AC and TRZ Agree to Terminate Arrangement

[Localizer]

Since privatisation would be the metric, and it would be a huge positive amount for Canada.

Maybe .. maybe not. Canadians could really care less at the end of the day, I see more calls/comments to let airlines go bankrupt .. We’ll see what the drama teacher brings to the table. I wouldn’t hold my breath considering airlines are raising their own money .. our votes aren’t worth buying apparently.

[altiplano]

Since privatisation would be the metric, and it would be a huge positive amount for Canada.

Maybe .. maybe not. Canadians could really care less at the end of the day, I see more calls/comments to let airlines go bankrupt .. We’ll see what the drama teacher brings to the table. I wouldn’t hold my breath considering airlines are raising their own money .. our votes aren’t worth buying apparently.

Not maybe.

The data on the economic contribution to the country from AC is fact. Between 10s of thousands of direct jobs, and tens of thousands of supporting jobs, the high tax and fee structures in this country, the connecting of regions and continents, driving and stimulating business and tourism.

The idea of the government constantly bailing out AC over the years is fallacy, there was a loan that was paid back, and they provided flexibility in the pension crisis which didn't cost anyone anything.

I agree on the rest of what you said though.

[Dry Guy]

Air Canada simply said it was waiting to hear what regulators decide.

How does that become "Air Canada says it's not backing out of Air Transat deal"? They did not say that. It bothers me the media can't report the news accurately or without their own little twist on it.

[Fanblade]

Air Canada simply said it was waiting to hear what regulators decide.

How does that become "Air Canada says it's not backing out of Air Transat deal"? They did not say that. It bothers me the media can't report the news accurately or without their own little twist on it.

I agree.

[Old fella]

Since privatisation would be the metric, and it would be a huge positive amount for Canada.

Maybe .. maybe not. Canadians could really care less at the end of the day, I see more calls/comments to let airlines go bankrupt .. We’ll see what the drama teacher brings to the table. I wouldn’t hold my breath considering airlines are raising their own money .. our votes aren’t worth buying apparently.

Ok... what would The Toole and/or Chopper MacKay or the two social conservatives candidates do should they become PM that our drama teacher PM can’t/won’t. Just asking

[altiplano]

How about act decisively and not link economics to social justice?

[Fanblade]

Ok... what would The Toole and/or Chopper MacKay or the two social conservatives candidates do should they become PM that our drama teacher PM can’t/won’t. Just asking

Someone will eventually have to deal with the economic mess of putting the boot to the neck of Alberta and now Newfoundland. It takes time for the financial contagion to spread. Alberta is still paying into equalization because it is a rolling average. Eventually Alberta will register as have not or at the best middle of the road and the flow of $ to central Canada will stop. Newfoundland will be put back deep into have not status.

It’s not just the deficits our drama teacher is running, he is also reducing revenue at the same time. Eventually someone will have to fix it. That will be a conservative. Once fixed we will vote back in a Liberal and live the high life ignoring the consequences. Then we will elect a conservative again to fix that.

On and on it goes. Spender, fixer, spender, fixer.

Everyone likes the spender. Taking from Peter to pay Paul? Awesome so long as you are Paul. So long as there are more Paul’s the spender rules parliament.

The fixer? Put up with them out of necessity, and only as long as required. Unless of course you are Peter and know what’s next if the fixer gets replaced by the spender.

But not all is lost. There are young people who understand what we are doing to them. What I’m wondering is what they are going to do to us when they eventually have to be the fixer?

http://www.generationscrewed.ca/

[Big Pistons Forever]

Fan

Sorry but the facts just don’t support the old trope of Conservatives fiscally prudent, Liberals spendthrifts

The liberals had to fix the huge deficit run up by Mulroney, and Harper had the deficit up to 55 billion at one point.

Deficits always soar under conservatives because they cut taxes but don’t cut spending. The spending doesn’t get cut because voters by and large like the government programs they get.

No Conservative has shown the intestinal fortitude to make the kinds of cuts required to meaningfully bend the spending curve. Instead they peddle the fantasy that they can cut taxes but maintain spending.

The poster child for bad governance is Alberta. God gave them the pot of gold and 25 years of Conservative government pissed it away.

Norway’s Sovereign oil fund reserve 1.1 Trillion, Alberta’s 9 Billion

[tsgas]

Since privatisation would be the metric, and it would be a huge positive amount for Canada.

