Canadian leisure operator Air Transat said Thursday that “fierce” competition on flights to Europe is forcing some carriers to lower their prices during the peak summer season.
“We are seeing pressure from Westjet to Europe this year,” said Annick Guerard, Transat’s Chief Operating Officer. “They’re increasing their presence, not only Westjet but others as well, so there’s been increased pressure on the pricing.”
Transat said that global capacity between Canada and Europe is up six per cent this summer, with Westjet making some of the biggest gains with its new Boeing 787 Dreamliner flights from Calgary to London, Paris and Dublin.
Transat said its own capacity to Europe was up one per cent this year, with fares similar to 2018. So far this summer, 64% of its overseas seats have been sold, up marginally from a year ago.
“July and Aug we are seeing fierce competition, some competitors are lowering their prices at this point,” said Guerard. Three-quarters of Transat’s capacity is deployed to Europe in the summer.
Transat is in talks with Air Canada for a potential buyout. If it goes ahead, just two airline alliances would control 80% of the market between Canada and Europe, with Air Canada and its partners holding two-thirds of the market, and Westjet/KLM/Air France holding much of the balance.
Transat said it has incurred more than $2 million in expenses as a result of the talks, due mostly to the jump in its share price when talks about a possible takeover were announced. The two sides have until June 26 to conclude a deal.
Transat stressed that operations continue as usual while the talks proceed.
Transat reported a $2.3 million profit in the second quarter, down 70% from the previous year, due mainly to the effect of higher gas prices and a weaker Canadian dollar.
Still, Transat Chief Financial Officer Denis Petrin said this summer was shaping up to be slightly better overall for the company.
“We’re better positioned than at the same time last year,” he said.
Transat is in the process of introducing Airbus A321neo aircraft into the fleet, which have the range to reach Europe from Canada, but are smaller and more fuel efficient than the long-haul A310 aircraft they are replacing.
“It’s really a game-changer for us,” said Petrin.
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Transat is expecting its second A321 at the end of June, with further deliveries during the winter.
“We’re still in discussions with Airbus in terms of exact delivery dates,” said Guerard. “We know that we’re going to have additional ones for the winter season and summer 2020, however, we’re still in discussion with Airbus about when exactly the aircraft will arrive.”
Transat said bookings were up more than two per cent last winter, but the mix of travellers has changed. More people are booking air-only travel, shifting away from more lucrative all-inclusive packages that include hotel stays.
The Canadian government finalized new rules around air charters Wednesday, loosening ticket sales, and potentially allowing more competition to leisure destinations.