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Annual Report
2020
Transat A.T. inc.
Senior
Management
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
Jean-François
Lemay
President,
Air Transat A.T. Inc.
Daniel
Godbout
Senior
Vice-President
and Advisor to
the President,
Transat A.T. Inc.
Bruno
Leclaire
Chief Information
and Digital Officer,
Transat A.T. Inc.
Annick
Guérard
Chief Operating
Officer,
Transat A.T. Inc.
Jordi
Solé
President,
Hotel Division,
Transat A.T. Inc.
Bernard
Bussières
Vice-President,
General Counsel and
Corporate Secretary,
Transat A.T. Inc.
Christophe
Hennebelle
Vice-President,
Human Resources
and Corporate
Affairs,
Transat A.T. Inc.
Denis
Pétrin
Vice-President,
Finance and
Administration,
and Chief Financial
Officer,
Transat A.T. Inc.
resp.transat.com
transat.com
Head Office
Transat A.T. inc.
Place du Parc
300 Léo-Pariseau St.
Suite 600
Montreal, Quebec
H2X 4C2
Telephone: 1.514.987.1660
Fax: 1.514.987.8035
transat.com
info@transat.com
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Annual Report
2020
Transat A.T. inc.
Senior
Management
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
Jean-François
Lemay
President,
Air Transat A.T. Inc.
Daniel
Godbout
Senior
Vice-President
and Advisor to
the President,
Transat A.T. Inc.
Bruno
Leclaire
Chief Information
and Digital Officer,
Transat A.T. Inc.
Annick
Guérard
Chief Operating
Officer,
Transat A.T. Inc.
Jordi
Solé
President,
Hotel Division,
Transat A.T. Inc.
Bernard
Bussières
Vice-President,
General Counsel and
Corporate Secretary,
Transat A.T. Inc.
Christophe
Hennebelle
Vice-President,
Human Resources
and Corporate
Affairs,
Transat A.T. Inc.
Denis
Pétrin
Vice-President,
Finance and
Administration,
and Chief Financial
Officer,
Transat A.T. Inc.
resp.transat.com
transat.com
Head Office
Transat A.T. inc.
Place du Parc
300 Léo-Pariseau St.
Suite 600
Montreal, Quebec
H2X 4C2
Telephone: 1.514.987.1660
Fax: 1.514.987.8035
transat.com
info@transat.com
Leader
in sustainability
The proof? Transat is the first major international
tour operator to be Travelife Certified for all its activities.
Board
of Directors
1
2
4
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
Louis-Marie
Beaulieu
Chairman of
the Board,
President and Chief
Executive Officer,
Groupe Desgagnés Inc.
Lina
De Cesare
Corporate Director
Jean-Yves
Leblanc
Corporate Director
1 2 3
Raymond
Bachand
Lead Director
Strategic Advisor,
Norton Rose
Fulbright Canada
S.E.N.C.R.L., s.r.l./LLP
1 3
Lucie
Chabot
3
Corporate Director
W. Brian
Edwards
1 2 4
Corporate Director
Ian
Rae
Founder, President
and Chief Executive
Officer, CloudOps
Jacques
Simoneau
President and Chief
Executive Officer
and Director,
Gestion Univalor, LP
1 3 4
Susan
Kudzman
2 4
Corporate Director
Louise
St-Pierre
Corporate Director
Philippe
Sureau
Corporate Director
Committees
1 Executive
Committee
2 Human Resources
and Compensation Committee
3 Audit
Committee
4 Risk Management and Corporate
Governance Committee
resp.transat.com
Information
transat.com
For additional
information, write to
the Vice-President, Finance
and Administration,
and Chief Financial Officer.
Ce rapport annuel
est disponible en français.
Stock Exchange
Toronto Stock
Exchange (TSX)
TRZ
Transfer Agent
and Registrar
AST Trust Company (Canada)
2001 Robert-Bourassa Blvd.
Suite 1600
Montreal, Quebec
H3A 2A6
Toll-free: 1.800.387.0825
inquiries@astfinancial.com
astfinancial.com/ca-en
Auditors
Ernst & Young LLP
Montréal (Québec)
Annual and Special Meeting
of Shareholders
Thursday, April 22, 2021
This annual report is
printed on Rolland Enviro
Print paper.
Use a ton of
Rolland Enviro Print
rather than a virgin
paper and save
the equivalent of:
100%
17
trees
62,078
litres of water
2,500 kg
of greenhouse
gas emissions
761 kg
of solid waste
Leader
in sustainability
The proof? Transat is the first major international
tour operator to be Travelife Certified for all its activities.
Board
of Directors
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
1
Louis-Marie
Beaulieu
Chairman of
the Board,
President and Chief
Executive Officer,
Groupe Desgagnés Inc.
2
Lina
De Cesare
Corporate Director
4
Jean-Yves
Leblanc
Corporate Director
1 2 3
Raymond
Bachand
Lead Director
Strategic Advisor,
Norton Rose
Fulbright Canada
S.E.N.C.R.L., s.r.l./LLP
1 3
Lucie
Chabot
Corporate Director
3
W. Brian
Edwards
Corporate Director
1 2 4
Ian
Rae
Founder, President
and Chief Executive
Officer, CloudOps
Jacques
Simoneau
President and Chief
Executive Officer
and Director,
Gestion Univalor, LP
1 3 4
Susan
Kudzman
Corporate Director
2 4
Louise
St-Pierre
Corporate Director
Philippe
Sureau
Corporate Director
Committees
1 Executive
Committee
2 Human Resources
and Compensation Committee
3 Audit
Committee
4 Risk Management and Corporate
Governance Committee
resp.transat.com
Information
transat.com
For additional
information, write to
the Vice-President, Finance
and Administration,
and Chief Financial Officer.
Ce rapport annuel
est disponible en français.
Stock Exchange
Toronto Stock
Exchange (TSX)
TRZ
Transfer Agent
and Registrar
AST Trust Company (Canada)
2001 Robert-Bourassa Blvd.
Suite 1600
Montreal, Quebec
H3A 2A6
Toll-free: 1.800.387.0825
inquiries@astfinancial.com
astfinancial.com/ca-en
Auditors
Ernst & Young LLP
Montréal (Québec)
Annual and Special Meeting
of Shareholders
Thursday, April 22, 2021
This annual report is
printed on Rolland Enviro
Print paper.