Maybe .. maybe not. Canadians could really care less at the end of the day, I see more calls/comments to let airlines go bankrupt .. We’ll see what the drama teacher brings to the table. I wouldn’t hold my breath considering airlines are raising their own money .. our votes aren’t worth buying apparently.

Ok... what would The Toole and/or Chopper MacKay or the two social conservatives candidates do should they become PM that our drama teacher PM can’t/won’t. Just asking

What does your socialist political views have to do with aviation ?

[rudder]

Back to the thread topic.

Most North American airline stocks up 15-40% in the last 3 trading days. TRZ is down.

Investors are placing bets.

[Gilles Hudicourt]

Deleted

[goldeneagle]

Investors are placing bets.

You are confusing momentum traders with investors.

[tsgas]

Investors are placing bets.

You are confusing momentum traders with investors.

Either way , they have to make a financial Investment , in order to buy the shares.

[98 Corolla]

Latest from Air Transat

While the Corporation remains firmly committed to completing the transaction with Air Canada, certain factors beyond its control and related to the COVID-19 pandemic could influence the outcome of the proposed arrangement. The market conditions of the global industry have been completely transformed. Among other things, the vast majority of North American, European and international air carriers have announced reductions in capacity and requested financial assistance measures. This could impact the possibility of reaching an agreement with regulatory authorities regarding an appropriate package of remedies aimed at obtaining the necessary approvals.

[rudder]

Also mentioned in the same corporate statement is the possibility that the corporation may need to add debt (for liquidity?) which would be a breach of the purchase covenant.

[Gilles Hudicourt]

Just before the Air Canada purchase offer, TRZ shares were in the 4.60 to 5.50 range, about what they are today.
In the years prior, Air Canada had invested heavily in creating Rouge, an airline that we all knew had been created to kill Transat. Rouge began competing with Transat on markets Air Canada had never served in its history. Often, when setting off for Europe, we would see a Rouge 767 serving the same destination, the same day of the week and at nearly the same time. The intent was clear. Certain routes were saturated with seats but Transat didn't back off, like they had done in similar situations in the past. Instead, they maintained service.

This went on for several years. Finally out of the blue, came the purchase offer. We didn't see it coming. It was a big surprise. First at $13, then at $18. Those offers were not based on the pre-offer value of TRZ shares, but on what Air Canada was buying: Transat's market share. Transat route structures, slots, aircraft, pilots, mechanics, savoir-faire were only gravy to Air Canada. What they were paying for was Transat's market share. They were getting rid of a big competitor on Europe, a fairly big one on Sun destinations.

Does Air Canada still want to to purchase Transat ? Well the real test is if the reasons that led them to make the offer in 2019 still stand for 2020, 2021, 2022, if the competition that existed before 2020 will still exist in the future. Time will tell.

[Sharklasers]

Just before the Air Canada purchase offer, TRZ shares were in the 4.60 to 5.50 range, about what they are today.
In the years prior, Air Canada had invested heavily in creating Rouge, an airline that we all knew had been created to kill Transat. Rouge began competing with Transat on markets Air Canada had never served in its history. Often, when setting off for Europe, we would see a Rouge 767 service the same destination, the same day of the week and at nearly the same time. The intent was clear. Certain routes were saturated with seats but Transat didn't back off, like they had done in similar situations in the past. Instead, they maintained service.

This went on for several years. Finally out of the blue, came the purchase offer. We didn't see it coming. It was a big surprise. First at $13, then at $18. Those offers were not based on the pre-offer value of TRZ shares, but on what Air Canada was buying: Transat's market share. Transat route structures, slots, aircraft, pilots, mechanics, savoir-faire were only gravy to Air Canada. What they were paying for was Transat's market share. They were getting rid of a big competitor on Europe, fairly big one on Sun destinations.

Does Air Canada still want to to purchase Transat ? Well the real test is if the reasons that led them to make the offer in 2019 still stand for 2020, 2021, 2022, if the competition that existed before 2020 will still exist in the future. Time will tell.

Air Transat did a good job considering the circumstances. As Jm stared TRZ has 42 years of experience dealing with difficult situations and is now drawing on that to do the best they can.

