Canadian leisure carrier Air Transat has “closely analyzed” the escalating trade war and annexation threat from US President Donald Trump, as consumer sentiment could affect summer bookings for sour airlines.
CEO Annick Gerard said in Transat's first quarter revenue that carriers are cautiously looking at the “potential impact of tariffs” while also pointing out that their European-centric Atlantic network has limited exposure to the US market.
AirTransat flies to two destinations in Florida (Orlando and Fort Lauderdale) and there are no other US cities. These routes represent approximately 3% of passenger capacity measured in available seat kilometers (ASK).
“However, the negative impact of a trade dispute with the US could have multiple impacts in two important areas of interest,” says Gerard.
She points to “already ongoing” depreciation of the Canadian dollar as a factor that increases the operating costs of Transat “particularly due to fuel and aircraft leases priced in US dollars.”
Canada's dollar is currently worth US$0.69 amid concerns that it could weaken further as a result of economic pressure from the US.
But Transat's most concern is the bleak economic outlook that has sparked the fear of a recession in the US and overseas, with market indicators increasingly dropping sharply recently, and consumers tightening their spending.
“More importantly, the broader economic uncertainty that creates conflicts like this, affects consumer confidence and potentially affects travel demand,” Gerard says. “We recognize that this is a very unstable environment. We are closely monitoring evolution and continue to factor that into decision-making and forecasting processes.”
Transat has yet to see a negative impact on booking trends, but Guerard points out that he is currently in the busiest time to book summer air travel.
“We are well aware that the current environment is affecting the overall consumer trust, which could ultimately affect travel demand,” she says. “But we haven't affected last week's booking.”
Guerard adds that Transat's leadership team “will not be surprised.”
Having long struggled to maintain profitability, Transat reports a loss of $123 million ($85 million) over the three months ended January 31st.
This is compared to a $61 million loss during the same stretch last year.