Use a ton of
Rolland Enviro Print
rather than a virgin
paper and save
the equivalent of:
100%
17
trees
62,078
litres of water
2,500 kg
of greenhouse
gas emissions
761 kg
of solid waste
2020
Financial Highlights
in thousands of dollars, except per share amounts and ratios
Transat A.T. Inc. is a leading integrated international tourism company specializing in holiday travel.
It serves some 60 destinations in more than 25 countries in the Americas and Europe.
Cash flows related to operating activities
Revenues
2020
2019
2018
2017
2016
(46,136)
216,021
68,804
161,487
43,561
2020
2019
2018
2017
2016
1,302,069
2,937,130
2,848,955
3,005,345
2,889,646
Adjusted operating income (loss)1
Net income (loss) attributable to shareholders
2020
2019
2018
2017
2016
(122,175)
192,441
17,195
102,025
25,776
2020
2019
2018
2017
2016
(496,545)
(32,347)
6,451
134,308
(41,748)
Revenues
Operating income (loss)
2020
2019
Variance ($)
Variance (%)
1,302,069
2,937,130
(1,635,061)
(55.7)
(425,962)
(13,588)
(412,374)
(3 034.8)
Adjusted operating income (loss)1
(122,175)
192,441
(314,616)
(163.5)
Net income (loss)
(496,765)
(29,716)
(467,049)
(1 571.7)
Net income (loss) attributable to shareholders
(496,545)
(32,347)
(464,198)
(1 435.1)
Diluted earnings (loss) per share
(13.15)
(0.86)
(12.29)
(1 429.1)
Cash flows related to operating activities
(46,136)
216,021
(262,157)
(121.4)
Cash and cash equivalents
Total assets
Long-tem debt (including current portion)
Debt ratio2
Stock price as at October 31 (TRZ)
426,433
564,844
(138,411)
2 016,071
2,324,490
(308,419)
49,980
0.97
4.65
-
49,980
0.76
15.37
0.21
(10.72)
-
(24.5)
(13.3)
100.0
27.2
(69.7)
-
Oustanding shares, end of year (in thousands)
37,747
37,747
1 See Non-IFRS financial measures section.
2 Debt ratio: total liabilities divided by total assets.
Chairman of the Board, President and Chief Executive OfficerJean-Marc EustacheDecember 11, 2020To withstand the pandemic shockThe year 2020 soon ending will undeniably have marked not only the history of Transat, but that of the travel and aviation industry worldwide. The COVID-19 pandemic, which has disrupted all our lives in so many ways, has also had a devastating impact on our operations. So much so that, as we assess the past year, it is almost difficult to remember what life was like before.The year began on a very promising note, however. Up to the beginning of March 2020, our adjusted operating income1 was up $63.3 million compared with 2019. We were on track to return to profitability, or at least break even, for the winter season, after many years of losses during this period. The changes we were implementing in our costs, our fleet and our revenue management seemed to be starting to really pay off.We also had a very strong balance sheet. In previous years, we had disposed of some business units in order to free up cash to invest in the development of our new hotel division. As a result, our cash and cash equivalents at January 31 were $682 million. This position greatly helped us deal with the crisis that hit us starting in early March, when Northern Italy was affected, and accelerated on March 11, when the World Health Organization declared the state of pandemic.We then reacted very quickly, making all the necessary, and often difficult, decisions to cut costs and protect our cash position. We had to temporarily lay off up to 85% of our workforce and over time transform some of these Message to Shareholders1 See Non-IFRS financial measures section. layoffs into terminations. We offered travel credits with no expiry date and fully transferable for cancelled flights and packages. We renegotiated agreements with our suppliers, particularly leases on aircraft and buildings, in order to reduce our commitments or defer payments. We cut our investments where we could do so without causing harm. And we drew on our $50 million revolving credit agreement and put in place a $250-million short-term loan facility.Some of these decisions have enabled us to move forward more quickly with transformations that were necessary in any event. For example, we accelerated the transformation of our fleet with the withdrawal of the Airbus A310s, some A330 wide-body aircraft and our Boeing 737 narrow-body jets, and offset this by taking delivery of the A321neoLR, a single-aisle, long-range jet that can perform a variety of missions and will therefore be the ideal aircraft after the pandemic.We are ending the year with a 56% drop in sales, and a 73% decline over the nine months from February to October, including a period of almost four months during which we did not operate at all. Our results reflect this and the inconceivable shock of the pandemic. It is a jolt being felt throughout the industry, with IATA forecasting a 61% decrease in sales for all the world’s airlines in 2020, but particularly in Canada, where we have suffered from a combination of general travel restrictions, the quarantine and the lack of government assistance at a time when our foreign competitors were heavily supported by their governments.In spite of everything, we have held our ground. We have substantially reduced our costs and cash outflows. For the destinations we have been able to serve, we have enabled our customers to travel in complete safety thanks to our Traveller Care program. Their level of satisfaction also remained very high. We have maintained the link with our employees and in fact in the midst of the pandemic, we were ranked 57th, and 5th among airlines, on Forbes magazine’s annual list of the world’s best employers.At a time when, in spite of the second wave of COVID-19, the announcements of upcoming vaccines allow us to hope for an end to the crisis and a recovery in demand, we are poised to take off again and to rebuild Transat.1 See Non-IFRS financial measures section. Management’s Discussion and Analysis
TABLE OF CONTENTS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Caution regarding forward-looking statements .................................................................. 6
Non-IFRS financial measures ............................................................................................. 9
Financial highlights .......................................................................................................... 12
Overview ......................................................................................................................... 13
Revised arrangement agreement ...................................................................................... 19
Consolidated operations ................................................................................................. 20
Financial Position, Liquidity and Capital Resources ........................................................... 27
Other .............................................................................................................................. 34
Accounting ...................................................................................................................... 35
Risks and Uncertainties .................................................................................................... 42
Controls and Procedures ................................................................................................. 55
Outlook ........................................................................................................................... 55
Management’s Report ................................................................................................................... 56
Independant Auditor’s Report ....................................................................................................... 57
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) provides a review of Transat A.T. Inc.’s operations, performance and
financial position for the year ended October 31, 2020, compared with the year ended October 31, 2019, and should be read
in conjunction with the audited consolidated financial statements and notes thereto. Unless otherwise indicated, the
information contained herein is dated as of December 11, 2020. You will find more information about us on Transat’s website
at www.transat.com and on SEDAR at www.sedar.com, including the Attest Reports for the year ended October 31, 2020 and
the Annual Information Form.