The TRZ conference call highlights include the fact that ‘pretty well all’ of the July restart requires political changes from the respective destination countries (I found it amusing that they clarified that as of today Transat can fly to all those destinations, just without passengers) , deferred lease obligations become due in 90 days which represent a substantial charge, and JMs odd retort to CIBC over the question of cash burn and minimum cash requirements going forward.
Today was the first time we saw Transat executives acknowledge with any elaboration that the deal is far from assured at this point and that it is in talks with bankers for bridge financing that will breach the covenants of the purchase agreement that would give AC an opportunity to end or renegotiate the deal.
The announced reduction to the A330 fleet will mean less work to go around and less jobs after a recovery as well as a potential breach of section 4.1.2(I) of the arrangement agreement regarding the disposal of assets

TRZ is in a tough spot. A lot of the moves it would likely make like secure more liquidity and make structural changes to its organizations and fleet to adapt are prohibited by the purchase agreement. The longer the approval process the longer it is before Transat can access those tools that other airlines are using to help weather this storm.

[Localizer]

The announced reduction to the A330 fleet will mean less work to go around and less jobs after a recovery as well as a potential breach of section 4.1.2(I) of the arrangement agreement regarding the disposal of assets

A lease is typically not considered an asset as the lessor is the owner of the asset. Some contract language will use the term "contractual asset" but not usually considered a "company asset".

[Sharklasers]

The announced reduction to the A330 fleet will mean less work to go around and less jobs after a recovery as well as a potential breach of section 4.1.2(I) of the arrangement agreement regarding the disposal of assets

A lease is typically not considered an asset as the lessor is the owner of the asset. Some contract language will use the term "contractual asset" but not usually considered a "company asset".

From the agreement
Corporation Aircraft" means all Aircraft owned, leased or subleased by the Corporation or one of its Subsidiaries (excluding any wet lease where the Corporation or one of its Subsidiaries is the wet lessee) or otherwise operated by or on behalf of the Corporation or one of its Subsidiaries, including all Seasonal Aircraft that are not subject to a wet lease where the Corporation or one of its Subsidiaries is the wet lessee.

"Corporation Assets" means all of the assets (tangible, corporeal, intangible and incorporeal), properties (real, immovable, personal or movable), rights, interests, Contracts or Authorizations (whether contractual or otherwise) owned, leased, licensed or otherwise used or held for use by the Corporation or any of its Subsidiaries, including the Corporation Owned Properties and the Corporation Leased Properties and any Corporation Aircraft, Corporation Engines, Corporation Parts, machinery, equipment, fixtures, furniture, furnishings, office equipment, Corporation Intellectual Property, Business Systems, Corporation Data, supplies, materials, vehicles, material handling equipment, implements, parts, tools, jigs, dies, moulds, patterns, tooling and spare parts and other assets.


(i) except as disclosed in Section 4.1(2)(i) of the Corporation Disclosure Letter, sell, sell and lease back, pledge, licence, lease, sublease, alienate, dispose, swap, transfer or voluntarily lose the right to use, in whole or in part, or otherwise dispose of, or subject to any Lien (other than Permitted Liens), any Corporation Asset

[rudder]

A lease is not an asset. It is a liability and shows up as a debt obligation.

[Sharklasers]

Your confusing asset like on a balance sheet and asset like something the company uses to generate revenue.

Please see how both AC and TRZ define corporation asset and corporation aircraft in their purchase agreement.

They very clearly define leased aircraft as an ‘asset’ for the purposes of the agreement.

https://www.transat.com/getmedia/b39fdc ... 1.pdf.aspx

[Localizer]

I see your point, maybe the new aircraft coming in are replacing what’s leaving so the sum is still the same.

[FL320]

https://www.lapresse.ca/affaires/entrep ... estisseurs

Looks like investors were expecting 247 millions liquidity instead of the actual 409 millions. Monthly fees reduced at 15 millions instead of 60; I don’t see the company going bankrupt as fast as some mentioned here. Altipiano I let you translate.

[Gilles Hudicourt]

The announced reduction to the A330 fleet .......

Excuse me but I read what I had, I googled, I made some phone calls.....

No one I know has heard of the "Announced reduction to the A330 fleet" you are talking about. Can you elaborate please ?

