8 million in lease expenses, like the earnings impact and the cash flow impact there? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [31] -------------------------------------------------------------------------------- Could you clarify this, please? -------------------------------------------------------------------------------- Tim James, TD Securities Equity Research - Research Analyst [32] -------------------------------------------------------------------------------- Well, there was -- it was reported $12.8 million, I believe, it was in lease incentives in the second quarter. Those were -- I assume that was sort of cash deferrals of payments. I'm just wondering about sort of the complete accounting treatment for that. Was any of that still expensed in the quarter? And just payables generated? Or how did it impact? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [33] -------------------------------------------------------------------------------- Tim, I don't know if we were clear enough in the way we put that in our MD&A, but it's related to the amount that we are receiving from the government for our employees. And that's the CEWS program. It's not related to -- it's not supposed to be related to our fleet at all. -------------------------------------------------------------------------------- Tim James, TD Securities Equity Research - Research Analyst [34] -------------------------------------------------------------------------------- Oh, I see. So the... -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [35] -------------------------------------------------------------------------------- If it's not clear, maybe I could get back offline, but it's related to deepen the program with the Canadian government. -------------------------------------------------------------------------------- Tim James, TD Securities Equity Research - Research Analyst [36] -------------------------------------------------------------------------------- And that's -- so the Canadian government was providing lease incentives of $12.8 million? -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [37] -------------------------------------------------------------------------------- No, it's not lease -- it's really to cover a portion of our salary. And I'll give you more insight in that. Then we have the 85% of our employees that were temporary lay off, and we have 15% of our employees that are still active in the company. We have booked, in the quarter, only the portion that is related in that number. It's only the portion that is related for employees that were working. We have not booked yet the amount. That has been paid to employees that were not at work, nor the amount that we will receive from the government because it's a (inaudible). It's kind of the same amount. Then the amount that we're showing here on Page 45 of the MD&A is for the portion -- paid -- the amount to be received by the government for employees at work. -------------------------------------------------------------------------------- Tim James, TD Securities Equity Research - Research Analyst [38] -------------------------------------------------------------------------------- Okay. Denis, I apologize. I was looking at actually the second quarter of '19, my mistake. I was looking back at last year's. My next question, the destinations that are all included in your flight plans for -- beginning July 23, do all of those destinations have open borders at this point and no restrictions that could impact your plans? Or do some of those destinations require sort of political change or regulatory change between now and the start of those flights? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [39] -------------------------------------------------------------------------------- Yes. So actually, most of them require political change before we are able to operate our flights. So -- and -- but what we've seen so far over the last weeks is that everything is moving quite rapidly from all of the different destination where we plan to operate. First on the French side, on the U.K., on Portugal. Portugal is open. Portugal is without restriction. Mexico is without restriction as well. So we are looking at the evolution of each of the different measures that are being imposed right now and following this very thoroughly. That being said, we have the right to flight today. Nothing prevents us from flying. But from a customer perspective, we want, of course, passengers to be accepted at borders. And we want passengers as well, not to have to follow restriction as quarantine and which would give them some barriers for traveling. So the first one that we are expecting, of course, and that we are waiting for, impatiently, is Canada. So we expect that, and we hope that Canada will position itself over the next few weeks. And as we see border being released, we will adapt our program. We may do changes. If borders do not reopen, we will have to cancel most of our plan, but we don't believe this will happen. And we have done all cases, worst-case scenarios, so we are ready to make last minute changes if it's required. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- (foreign language) Our next comes from the line of Cameron Doerksen with National Bank Financial. -------------------------------------------------------------------------------- Cameron Doerksen, National Bank Financial, Inc., Research Division - Analyst [41] -------------------------------------------------------------------------------- I just wanted to follow-up on the -- Tim's question there about the travel restrictions. I mean, you mentioned that you're expecting some decision from Canada at some point, I guess this is probably key, but is it your expectation that Canada will eliminate the 14-day quarantine for returning passengers? Because it would seem to me that would be pretty much a nonstarter for most of these flights that people had to quarantine for 14 days once they came back from their trip. -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [42] -------------------------------------------------------------------------------- So at this point, we do not know. We don't know when and how will travel restriction be removed. However, we expect that these decisions will be made in the short future. -------------------------------------------------------------------------------- Cameron Doerksen, National Bank Financial, Inc., Research Division - Analyst [43] -------------------------------------------------------------------------------- Okay. That's helpful. And maybe just a couple of questions for Denis. Just looking at your presentation, just when you're talking about some relaunch costs and you refer to a number there of 2.75% to 3%. And I'm just wondering what that is referring to as far as relaunch costs? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [44] -------------------------------------------------------------------------------- What we put there was just in case we have rebooked cost, cost of credit card and the cost to process transaction. And the objective was to give some detail on what kinds of restart costs the company should have to cope with. -------------------------------------------------------------------------------- Cameron Doerksen, National Bank Financial, Inc., Research Division - Analyst [45] -------------------------------------------------------------------------------- So it's -- what's the 2.75% to 3%? Of what? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [46] -------------------------------------------------------------------------------- Of the revenue. Let's say we have a 2% charge from -- for the credit card. 0.75% related to the cost of booking a transaction, then that was to give you some more infos on. So cost including the restart cost. Obviously, we have to call some of our employees before the first flight, and we have to prepare the pilots. We have to then, it was to give you some more detail on that. -------------------------------------------------------------------------------- Cameron Doerksen, National Bank Financial, Inc., Research Division - Analyst [47] -------------------------------------------------------------------------------- Okay. No, that's helpful. And then just maybe a final thing, just on the lease deferrals, obviously, most airlines are doing this. I'm just wondering what -- and maybe you don't have to give specifics, but what is sort of typical repayment term, so you -- let's say you defer your lease payments for 3 months. I mean, over what period of time do you have to start repaying those deferred -- the lease cash costs? -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [48] -------------------------------------------------------------------------------- I would say it's an ongoing process because we started by approach like everyone. We started by approaching the lessor and say, there is a situation. Obviously, everyone -- every airlines were lining up to have those conversations with the lessor. Then at the beginning, not having a lot of clarity, airlines like us, have asked a little. But the crisis become -- it was become more obvious for everyone that the crisis was to be bigger than it was anticipated at the beginning, then we asked for more. And everyone are following the evolution of this, and we should land at the end with something that is proportionate with the impact of the crisis, then everything restart tomorrow. And I would say, many airlines would have had a deferral of a couple of months, like 3 months, paid over 6 months or a year or something like that. And -- but it's not what we are seeing right now, obviously. Then all airlines are asking for more than this because the crisis is really a huge one. And if airlines and IATA expect that it will take more than a year for the comeback, we could also expect that demand to lessor will be in line with the impact of the crisis because that's the biggest assets that -- fixed assets that airlines are having their fleet. It's really ongoing. Really ongoing. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- (foreign language) The question comes from the line of Mona Nazir from Laurentian Bank Securities. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [50] -------------------------------------------------------------------------------- I appreciate your comments and steps taken in these uncharted times. My first question is just going to your resumption of services in July. Typically, your summer is weighted more towards the transatlantic, and I see that you're planning on flights within Canada, the U.S., South and Europe. So if I'm just looking at the absolute number of flights, is transatlantic still the majority? Or is there greater domestic or even U.S. frequency, particularly given your comments surrounding the phased return to travel? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [51] -------------------------------------------------------------------------------- Yes. The majority of our capacity is on the European routes. We are talking about 14 routes at this point and a little more than 20 frequencies a week. We're going to go up to 30 and maybe more frequencies, whereas the South and the U.S. program is much smaller. We're talking about 9 routes with lower frequencies. And the domestic program is light as well. So the main program is definitely the European program. We're basically going into almost the same proportion of how we operate a summer usually. And this is all based on current and latest booking trends that we've seen over the last weeks. Of course, we will adjust if things changes. But this is how we're starting the return. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [52] -------------------------------------------------------------------------------- Okay. That's very helpful. And then just secondly, in your day-to-day operations and decisions, even involving the drawdown of $50 million and then the resumption of activities, with the Air Canada offer, it's safe to assume that they're involved or at least there are some discussions involving your decision-making to some degree? -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [53] -------------------------------------------------------------------------------- I would say the answer is yes. As per the agreement signed with them. When it's related to things like -- that where we need -- there we need to tell them. But (inaudible) obviously, everything that is commercial, schedule, pricing, all of this, we're all on our own. Transat is doing its things and Air Canada is doing its things. And we're not consulting, obviously, for these kind of subject. And it's according to the agreement in place, and that was signed last year. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [54] -------------------------------------------------------------------------------- And then just lastly for me. I'm just wondering if you could discuss the terms of your early return of some of the aircraft. Is there any penalty? Or if you could just speak about that a little bit more. -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [55] -------------------------------------------------------------------------------- Difficult to say words on this at this point. Obviously, we wanted to have our fleet to be composed, like it was said earlier of Airbus A330 and Airbus A321. Then, we're having discussion with -- ongoing discussion with all our lessor as we speak. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [56] -------------------------------------------------------------------------------- Okay. And the retirement of the A310, was that early? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [57] -------------------------------------------------------------------------------- Yes, it was. Not that much, but yes, it was because they were supposed to serve as backups, the last 2 ones were supposed to serve as backup and operate a couple of legs during summertime. So we decided to retire them earlier when the COVID situation started. So we have no more. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [58] -------------------------------------------------------------------------------- And there was no penalties attached to their early returns? -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [59] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [60] -------------------------------------------------------------------------------- No. We own it. We're selling parts now. -------------------------------------------------------------------------------- Mona Nazir, Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst [61] -------------------------------------------------------------------------------- Oh, yes, you're retiring it, you're right. -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [62] -------------------------------------------------------------------------------- Yes, yes, yes. -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [63] -------------------------------------------------------------------------------- And so those planes are grounded, and we're selling parts of those planes. And we have customers for the parts. So we will get some cash for that. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- (foreign language) We have no more of questions further on the line. Please continue with any closing remarks. -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [65] -------------------------------------------------------------------------------- So thank you, everyone. -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [66] -------------------------------------------------------------------------------- Yes? -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [67] -------------------------------------------------------------------------------- Sorry, I'm with you. Thanks, everyone. Just to remind you that our third quarter results will be released on September 10, 2020. Thanks very much, and have a good day. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- (foreign language) Thank you. That does conclude the conference call for today. We thank you for your participation. You can disconnect your lines. And have a good day, everyone.