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”). We occasionally refer to non-IFRS financial measures in the MD&A. See the Non-IFRS financial measures
section for more information. All dollar figures in this MD&A are in Canadian dollars unless otherwise indicated. The terms
“Transat,” “we,” “us,” “our” and the “Corporation” mean Transat A.T. Inc. and its subsidiaries, unless otherwise indicated.
1. CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This MD&A contains certain forward-looking statements with respect to the Corporation, including those regarding its
results, its financial position, the impacts of the coronavirus [“COVID-19”] pandemic, its outlook for the future and planned
measures, including in particular the gradual resumption of certain flights and actions to improve its cash flows. These
forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “will,” “would,” the negative of these terms
and similar terminology, including references to assumptions. All such statements are made pursuant to applicable Canadian
securities legislation. Such statements may involve but are not limited to comments with respect to strategies, expectations,
planned operations or future actions.
Forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ
materially from those contemplated by these forward-looking statements.
As at October 31, 2020, there exists material uncertainty that may cast significant doubt on the Corporation’s ability to
continue as a going concern. Section 7 of this MD&A, Financial position, liquidity and capital resources and note 2 to the
consolidated financial statements contain more detail on this issue.
The global air transportation and tourism industry has faced a collapse in traffic and demand. Travel restrictions, uncertainty
about when borders will reopen, both in Canada and at certain destinations the Corporation flies to, the imposition of
quarantine measures both in Canada and other countries, as well as concerns related to the pandemic and its economic
impacts are creating significant demand uncertainty, at least for fiscal 2021. In response to the first wave of the pandemic,
the Corporation temporarily suspended its airline operations from April 1 to July 22, 2020. Subsequently, the Corporation
implemented reduced summer and winter programs and is continuously making adjustments based on the level of demand
and decisions made by health and state authorities. The Corporation cannot predict all the impacts of COVID-19 on its
operations and results, or precisely when the situation will improve. The Corporation has implemented a series of
operational, commercial and financial measures, including cost reduction, aimed at preserving its cash. The Corporation is
monitoring the situation daily to adjust these measures as it evolves. However, until the Corporation is able to resume
operations at a sufficient level, the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows
from operations and operating results. While the likelihood of the availability of a vaccine in the near future makes it possible
to hope for the resumption of operations at a certain level during 2021, the Corporation does not expect such level to reach
the pre-pandemic level before 2023.
The forward-looking statements may differ materially from actual results for a number of reasons, including without
limitation, economic conditions, changes in demand due to the seasonal nature of the business, extreme weather conditions,
climatic or geological disasters, war, political instability, real or perceived terrorism, outbreaks of epidemics or disease,
consumer preferences and consumer habits, consumers’ perceptions of the safety of destination services and aviation
safety, demographic trends, disruptions to the air traffic control system, the cost of protective, safety and environmental
measures, competition, the Corporation’s ability to maintain and grow its reputation and brand, the availability of funding in
the future, fluctuations in fuel prices and exchange rates and interest rates, the Corporation’s dependence on key suppliers,
the availability and fluctuation of costs related to our aircraft, information technology and telecommunications, changes in
legislation, unfavourable regulatory developments or procedures, pending litigation and third party lawsuits, the ability to
Annual Report 2020 Transat A.T. Inc. | 6
Management’s Discussion and Analysis
reduce operating costs, the Corporation’s ability to attract and retain skilled resources, labour relations, collective
bargaining and labour disputes, pension issues, maintaining insurance coverage at favourable levels and conditions and at an
acceptable cost, and other risks detailed in the Risks and Uncertainties section of this MD&A.
This MD&A also contains certain forward-looking statements about the Corporation concerning a transaction involving the
acquisition of all the shares of the Corporation by Air Canada [the “transaction with Air Canada” or the “arrangement”].
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 the control of the Corporation, which may cause actual results to vary
materially. In particular, the completion of the transaction with Air Canada is subject to certain closing conditions that are
customary in this type of transaction, including regulatory approvals, particularly authorities in Canada and the European
Union. Notably, a public interest assessment of the arrangement regarding national transportation is being undertaken by
the Canadian authorities. The Commissioner of Competition released on March 27, 2020 his advisory report to the Minister
of Transport further to the Minister's determination that the proposed arrangement raises issues with respect to the public
interest regarding national transportation. On May 1, 2020, Transport Canada in turn provided its assessment report to the
Minister of Transport. To proceed, the transaction with Air Canada will have to receive approval from the Governor in Council,
on the Minister of Transport’s recommendation. The Governor in Council does not have a deadline for issuing a decision and
there can be no assurance that the transaction with Air Canada will be approved before the outside date. On May 25, 2020,
the European Commission decided to open an in-depth (“Phase II”) investigation to assess the transaction with Air Canada
with regard to European Union antitrust regulations. The move to Phase II is part of the European Commission's normal
process of assessing the impact of transactions submitted for its approval when there are concerns that a transaction may
effectively reduce competition. On September 28, 2020, the European Commission released a statement of objections to
the arrangement. The provisional deadline by which the Commission must render its decision is now February 9, 2021. The
competition authorities’ assessment process is currently complicated by the COVID 19 pandemic and the impact it is having
on the international commercial aviation market.
Among other things, the vast majority of North American, European and international air carriers have requested financial
assistance measures, but have had to implement reductions in capacity (as the Corporation did). This context could impact
the obtaining of approvals from regulatory authorities, especially regarding the appropriate package of remedies aimed at
obtaining those approvals. Air Canada retains discretion to determine the extent of the remedies it is prepared to offer
(beyond those that it is required to offer under the arrangement agreement). If Air Canada is unable to come to an agreement
with the regulatory authorities and obtain the required approvals before the outside date of February 15, 2021, the
arrangement agreement may be terminated in accordance with its terms.