[rudder]

Apologies for the format -


Q2 2020 Transat AT Inc Earnings Call Montreal Jun 11, 2020 (Thomson StreetEvents) -- Edited Transcript of Transat AT Inc earnings conference call or presentation Thursday, June 11, 2020 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Annick Guérard Transat A.T. Inc. - COO * Christophe Hennebelle Transat A.T. Inc. - VP of HR & Corporate Affairs * Denis Pétrin Transat A.T. Inc. - VP of Finance & Administration and CFO * Jean-Marc Eustache Transat A.T. Inc. - Chairman of the Board, President & CEO ================================================================================ Conference Call Participants ================================================================================ * Benoit Poirier Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst * Cameron Doerksen National Bank Financial, Inc., Research Division - Analyst * Kevin Chiang CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Analyst * Konark Gupta Scotiabank Global Banking and Markets, Research Division - Analyst * Mona Nazir Laurentian Bank Securities, Inc., Research Division - Director of Research and Transportation & Infrastructure Analyst * Tim James TD Securities Equity Research - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (foreign language) Good Morning, ladies and gentlemen, welcome to the Transat conference call. (foreign language) I would now like to turn the meeting over to Mr. Christophe Hennebelle, Vice President, Corporate Affairs. Mr. Hennebelle (foreign language). Please go ahead, Mr. Hennebelle. -------------------------------------------------------------------------------- Christophe Hennebelle, Transat A.T. Inc. - VP of HR & Corporate Affairs [2] -------------------------------------------------------------------------------- Thank you. Hi, everyone, and welcome to the Transat conference call for the presentation of the financial results of the second quarter ended April 30, 2020. I'm here with Jean-Marc Eustache, President and CEO; Annick Guerard, COO; and Denis Petrin, our CFO. Jean-Marc will provide his comments and observations on the current situation followed by Annick, who will focus on our operational and commercial plans for the future before Denis reviews the financial results in more details. We will then answer questions from financial analysts. Questions from journalists will be handled offline. The conference call will be held in English, but questions may be asked in French or English. As usual, our Investors presentation has been updated and is posted on our website in the Investors section. Denis may refer to it as he presents the results. Today's call contains forward-looking statements. There are risks that actual results will differ materially from those contemplated by these forward-looking statements. For additional information on such risks, we invite you to consult our filings with the Canadian securities commissions. The call also contains certain forward-looking statements concerning transaction involving the acquisition of all the shares of the corporation by Air Canada. These statements are based on certain assumptions deemed reasonable by the corporation, but are subject to certain risks and uncertainties, several of which are outside of the control of the corporation, which may cause actual results to vary materially. In particular, the completion of the transaction with Air Canada will be subject to customary closing conditions, including regulatory approvals, particularly authorities in Canada and the European Union. These approvals -- these approval processes are ongoing, and the details of the transaction with Air Canada will be discussed in a few minutes. Forward-looking statements represent Transat's expectations as at June 11, 2020, and accordingly, are subject to change after such date. However, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. Finally, we may refer to IFRS and non-IFRS financial measures. In addition to IFRS financial measures, we are using non-IFRS measures to assess the corporation's operational performance. It is likely that the non-IFRS financial measures used by the corporation will not be comparable to similar measures reported by other issuers or those issued by financial analysts as their measures may have different definitions. The measures used by the corporation are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures. Additional information on non-IFRS financial measures, such as their definition and their reconciliation with the more comparable IFRS measures, are available in our annual report. With that, let me turn the call over to Jean-Marc for his opening remarks. -------------------------------------------------------------------------------- Jean-Marc Eustache, Transat A.T. Inc. - Chairman of the Board, President & CEO [3] -------------------------------------------------------------------------------- Thank you, Christophe. Good day, everyone. There are world-changing events and the COVID-19 pandemic is certainly one of them. We are reading a lot these days about what the world will be like going forward. Some are concerned about the devastating recession for the world economy, others hope that we will seize the opportunity to correct all of our previous failing from the way we care for our seniors to our ecological footprint on the planet. I won't make general predictions, but one thing is certain, the travel industry is going to be profoundly transformed. What we have experienced over the last few months cannot be compared with any past events. The magnitude of the crisis put this situation in a category of its own, quite different from what we experienced with 9/11 in 2001, SARS in 2003 and the global economic crisis in 2009. According to the International Air Transport Association, global air transportation capacity decreased by 87% in April compared to 2019. And international traffic in terms of passenger kilometers fell by 98%. In plain language, the very few aircraft that flew during the month of April, where the only market where March 2020 was