[Gilles Hudicourt]

We also -- we are also negotiating anticipated returns of some of our A330s to align our capacity with future reduced demand.

That reduction ? Ok. We ordered some A321LRs and it was always the plan, when they arrived to go down from the current 20 A330s to about 15 If my memory is correct........

[tsgas]

Sadly another $89.1 million was squandered on risky fuel hedges .

[FL320]

So TS will be the only option to go to all these cities in Europe for now; or can we expect to see AC or Rouge landing in Toulouse and al too? Where is the competition; people and the competition bureau might not like it?

[Localizer]

So the gist of it is TRZ is on fairly solid footing, they’ve taken the required steps to conserve cash. It doesn’t appear to me that they’ll disappear if the transaction never materializes. 20-22 million a day vs. 15 million a month .. TRZ can probably hold out longer than AC at this point. To top it off a number of economist are expecting the leisure market to recover the quickest .. I think last weeks stories about AC trying to get out of the deal are bullsh*t.

[FL-280]

I partially agree with that statement. I am impressed of Transat’s flexibility and ability to cut costs, cash burn is much much lower than AC’s even in business proportion. BUT, certain lease payments were deferred to Q3 and operations start again on july 23rd (maybe), so we can expect a harder quarter. 65-80 million $ loss is my guess....
I also agree that with currents cash burns (Q2) AT maybe has a longer time horizon than AC before serious trouble. BUT, multiple factors can change that. Example: AC’s ability to get financing and raise capital is much larger than AT’s at this point and if AT seeks it, it would be a clear breach of the arrangement.

I think AT will be around if there is a transaction or no Transaction. I don’t wish AT folds, but you can’t blame AC pilots for not wanting this merger.

As for the transaction, I don’t think the rumours are bullshit. At a minimum, the price must come down and AT’s book value is in freefall quarter after quarter. 179 million down in Q2. As is stands, 300-500 million is a range that makes sense.... will there be a full bloc? Partial bloc? Will AT’s share holders accept a new negociated price? Will AC just simply walk from the deal and leave it up to AT to fight it out in court....?

I have had a lot of time to reflect, calm down on this emotional topic. Reality is: who knows? Even the exact road this will take, I bet you CR doesnt even know.... he is probably waiting for variables to narrow down or get confirmed to play his hand...

[termerair]

For those of you who understand french, here is an interview of Jean Marc Eustache at "RDI Economie". Fairly positive but could it be really different? All is "good" even in the eye of the storm...

Enjoy!

T.

[Dry Guy]

That plane doesn't have an engine.

[rudder]

JME said everything that you would expect him to say.

He asserted that TRZ will survive the COVID crisis and will survive with or without the AC transaction.

[Gilles Hudicourt]

That plane doesn't have an engine.

It's a retired A310. will never fly again.

[Dry Guy]

Perhaps foreshadowing

[Gilles Hudicourt]

Perhaps foreshadowing

[url=https://flic.kr/p/GzwWmf]

[FL320]

Perhaps foreshadowing

You don’t impress anyone with that kind of comment, it’s just pathetic

[TFTMB heavy]

Perhaps foreshadowing

[url=https://flic.kr/p/GzwWmf]

LOL

[BTD]

No matter the livery, it’s always sad for me to see once great machines being taken apart slowly.

[FL320]

More good news: cargo contract with 2x A330 to china and middle east (and other routes to be announced in the future)

https://cargofacts.com/allposts/busine ... r-transat/

[TFTMB heavy]

More good news: cargo contract with 2x A330 to china and middle east (and other routes to be announced in the future)

https://cargofacts.com/allposts/busine ... r-transat/

Says Far East...

Can you post the whole article?

[FL320]

My mistake; far east.

Post from GTA air cargo:
GTA Air Cargo Set to Launch Passenger Freighters in Cooperation with Air Transat

It is with great pleasure and excitement that I announce that GTA Air Cargo will soon take to the skies using Air Transat A330-200 passenger freighter aircraft. Our two companies have reached an ACMI agreement for two, soon to be reconfigured, Air Transat aircraft that will fly on behalf of the newest GTA Group company, GTA Air Cargo. The first stage will focus on flights from China and other countries in the far east. Phase two will incorporate additional routes and destinations. I want to thank Air Transat for its collaboration on this project and I look forward to seeing these aircraft take to the skies.

[Localizer]

I’d say that’s positive news for the Transat folks .. it also shows TRZ can diversify and adapt their operation to the new horizon.

[Jean-Pierre]

I hear AC 767 are going to Amazon so probably will fly again. Though not in Canada since I doubt they could do it cheaper than Cargo Jet.