Under the revised arrangement agreement, the deadline for obtaining the regulatory approvals is set at February 15, 2021
[the “outside date”]. If the required approvals are obtained and the conditions are met, it is now expected that the
arrangement will be completed before that date.
Moreover, although the Corporation has been able to put in place a new subordinated short-term credit facility and make
amendments to its senior revolving term credit facility, such arrangements are for a limited duration and will need to be
replaced if the arrangement is not consummated on or before the new outside date of February 15, 2021. In particular, the
new short-term loan facility matures on the earlier of March 31, 2021 and the closing of the arrangement. Furthermore, the
temporary suspension of the application of certain financial ratios under the Corporation’s revolving term credit facility and
the new short-term loan facility expires on January 30, 2021, after which time, absent of any extension, the Corporation
could be in default of its obligations and the term of its borrowings could be accelerated. Pursuant to the terms of the
arrangement agreement, the Corporation’s ability to put in place new sources of financing is restricted and requires Air
Canada’s consent. As a result, if the requisite shareholder and regulatory approvals are not obtained and the arrangement is
not consummated on or prior to the outside date, the Corporation will need to address the challenges posed by its cash
position and the maturing lending facilities. If the Corporation is not able to renew maturing facilities at acceptable
conditions or find financing alternatives, its financial position and business prospects could be materially and adversely
affected. Furthermore, if the arrangement is not approved by the shareholders and otherwise not consummated, there is a
risk that Transat’s lenders, lessors, credit card processors, clients and other trade partners become more preoccupied by
Transat’s financial position, prospects and ability to execute its strategic plan as a going concern, which could result in more
onerous credit terms, repayment obligations, an inability to refinance maturing indebtedness or find new sources of
financing, restricted access to goods and services, and/or reduced business, all of which could significantly and adversely
affect Transat’s cash flows and ability to continue as a going concern.
Annual Report 2020 Transat A.T. Inc. | 7
Management’s Discussion and Analysis
The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect any of the
Corporation’s forward-looking statements. The reader is also cautioned to consider these and other factors carefully and
not to place undue reliance on forward-looking statements.
The forward-looking statements in this MD&A are based on a number of assumptions relating to economic and market
conditions as well as the Corporation’s operations, financial position and transactions. Examples of such forward-looking
statements include, but are not limited to, statements concerning:
The outlook whereby until the Corporation is able to resume operations at a sufficient level, the situation
will affect its operating results and cash position.
The outlook whereby Air Canada will acquire all of the shares of the Corporation.
The outlook whereby if the required regulatory approvals are obtained and conditions are met, it is
expected that the transaction with Air Canada will close prior to February 15, 2021.
The outlook whereby, subject to obtaining additional financing as discussed in Section 7. Financial position,
liquidity and capital resources of this MD&A and note 2 to the consolidated financial statements, the
Corporation has the resources it needs to meet its 2021 objectives and to continue building on its long-
term strategies.
The outlook whereby, subject to obtaining additional financing as discussed in Section 7. Financial position,
liquidity and capital resources of this MD&A and note 2 to the consolidated financial statements, the
Corporation will be able to meet its obligations with cash on hand, cash flows from operations and its
borrowing capacity.
The outlook whereby travel credits will be used by customers and not reimbursed in cash.
The outlook whereby the Corporation will be able to favourably negotiate concessions and deferrals with
its aircraft lessors, owners of premises, suppliers, credit card processors and the extension of the
temporary suspension of the application of certain financial ratios granted by the lenders of its revolving
term credit facility and its subordinated short-term credit facility.
In making these statements, the Corporation has assumed, among other things, that travel and border restrictions imposed
by government authorities will be relaxed to allow for a resumption of operations of the type and scale expected, that the
standards and measures imposed by government and airport authorities to ensure the health and safety of personnel and
travellers will be consistent with those announced or currently anticipated, that travellers will continue to travel despite the
new health measures and other constraints imposed as a result of the pandemic, that credit facilities and other terms of
credit extended by its business partners will continue to be made available as in the past, that management will continue to
manage changes in cash flows to fund working capital requirements for the full fiscal year. If these assumptions prove
incorrect, actual results and developments may differ materially from those contemplated by the forward-looking statements
contained in this MD&A.
The Corporation considers that the assumptions on which these forward-looking statements are based are reasonable.
These statements reflect current expectations regarding future events and operating performance, speak only as of the date
this MD&A is issued, and represent the Corporation’s expectations as of that date. The Corporation disclaims 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 applicable securities legislation.
Annual Report 2020 Transat A.T. Inc. | 8
Management’s Discussion and Analysis
2. NON-IFRS FINANCIAL MEASURES
This MD&A was prepared using results and financial information determined under IFRS. In addition to IFRS financial
measures, management uses 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 used 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.
Generally, a non-IFRS financial measure is a numerical measure of an entity’s historical or future financial performance,
financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-
IFRS financial measures are important as they provide users of our consolidated financial statements with a better
understanding of the results of our recurring operations and their related trends, while increasing transparency and clarity
into our operating results. Management also believes these measures to be useful in assessing the Corporation’s capacity to
fulfil its financial obligations.
By excluding from our results items that arise mainly from long-term strategic decisions and/or do not, in our opinion, reflect
our operating performance for the period, such as the change in fair value of fuel-related derivatives and other derivatives,
gain (loss) on business disposals, restructuring charges, asset impairment, depreciation and amortization, foreign exchange
gains (losses) and other significant unusual items, and by including premiums for fuel-related derivatives and other
derivatives matured during the period, we believe this MD&A helps users to better analyze our results, as well as our ability
to generate cash flows from operations. Furthermore, the use of non-IFRS measures helps users by enabling better
comparability of results from one period to another and better comparability with other businesses in our industry.