not the lowest point in the last 30 years with the Chinese domestic market, which has become to recover. At the end of May, the number of flights have increased by 30% from the low point reached in April, but while still 73% below the volume of January (inaudible). Also, according to IATA, worldwide airline revenues are expected to fall by 55% this year compared to 2019. This represents USD 314 billion in lost sales. If we look more broadly at the tourism industry, the United Nations World Tourism Organization estimates that 67 million international arrivals were less in March, resulting in a shortfall of USD 80 billion. Depending on the scenarios, the organization estimates that the decline over the entire 2020 year will be between 58% and 78%. (inaudible) destination Canada believes that the decrease in spending by travelers in Canada in 2020 will be somewhere between CAD 36 billion and CAD 62 billion, a drop between 35% and 59%. The impact on unemployment will be between 263,000 and 450,000 job losses. For the record, there was no decline in 2001, whereas there was a 3% and 5% decline in 2003 and 2009. All of these figures are rather difficult to envision, but they administrate the university -- the universe in which Transat is evolving today. And our results for the quarter and winter season should be read in that context. Denis will provide you with the detail in a few moments, but I would like to give you the outline. For the quarter, our revenues are down 36% compared to the same period last year. The operating loss was $30 million, $26 million worse than last year, which leads to the following results for the entire winter season compared to the corresponding 6 months period last year. Revenues, $1.3 billion, down 80 -- 18%, operating losses of $55 million compared with $52 million in 2019. Adjusted operating income of $49 million against $33 million in 2019. Adjusted net loss of $55 -- $59 million compared with $46 million. Net loss attributable to shareholders of $213 million compared with $54 million. I want to remind you that our second quarter covers the period from February to April. So the impact of the pandemic is felt only over 1.5 months. The impact is very strong on the net income as per financial statement, even if some of it is unrealized and a portion of that has already been reversed due to the upward evolution of the price of oil and the value of the Canadian dollar. But when you look at the operational results, it is much less so. The 2 -- there are 2 main reasons for this. The first is the very good performance at the beginning of the year. As I was saying, the pandemic only hit at the end of the past year, whereas we are -- very promising start to the year. At the end of February, our adjusted operating income for the first 4 months of the year was up $63 million over 2019. We were on track to return to profitability or at least to breakeven for the winter season after many years of losses during that period. These strong lead in the first 4 months was erased by the result of the last few weeks. The second reason is the speed with which we react. We announced, as early as March 18, that we will be temporarily suspending our operations. Until April 1, we operated very costly repatriation flights to bring our customers back to their own countries. And then we stop all our flights and reduced our expenses to the bare minimum. We negotiated with all of our suppliers, including aircraft lessors, to reduce or defer all possible costs. And we laid up -- laid off up to 85% of our staff. We were fortunate to have a very strong balance sheet before the arrival of the coronavirus. As at April 30, total cash was similar to last year, $1 billion, including $50 million drawn under our revolving term credit facility. And $337 million placed in trust account or otherwise reserved. As a precautionary measure, we were doing like the vast majority of our competitors and moving on with different options, while exploring all possibilities for increasing cash flow. including approaching our bankers and the various levels of government. In retrospect, I think the suspension of operations was the right decision. It has enabled us to limit the damage in the period that has just passed and now put us in a position to consider resuming operations as we are announcing today. Annick will speak to you at a greater length, but we intend to reopen 23 international routes during the summer season that expands until the end of October. The restart will be the basis for the gradual rebuilding of our capacity in the coming months. To evaluate for future demand, we need to answer 4 questions: will customers be allowed to travel? Will they feel like it? Will they be able to afford? And will they be afraid of catching the virus if they do? The first issue implies the removal or easing of the travel restriction that had been introduced in the recent months by various governments. Our recovery is conditional on that, but we see many encouraging signs in this regard. For the rest, Transat is particularly well positioned to take advantage of the demand that will begin to emerge again. First, we expect travel to resume with what we call VFR, or visiting friends and relatives and then for vacation travel well before business trial. All the indications today are that. After long weeks in lockdown, customers are eager to travel as soon as it is safe to do so. Several studies support this. VFR and holidays happen to be exactly the 2 segment in which we operate. And we offer our customers the best cost travel option. Second, our good image with consumer and our high satisfaction rates as well as the level of support that we are providing as a tour operator will enable us to offer our customers the promise of an experience that meets their expectations. More specifically, with respect to COVID-19 the Traveller Care program, which we are announcing today. We provide travelers with measures that will accompany them throughout their experience, at the travel agency, at the airport, onboard the aircraft