Canadian tour company Air Transat posted an operating loss of $52.6 million dollars from November to January, as increased fuel and fleet costs ate into company revenues. That compares with a loss of $43.5 million in the same period a year earlier.

“We’re at the heart of the implementation cycle of our strategic plan,” said Transat President and Chief Executive Officer Jean‑Marc Eustache in a statement. “The material transformations, especially in the fleet, lead to an increase in costs, which is a necessary step in order to improve our medium-term performance.”

Transat is one of the largest integrated tourism companies in the world, meaning it owns both resorts and the planes to get people there.

It was voted best leisure airline in the world by Skytrax in 2018.

Transat was spared recent controversy around the Boeing 737 Max, since it does not fly the type, and is transitioning to an all-Airbus fleet. The company is awaiting the delivery of a pair of new long-range Airbus A321 new engine option aircraft in April and June as part of a turnaround. A total of 17 are on order to replace ageing Airbus A310s.

“When we decided to select this aircraft,” said Eustache, “we came to the conclusion that this aircraft was made to meet our needs. The needs of the summer because of the range, but also the needs of the winter, because of the size of the plane.”

The A321LR has a range of up to 7,400km with a typical load of more than 200 passengers, about 20% less than the A310s they are replacing. Eustache believes the smaller size will help, especially in winter months when loads are lighter.

This winter, 85% of Transat’s business consisted of taking Canadians to sun destinations on their holidays. While the overall number of passengers increased 3.5% over the previous year, the number of seats among all airlines was up 10%. That forced fares down almost one per cent, while costs for fuel and the U.S. dollar continued to rise.

Transat reported Thursday that more people chose to fly this winter, but a smaller percentage booked at more lucrative company hotels and resorts.

The picture wasn’t much better to Europe this winter. While 75% of Transat’s seats were sold across the Atlantic, fares were down three per cent.

And Transat believes competition to Europe will be fierce in the coming summer, when airlines shift their fleets from sun destinations to trans-Atlantic flights.

“Global capacity on the market (for the summer 2019) is eight per cent higher,” said Vice-President and Transat Chief Financial Officer Denis Pétrin. “Currently, 33% of our capacity has been sold. Bookings are up nine per cent. Fares are lower by 2.2%.”

Transat believes, however, those lower fares will be offset by higher ancillary fees.

“We are confident, seeing the trends over the last weeks, that we are going to be able to perform a decent summer,” said Annick Guérard, Transat’s Chief Operating Officer.

Guérard said the creation of a base fare, which does not include checked bags, will encourage people to either pay for their bags, or buy more expensive fares – echoing a trend that has been reported at other airlines, including Westjet and Air Canada.