Annual Report 2020 Transat A.T. Inc. | 9
Management’s Discussion and Analysis
The non-IFRS measures used by the Corporation are as follows:
Adjusted operating
income (loss)
Operating income (loss) before depreciation, amortization and asset impairment expense,
restructuring charge, lump-sum payments related to collective agreements and other significant
unusual items, and including premiums for fuel-related derivatives and other derivatives
matured during the period. The Corporation uses this measure to assess the operational
performance of its activities before the aforementioned items to ensure better comparability of
financial results.
Adjusted pre-tax
income (loss)
Adjusted net income
(loss)
Income (loss) before income tax expense before change in fair value of fuel-related derivatives
and other derivatives, gain (loss) on business disposals, gain (loss) on asset disposals,
restructuring charge, lump-sum payments related to collective agreements, asset impairment,
foreign exchange gain (loss) and other significant unusual items, and including premiums for
fuel-related derivatives and other derivatives that matured during the period. The Corporation
uses this measure to assess the financial performance of its activities before the aforementioned
items to ensure better comparability of financial results.
Net income (loss) attributable to shareholders before net income (loss) from discontinued
operations, change in fair value of fuel-related derivatives and other derivatives, gain (loss) on
business disposals, gain (loss) on asset disposals, restructuring charge, lump-sum payments
related to collective agreements, asset impairment, foreign exchange gain (loss), reduction in
the carrying amount of deferred tax assets and other significant unusual items, and including
premiums for fuel-related derivatives and other derivatives that matured during the period, net
of related taxes. The Corporation uses this measure to assess the financial performance of its
activities before the aforementioned items to ensure better comparability of financial results.
Adjusted net income (loss) is also used in calculating the variable compensation of employees
and senior executives.
Adjusted net income
(loss) per share
Adjusted net income (loss) divided by the adjusted weighted average number of outstanding
shares used in computing diluted earnings (loss) per share.
Total debt
Total net debt
Long-term debt plus the amount for lease liabilities. Management uses total debt to assess
the Corporation’s debt level, future cash needs and financial leverage ratio. Management
believes this measure is useful in assessing the Corporation’s capacity to meet its current and
future financial obligations.
Total debt (described above) less cash and cash equivalents. Total net debt is used to assess the
cash position relative to the Corporation’s debt level. Management believes this measure is
useful
future
financial obligations.
the Corporation’s capacity
its current and
in assessing
to meet
Annual Report 2020 Transat A.T. Inc. | 10
Management’s Discussion and Analysis
The following tables reconcile the non-IFRS financial measures to the most comparable IFRS financial measures:
(in thousands of Canadian dollars, except per share amounts)
Operating income (loss)
Special items
Depreciation and amortization
Premiums related to fuel-related derivatives and other
derivatives matured during the year
Adjusted operating income (loss)
Income (loss) before income tax expense
Special items
Change in fair value of fuel-related derivatives and other derivatives
Loss (gain) on asset disposals
Foreign exchange loss (gain)
Premiums related to fuel-related derivatives and other
derivatives matured during the year
Adjusted pre-tax income (loss)
Net income (loss) attributable to shareholders
Special items
Change in fair value of fuel-related derivatives and other derivatives
Loss (gain) on asset disposals
Foreign exchange loss (gain)
Premiums related to fuel-related derivatives and other
derivatives matured during the year
Tax impact
Adjusted net income (loss)
Adjusted net income (loss)
Adjusted weighted average number of outstanding shares used
in computing diluted earnings (loss) per share
Adjusted net income (loss) per share
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the figures for 2019 and as at November 1, 2018. See section 9. Accounting.
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
Long-term debt
Lease liabilities
Total debt
Total debt
Cash and cash equivalents
Total net debt
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the figures for 2019 and as at November 1, 2018. See section 9. Accounting.
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
Annual Report 2020 Transat A.T. Inc. | 11
2020
$
(425,962)
99,675
204,112
2019
2018
Restated(1) Not restated(2)
$
(50,593)
8,962
59,125
$
(13,588)
23,875
182,321
—
(122,175)
(167)
192,441
(299)
17,195
(488,973)
99,675
13,715
11,271
3,601
(37,736)
23,875
8,664
(9)
(1,110)
5,044
8,962
(8,360)
(31,064)
(339)
—
(360,711)
(167)
(6,483)
(299)
(26,056)
(496,545)
99,675
13,715
11,271
3,601
—
12,948
(355,335)
(32,347)
23,875
8,664
(9)
(1,110)
6,451
8,962
(8,360)
(31,064)
(339)
(167)
(8,304)
(9,398)
(299)
367
(24,282)
(355,335)
(9,398)
(24,282)
37,747
(9.41)
37,673
(0.25)
37,562
(0.65)
2020
October 31, October 31, November 1,
2018
Restated(1) Restated(1)
$
2019
$
$
49,980
853,906
903,886
—
665,929
665,929
—
565,170
565,170
903,886
(426,433)
477,453
665,929
(564,844)
101,085
565,170
(593,654)
(28,484)
Management’s Discussion and Analysis
3. FINANCIAL HIGHLIGHTS
(in thousands of Canadian dollars, except per share amounts)
Consolidated Statements of Income (Loss)
Revenues
Operating loss
Net income (loss) attributable to shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Adjusted operating income (loss)(3)
Adjusted net income (loss)(3)
Adjusted net income (loss) per share(3)
Consolidated Statements of Cash Flows
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
2020
$
2019
2018
Restated(1) Not restated(2)
$
$
Change
2020
2019
%
%
1,302,069
(425,962)
(496,545)
(13.15)
(13.15)
(122,175)
(355,335)
(9.41)
2,937,130
(13,588)
(32,347)
(0.86)
(0.86)
192,441
(9,398)
(0.25)
2,848,955
(50,593)
6,451
0.17
0.17
17,195
(24,282)
(0.65)
(55.7)
(3,034.8)
(1,435.1)
(1,429.1)
(1,429.1)
(163.5)
(3,681.0)
(3,664.0)
3.1
73.1
(601.4)
(605.9)
(605.9)
1,019.2
61.3
61.5
(46,136)
(60,414)
(33,374)
1,513
216,021
(163,779)
(81,993)
941
68,804
(93,644)
(430)
(982)
(121.4)
63.1
59.3
60.8
214.0
(74.9)
(18,968.1)
195.8
(138,411)
(28,810)
(26,252)
(380.4)
(9.7)
As at
As at
As at
October 31, October 31, November 1,
2018
Restated(1) Restated(1)
$
2020
2019
$
$
Change
2020
Change
2019
%
%
Consolidated Statements of Financial Position
Cash and cash equivalents
Cash and cash equivalents in trust or otherwise reserved
(current and non-current)
426,433
564,844
593,654
(24.5)
(4.9)
308,647
352,771
338,919
(12.5)
4.1
Total assets
Debt (current and non-current)
Total debt(3)
Total net debt(3)
454.9
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the figures for 2019 and as at November 1, 2018. See section 9. Accounting.