and our -- their distinction. Annick will elaborate on this. We are currently stepping up the transformation of our fleet to focus it around the Airbuses as has been our plan. And more specifically, the Airbus A321neo long range, which are the ideal aircraft in the current circumstances. Fuel efficient with a long range and reasonable number of seats. This is the aircraft we need at the moment. We are -- we have permanently removed the Airbus 310 from the fleet. And we are continuing to negotiate with the leasing companies to return some of the other aircraft. It is also very likely that concern for environment will be even greater during the recovery than it was before. Here, again, Transat is well positioned. We are the first major tour operator to receive Travelife certification for all of our activities. And we have made greenhouse gas reduction a priority. As illustrated, in particular by our participation in the SAS Plus consortium. Finally, our start to the fiscal year is very encouraging and showed that we are able, before the start of the pandemic, to generate profit from our activities in all our markets, much more so than in previous years. We are beginning to reap the benefits of the reorganization of our revenue management structure, and this increased expertise will be invaluable when volume returns. We, therefore, believe that we are very well positioned to benefit from the recovery, which we will pursue cautiously, of course, in order to be ready to deal with a positive over research of the pandemic and the new restrictive measures that might accompany it. It is likely to be a long time, probably several years, before demand return to its 2019 level. Some people are talking about 2023, but it's very difficult to predict. In any case, we expect Transat to operate on a reduced basis for the foreseeable future. But this is also an opportunity to review the way we do things, to simplify our structures and to become even more agile and efficient. An issue that has been much debated recently is that of future travel credits for customers whose flights were canceled as a result of the pandemic. I would like to say a few words on this. To begin with, I think that the travel credit, which is valid for 24 months, is a satisfactory option under the circumstances for most of our customers, who will soon be able to use it to travel with us again. That said, we fully understand that some of them have no intention or ability to travel and would like a refund. We also like to be able to offer it to them, provided the burden is not excessive. Much has been said about the American and European airlines, which have been ordered by their respective government to give refunds and some (inaudible). However, what is overlooked is that the government demand has been accompanied by assistant plans that are out of all proportion to what we have seen in Canada. For most of the large companies, government assistant plans, whether in form of a loan or a grant, have amounted to billions of dollars or euro. Canada has yet to come up with any specific support plan for the airline industry. So I say clearly to the various level of governance, help us find a solution that is acceptable to all stakeholders, and we are all for it. The objection will be made that there are programs such as the LEEFF or (inaudible), it is true. But these programs are not designated -- designed for the airline industry and do not fully meet its particular needs. With respect to the views, specifically, Transat has made the choice to all of its laid off employees to benefit from it and then renewed what -- choice when it was extended until August 29, and we are very pleased that this program exists. We did so because we are convinced that our employees are central to Transat's success, and we want to help them as best as we can through this difficult period. This is the kind of commitment that help us to be ranked eighth best employer in Canada in Forbes Magazine latest list. But 85% of the subsidy we received this week goes to pay employees who are not working and would not have cost the company anything if the subsidy did not exist. We were happy to collect the remaining 15% under the salaries of our employees who are actually at work, but that's a pretty small amount compared to the needs of an airline. I will conclude by mentioning the Air Canada transaction, which is the subject of much speculation. Of course, we remain firmly committed to this transaction and to the commitments we made to Air Canada. However, it must be noted that several factors beyond our control could influence the outcome of the proposed arrangement. The market conditions of the world industry have been completely transformed by COVID-19. On the one hand, this is impacting our operations and cash flow and could force us to take a number of measures in response, including the use of certain additional sources of financing. While our ability to take these measures is limited and framed by the commitments made under the arrangement agreement with Air Canada. On the other hand, it could also impact the ability to reach an agreement with the regulatory authorities on an adequate set of quality measures to secure the necessary regulatory approvals. Nevertheless, at this stage, the process of seeking this approval is ongoing, and we are making sure that whatever happens, we will be prepared to deal with the situation in the best interest of all stakeholders. The employees, suppliers, partners and shareholders. I will now turn the discussion over to Annick to talk about our recovery plan, and then Dennis will comment on our results in more detail. -------------------------------------------------------------------------------- Annick Guérard, Transat A.T. Inc. - COO [4] -------------------------------------------------------------------------------- Thank you, Jean-Marc. So as Jean-Marc mentioned, we are very pleased to be announcing today that we are resuming our operation starting July 23. And of course, we will do so in the best financial and