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
3 See section 2. Non-IFRS financial measures.
(28,484)
477,453
101,085
372.3
735,080
2,016,071
49,980
903,886
917,615
2,324,490
—
665,929
932,573
2,174,215
—
565,170
(19.9)
(13.3)
100.0
35.7
(1.6)
6.9
—
17.8
Annual Report 2020 Transat A.T. Inc. | 12
Management’s Discussion and Analysis
4. OVERVIEW
IMPACT OF THE COVID-19 PANDEMIC
The global air transportation and tourism industry has faced a collapse in traffic and demand. Travel restrictions, uncertainty
about when borders will reopen, both in Canada and at certain destinations the Corporation flies to, the imposition of
quarantine measures both in Canada and other countries, as well as concerns related to the pandemic and its economic
impacts are creating significant demand uncertainty, at least for fiscal 2021. In response to the first wave of the pandemic,
the Corporation temporarily suspended its airline operations from April 1 to July 22, 2020. Subsequently, the Corporation
implemented reduced summer and winter programs and is continuously making adjustments based on the level of demand
and decisions made by health and state authorities. The Corporation cannot predict all the impacts of COVID-19 on its
operations and results, or precisely when the situation will improve. The Corporation has implemented a series of
operational, commercial and financial measures, including cost reduction, aimed at preserving its cash. The Corporation is
monitoring the situation daily to adjust these measures as it evolves. However, until the Corporation is able to resume
operations at a sufficient level, the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows
from operations and operating results. While the likelihood of the availability of a vaccine in the near future makes it possible
to hope for the resumption of operations at a certain level during 2021, the Corporation does not expect such level to reach
the pre-pandemic level before 2023.
Preserving cash is a priority for the Corporation; the Corporation has taken the following actions with respect to the
COVID-19 pandemic and other opportunities are being evaluated to achieve this objective:
Airline and commercial operations
On July 23, 2020, the Corporation partially resumed airline operations after four months of inactivity. Effective
August 2, 2020, a reduced summer program consisting of 23 routes to some 17 destinations was implemented.
For the winter program (from November to April 2021), to adapt to the low demand resulting from the COVID-19
second wave and to continued border restrictions and requirements in Canada and elsewhere, Transat will gradually
offer a reduced program of international flights departing from Montréal, Toronto et Québec City.
Transat is committed to providing a simple and safe travel experience at every step. To this end, it has launched
its Traveller Care program regarding health measures, which are regularly updated in compliance with
recommendations issued by regulatory authorities. It has also assembled a new comprehensive practical guide full
of tips to help travellers prepare for their trips and travel with peace of mind.
Cost reduction measures
In March, the Corporation decided to early retire all of its Airbus A310s from the fleet. Subsequently, the Corporation
accelerated the expected retirement of its Boeing 737 fleet as well as some of its Airbus A330 to expedite the
transformation of its fleet and make it more uniform (comprising only Airbus aircraft with the same cockpit layout)
and more adapted to the post-COVID-19 market, in terms of both aircraft size and overall capacity.
Management and the Board of Directors, agreed on a voluntary temporary reduction in their compensation ranging
from 10% to 20%, which was in place until November 1, 2020, with the exception of Executive Officers whose
reductions, ranging from between 15% to 20%, are maintained until December 31, 2020 and members of the Board
of Directors whose reduction of 20% is maintained until February 15, 2021.
The Corporation has also been negotiating with its suppliers to benefit from cost reductions and changes in payment
terms, and has implemented measures to reduce expenses and investments.
The Corporation has also reduced its investment expenditures where possible without jeopardizing its
future development.
Annual Report 2020 Transat A.T. Inc. | 13
Management’s Discussion and Analysis
As of the end of March, the Corporation proceeded with the gradual temporary layoff of a large part of its personnel,
reaching approximately 85% at the height of the crisis. Following the resumption of airline operations, the
Corporation was able to recall a certain number of employees, thereby adjusting its workforce to 25% of its
pre-pandemic level.
As of March 15, 2020, the Corporation made use of the Canada Emergency Wage Subsidy (“CEWS”) for its Canadian
workforce, which enabled it to finance part of the salaries of its staff still at work and to propose employees
temporarily laid off to receive a part of their salary equivalent to the amount of the grant received, with no work
required. As at October 31, 2020, approximately two-thirds of the subsidy received corresponded to compensation
paid to employees who were not working.
Financing and cash flows
In March, as a precautionary measure, the Corporation drew down on its $50.0 million revolving credit facility
agreement for operating purposes.
Since March, the Corporation has been renegotiating with aircraft lessors, as well as other lessors, to defer a number
of monthly lease payments.
On October 9, 2020, Transat put in place a $250.0 million subordinated short-term credit facility with the National
Bank of Canada as the lead arranger. This loan facility may be drawn down in tranches at any time before
February 28, 2021, subject to the satisfaction of pre-requisites and applicable borrowing conditions. These
conditions include certain requirements relating to unrestricted cash before and after a drawdown on the facility.
The new loan facility matures on the earlier of March 31, 2021 and the closing of the arrangement with Air Canada.
As part of the implementation of the revised arrangement agreement and the new loan facility, Transat has also been
able to make certain amendments to its existing senior revolving term credit facility, including the temporary
suspension of the application certain financial ratios, providing Transat with additional flexibility in the context of
the current business and economic environment. The amended terms and conditions also include a new
requirement to maintain certain minimum levels of unrestricted cash as well as restrictions on the capacity to
contract additional loans.