sanitary conditions. Based on detailed analysis of current assumptions on demand recovery, we have developed a new flight program that will offer 22 destinations in Europe, the South and the Caribbean, Florida and Canada until the end of the summer season on October 31. So for a total of 28 routes. As well to address the concerns caused by COVID-19 and to prioritize the safety of our customers and employees, we will be implementing new health measures as part of our new Traveller Care program. In compliance with the recommendations and requirements of regulatory authorities, these measures will accompany our customers throughout their travel experience from the travel agency, to the airport, to the onboard and to the destination. So looking in more details at our summer flight program. Starting July 23, we will gradually operate direct flights from Montreal to Athens, Bordeaux, Lisbon, Lyon, Nantes, Marseille, Paris and Toulouse. As for Toronto, we will offer direct flight from Athens, Glasgow, London, Manchester, Porto and Rome. As for South destination and the U.S. market, we will offer direct flights to Cayo Coco in Cuba, Cancun, Fort Lauderdale, Punta Cana from both Montreal and Toronto, in addition to one direct flight a week to Port-au-Prince, Haiti, from Montreal. Finally, we will also offer domestic flights between main cities in Canada, Montreal, Toronto, Calgary and Vancouver. So overall, we will be offering these 28 routes. And depending on demand and the easing of regulatory restrictions, we may enhance our flight schedule for the month of September and October. A word on the fleet. Most of our summer program will be operated by A321neo long range. We will be receiving 3 additional of these aircraft in the weeks to come, a perfect aircraft for our mission and exactly the type of aircraft we need right now to restart our operation, giving us ability, agility and flexibility. It is worth mentioning that through this crisis, we are seizing the opportunity to accelerate the transformation of our fleet towards a full Airbus fleet like we had announced in the past, which will allow us to become more efficient and provide a better experience to our customers while taking an important step towards reducing our environmental footprint. Therefore, we have retired the remaining A310s, and we are actively negotiating anticipated return for our B737 fleet. We also -- we are also negotiating anticipated returns of some of our A330s to align our capacity with future reduced demand. Our objective is to have simplified our fleet from 4 aircraft types to 2 aircraft types by 2021, fleet composed mainly of Airbus 330 and A321. Regarding the program, of course, we will be offering flexibility to our customers. As we restart operation, we understand customers will expect flexibility from us. We are fully aware that travel plans can change. We are, therefore, implementing a travel policy offering more flexibility to travelers, whose flights are scheduled to operate this summer. They will be able to make changes to their plan if they are already booked on the fights that we will be operating. All details regarding our flexibility policies will be available on our websites as of today. As for our new health and safety program, we are proud to unveil the Traveller Care program. We understand that people can have a strong desire to travel, but they also need to be strongly reassured that we will be implementing best-in-class health and safety measures. Our goal is to ensure that health and safety of both our customers and employees will be taken care of. These measures are based on recommendation from civil aviation, regulatory authorities, including the International Civil Aviation Organization, guidelines from the Government of Canada, Transport Canada, Public Health Agency and, of course, jurisdiction of the countries to which we travel. Traveller Care program take into consideration expecting social distancing, limiting physical contact, reducing handling. Overall, travel experience has been completely revisited from the visit to the travel agency -- Transat travel agency at the airport, onboard our aircraft and, of course, at destination. Let me share just a few highlights. At our Transat travel agencies, clients will be encouraged to make appointments before presenting themself at a branch. There will be a limit of one client per consultation. At the airport, passengers will be strongly encouraged to check in online to limit contact. Passengers will be asked health-related questions, and counters and self-service kiosk will be regularly disinfected. Boarding will be changed, will be done by rule of seat from back to front. Passengers will -- special needs will always be able to put first regardless of the seat numbers, of course. Onboard, all necessary precautions will be taken to provide a safe in-flight experience. All of our passengers will receive complementary traveler kit, including a face covering, gloves, hand sanitizer and disinfecting wipes. All passengers and crew will be required to wear face covering throughout the flight. The in-flight service will be revised to reduce handling and contact. And as for aircraft cleanness, onboard all aircraft, passengers and crew can count on reliable, high efficiency particulate air filters, which eliminates almost 100% smart particles such as bacteria and viruses and refreshing cabin air every 3 minutes. The aircraft will be thoroughly clean with hospital-grade disinfectant before each and every flight. And every 24 hours the aircraft cabins will be thoroughly cleaned and disinfected following a strict 82-point program in addition to electrostatic disinfection of the cabins. Finally, a destination. We have been working with all our partners over the last months. They are implementing rigorous health and safety protocols, so that travelers can enjoy their vacation with complete peace of mind. Our partners take this matter, of course, very seriously and have been very proactive in reviewing their guest experience. These protocols will be