In order to protect its cash position and allow recovery after the restrictions have been lifted, the Corporation
granted its customers a fully transferable travel credit valid without expiry date for flights and packages cancelled
due to the exceptional situation and, in particular, to the travel restrictions imposed by governments.
As at October 31, 2020, cash and cash equivalents totalled $426.4 million.
THE HOLIDAY TRAVEL INDUSTRY
The holiday travel industry consists of tour operators, traditional and online travel agencies, destination service providers,
hotel operators, and air carriers. Each of these subsectors includes companies with different operating models.
Generally, outgoing tour operators purchase the various components of a trip locally or abroad and sell them separately or
in packages to consumers in their local markets through travel agencies or via the Web. Incoming tour operators design travel
packages or other travel products consisting of services they purchase in their local market for sale in foreign markets,
generally through other tour operators or travel agencies. Destination service providers are based at destination and sell a
range of optional services to travellers onsite for spontaneous consumption, such as excursions or sightseeing tours. These
companies also provide outgoing tour operators with logistical support services, such as ground, maritime or flight transfers
between airports and hotels or ports and hotels. Travel agencies, operating independently, in networks or online, are
distributors serving as intermediaries between suppliers and consumers. Hotel operators sell accommodation, on an all-
inclusive basis or not, either directly, through travel agencies or through tour operators. Air carriers sell seats through travel
agencies or directly to tour operators that use them in building packages, or directly to consumers.
Annual Report 2020 Transat A.T. Inc. | 14
Management’s Discussion and Analysis
CORE BUSINESS, VISION AND STRATEGY
Core Business
Transat is a leading integrated international tourism company specializing in holiday travel, which operates and markets its
services in the Americas and Europe. It develops and markets holiday travel services in packages or à la carte, including air
travel and hotel stays, and air-only formats. Transat operates under the Transat and Air Transat brands mainly in Canada,
France, the United Kingdom and in ten other European countries, directly or through intermediaries, as part of a multi-
channel strategy. Transat is also a retail distributor, both online and through travel agencies, some of which it owns. It offers
destination services in Mexico, the Dominican Republic and Jamaica. Recently, Transat started setting up a division with a
mission to operate hotels in the Caribbean and Mexico and to market them, particularly in the United States, Europe and
Canada.
Strategy
As part of its 2018–2022 strategic plan, Transat set a two-pronged objective of building sustainable profitability: improve and
strengthen its current business model and pursue hotel development.
Transat will strengthen its current model by maintaining its focus on satisfying the expectations of leisure customers with
user-friendly service for an affordable price. This will be made possible by greater synergy between the Corporation’s various
divisions in Canada, continued efforts to increase efficiency and reduce costs, continuous improvement in the Corporation’s
digital footprint and a special focus on the development of certain functions, such as revenue management or air
network planning.
Lastly, corporate responsibility, whether in terms of the environment, customers, employees, partners, or governance, will
remain a key part of Transat’s strategy.
As of August 23, 2019, Transat’s shareholders approved an arrangement agreement with Air Canada, under which Air Canada
is to acquire all issued and outstanding shares of Transat. On October 9, 2020, a new arrangement agreement with revised
conditions was signed to replace the previous agreement. If this new arrangement agreement is approved by the shareholders
on December 15, 2020, the regulatory approvals are obtained, the other conditions are satisfied and the transaction takes
place, Transat’s business will be integrated into Air Canada’s strategic plan. Meanwhile, the Corporation has continued to
implement its plan, but has slowed down investment in hotel development. The Corporation has continued its cost reduction
and service enhancement efforts, as well as to maintain its ability to fully implement its plan should the transaction not close.
By dramatically disrupting airline and travel businesses, the COVID-19 global pandemic has forced Transat to focus on
adapting to the situation in the short term by targeting cost reduction and cash preservation. At the same time, Transat has
nonetheless strived to move forward with parts of its strategic plan where possible, and to best position itself for recovery
when demand picks up.
Accordingly, for fiscal 2021, Transat has set the following objectives and performance drivers:
1. Obtain the regulatory authorizations necessary to close the transaction with Air Canada, operate in full
compliance with the conditions set by Air Canada, and if applicable, complete the transaction
2. Continue efforts to reduce costs, preserve cash and tailor the offering to the volatile situation triggered by
the COVID-19 pandemic
3. Maintain intact the capacity to operate independently and develop a medium to long-term post-COVID-19
recovery plan.
4. Secure the long-term financing required for that purpose
5. Continue to resize the company in terms of fleet, workforce, installations and resources in line with the plan
in the medium and long term.
6. Redefine the financial structure of the hotel chain based on the new economic environment.
Annual Report 2020 Transat A.T. Inc. | 15
Management’s Discussion and Analysis
REVIEW OF OBJECTIVES AND ACHIEVEMENTS FOR 2020
The main objectives and achievements for fiscal 2020 were as follows:
Obtain the regulatory authorizations necessary to complete the transaction with Air Canada, while maintaining
its capacity to operate independently
Since the approval of the initial arrangement agreement with Air Canada by the shareholders on August 23, 2019, Transat has
made every effort, in cooperation with Air Canada, to obtain the required regulatory approvals.
The COVID-19 pandemic and the deeply disruptive impacts it had on the market has made the assessment of the transaction
by the authorities more complex, creating delays in their analysis process. Accordingly, Transat has used all the deferrals
available in the 2019 arrangement agreement to take the time required to obtain the approvals before the outside date.
Finally, the new arrangement agreement postponed the outside date from December 27, 2020 to February 15, 2021. Efforts
are currently underway to obtain the approvals before this final date. Meanwhile, Air Canada retains discretion to determine
the extent of the remedies it is prepared to offer (beyond those that it is required to offer under the arrangement agreement).
If Air Canada does not come to an agreement with the regulatory authorities and obtain the required approvals before the
outside date of February 15, 2021, the arrangement agreement may be terminated in accordance with its terms.
At the same time, Transat has taken the necessary measures to maintain its capacity to operate as an independent company,
particularly by continuing to improve its cost structure and profitability and by ensuring to retain the key employees required
in such eventuality. In the specific context of the pandemic, Transat has made sure to preserve its cash position by taking a
series of measures aimed at reducing or deferring its expenses, such as temporarily laying off a significant number of
employees (up to 85% at one point in time), reducing management salaries, negotiating with aircraft lessors and building
owners as well as with important suppliers, issuing travel credits for cancelled flights, and arranging for additional financial
sources.