made available to consumers through our website. We will also have reinforced preventive measures during road transfers, such as reduced number of passengers on each bus and the transfer bus will be thoroughly clean and disinfected after each transfer. Provide support at destination, Transat representatives will always be available for our customers. So I will stop here and close by saying that, again, we are very pleased to announce the restart of our operation, and we are fully committed to take this as a first step towards getting healthy operations back on track from both a business and financial perspective. -------------------------------------------------------------------------------- Denis Pétrin, Transat A.T. Inc. - VP of Finance & Administration and CFO [5] -------------------------------------------------------------------------------- Thank you, Annick. And good morning, everyone. A few additional comments on the results and liquidity. The winter started on a very positive note, Q1 and February being much more profitable than last year. Including February, the adjusted operating income improvement was $63 million year-over-year, plus $35 million in Q1 and an additional $28 million for February only. We were aiming for our best winter results since 2009. Nevertheless, second quarter results starting in March were significantly impacted by the COVID-19 pandemic. Starting in mid-March, restriction on international travel and government-imposed quarantine measures made travel sales very difficult. Flights operated during the last 2 weeks of March were mainly intended for the repatriation of our customer to Canada or their own country, resulting in considerable cost. Thereafter, we suspended all of our flights as of April 1. March and April annihilated all the improvement of the first 4 months of the winter. Q2 results were then as follows: revenue of $571 million, down 36%; and adjusted operating income of $21 million compared with $40 million last year; and adjusted EBIT of minus $39 million compared with minus $7 million last year; and as per financial statement, the net loss attributable to shareholders was $180 million and included an unrealized loss, unchanged in fair value of derivatives of $89 million caused by the collapse in the jet fuel prices. Since then -- since the end of April, the price of fuel (inaudible) up and reversed $40 million of that amount. Also included, an unrealized foreign exchange loss of $30 million, mainly related to the reevaluation of aircraft lease obligation, IFRS 16, following the degradation of the Canadian dollar versus the U.S. dollar as at April 30, 2020. Canadian dollar versus the U.S. dollar also (inaudible) up and reversed as of Monday, $24 million of that amount, the one that I was referring to, the $32 million. Finally, included a reduction in the carrying value of deferred tax assets of $22 million. Obviously, those tax attribute remain fully valued and will be applied against future profit. Now for our balance sheet. Corporation free cash totaled $734 million versus $796 million a year ago. The variance is mainly due to a net reduction from mid-March of deposits from clients for the summer season, roughly $125 million, the acquisition of 2 spare engines to equip our new A321neo aircraft, $33 million, partially offset by the drawdown of $50 million from our revolving credit facility. Cash interest or otherwise reserved totaled $337 million. The deposit for future travel stood at $605 million compared with $630 million at the same date last year. The variance versus the amount of $809 million at the end of January is due to seasonality of our operations. Of the deposit for future travel as of May 31, travel credit voucher granted to customer in compensation for flight cancel due to the COVID-19 pandemic, amounted to $416 million. Off-balance sheet agreements stood at $1.1 billion as of April 30, and it is mainly related to the 14 aircraft A321neos to be delivered until 2023. One Airbus A321neo was added to our fleet in February. The rest of the decrease, since October 2019, is due to the revision of the estimated rent to be paid over the term of those lease, following the drop in interest rate on which the future rents are based. Lastly, we have very quickly implemented a series of decisive financial measures, including cost reduction, aimed at preserving our cash. Before the crisis, our fixed cost represent roughly $60 million a month and consisted of salary for $35 million a month, aircraft rent for $15 million a month and other fixed costs for $10 million a month, totaled $60 million. We started by putting in place measures to reduce expenses related to those fixed costs. Example, on salary, temporary layoff amounted to 85% of our workforce. About half of the costs related to the 15% of the workforce remaining was reduced by the amount obtained from the Canada Emergency Wage Subsidy. Salary reduction were also implemented for higher management. Globally, the $60 million per month of fixed costs was brought to $25 million. We continue by implementing other measures to protect short-term cash flow associated with the $25 million of fixed cost remaining. Example, on aircraft rents, we negotiate deferrals of rents for a certain period of time. Those discussions are obviously continuing. Globally, the resulting $25 million of monthly expenses was brought to $15 million when based on cash flow. Finally, other measures were taken to preserve our liquidity. Deposits from clients referred earlier, for which we have issued travel credit vouchers, ongoing discussions with suppliers to revisit our major contracts. And as a precautionary measure, considering the unknown resulting from the COVID-19 pandemic, like many of our competitors, we are having discussion with our bankers and the various levels of governance. Finally, as you can read in our press release this morning, we will not, for kind of obvious reason, provide any outlook for the rest of the summer, nor for winter 2021 at this stage. We will now proceed with your questions.