Improve financial performance
Up to mid-March, Transat continued its efforts to reduce costs and improve performance building on the measures initiated
in previous years. These efforts were beginning to pay off, as the results recorded at the end of February put the Corporation
on track to return to profitability for the winter season for the first time in many years.
As of mid-March, restrictions on international travel, government-imposed quarantine measures and more generally the fear
of the pandemic made it very difficult to sell travel, to the point that the Corporation had to completely suspend operations
from April 1 to July 22. Accordingly, efforts were focused on preserving cash using the measures discussed in the
previous paragraphs.
Optimize flight programs in order to maximize revenues and profitability, including increased network density,
fleet utilization and connectivity
While efforts in this respect continued at the beginning of the year according to the course set in previous years, since the
outbreak of the pandemic, they have been focused on adapting the program in real time to the changing situation, based on
travel restrictions, quarantine measures and observed demand.
Continue the transformation of revenue management practices and increase the revenue per unit
The efforts to transform revenue management practices continued at the beginning of the year, contributing to improved
performance early in the year with the adjusted operating income until the beginning of March 2020 up $63.3 million
compared with 2019, due to a significant improvement in the profitability of the sun destinations program, our main program
during the winter season.
The situation since the beginning of the pandemic makes any comparison with prior results meaningless.
Annual Report 2020 Transat A.T. Inc. | 16
Management’s Discussion and Analysis
Continue cost control and cost reduction initiatives
The COVID-19 pandemic has forced Transat to take urgent and drastic cost reduction and cash preservation measures that
far exceeded those that would have been implemented under normal circumstances. The effectiveness of these measures
enabled the Corporation to very quickly reduce its cost base and improve its resilience to the crisis.
Some of these measures consisted in accelerating the implementation of previously planned actions. In particular, the
pandemic allowed Transat to accelerate the transformation of its fleet by retiring its wide-body Airbus A310s, narrow-body
Boeing 737s and certain Airbus A330s earlier than expected and retaining only Airbus A330s and Airbus A321neoLRs, deliveries
of which continued during the period.
Continue to increase our share of direct distribution
The situation since the beginning of the pandemic makes any comparison with prior results meaningless.
Continue to improve the customer satisfaction and maintain a favourable brand perception
The first quarter results show that the improvement in customer satisfaction seen in previous years has continued.
Since introducing the new A321neoLRs, satisfaction rates of customers flying on these aircraft have been particularly high,
an aspect that Transat intends to capitalize on in the future when this aircraft will play a more prominent role in its fleet.
Results measured following the resumption of operations on July 23 show an even higher level of satisfaction, including a
significant increase in the Net Promoter Score. This shows, among other things, that the Traveller Care program
implemented to reassure customers they can travel with Transat and have peace of mind in the specific context of the
pandemic was well received.
Some negative perceptions may have been caused by the decision to issue travel credits for customers whose flights had to
be cancelled due to the pandemic and government travel restrictions, but Transat remains confident in its
brand’s attractiveness.
Maintain the satisfaction and engagement of our teams and encourage retention
Despite the extraordinary circumstances, many efforts were made to maintain the commitment and retention of the teams
that were very actively involved in managing the crisis, most of whom worked from home, as well as to preserve relationships
with employees who were temporarily laid off.
Special attention was given to communication, notably through video-conferences including Q&A sessions with the senior
executives for all staff. Training sessions on working from home and stress management have also been implemented.
The use of the CEWS to allow employees who wished to opt for a leave of absence with partial salary continuance in lieu of a
layoff also helped to maintain commitment.
Finally, the retention plan put in place as part of the transaction has resulted in a voluntary departure rate among employees
identified as key resources and covered by the plan that is significantly lower than in the population as a whole, providing
Transat with the skills it needs to relaunch operations after the pandemic.
Annual Report 2020 Transat A.T. Inc. | 17
Management’s Discussion and Analysis
ABILITY TO DELIVER ON OUR OBJECTIVES
Our ability to deliver on our objectives is dependent on our financial and non-financial resources, both of which have
contributed in the past to the success of our strategies and achievement of our objectives.
Our financial resources are as follows:
Cash
Credit facilities
Our balances of cash and cash equivalents not held in trust or otherwise reserved
totalled $426.4 million as at October 31, 2020.
For operational purposes, we can also rely on, among other resources, a
$50.0 million revolving term credit facility and a $250.0 million subordinated short-
term credit facility maturing on March 31, 2021. Should the transaction with Air
Canada not be completed, the Corporation will have to put in place overall financing
totalling approximately $500.0 million in 2021 to ensure continuity of operations.
Section 7. Financial position, liquidity and capital resources of this MD&A and note 2
to the consolidated financial statements contain more detail on this issue.
Our non-financial resources include:
Brand
Structure
Employees
The Corporation has taken the necessary steps to foster a distinctive brand image
and raise its profile, including its sustainable tourism approach.
Our vertically integrated structure enables us to ensure better quality control over
our products and services and facilitates implementing programs to achieve gains
in efficiency.
Our employees work together as a team and are committed to ensuring overall
customer satisfaction and contributing to improving the Corporation’s effectiveness.
In addition, we believe that the Corporation has strong management.
Supplier relationships
We have exclusive access to certain hotels at sun destinations as well as over 30 years
of privileged relationships with many hotels at these destinations and in Europe.
Subject to obtaining additional financing as discussed in Section 7. Financial position, liquidity and capital resources of this
MD&A and note 2 to the consolidated financial statements, Transat has the resources it needs to meet its 2021 objectives
and continue building on its long-term strategies.
Annual Report 2020 Transat A.T. Inc. | 18
Management’s Discussion and Analysis
5. REVISED ARRANGEMENT AGREEMENT
On October 9, 2020, a revised arrangement agreement [”the revised arrangement agreement” or the “arrangement
agreement”] was approved unanimously by Transat’s Board of Directors, under which Air Canada will acquire all the issued
and outstanding shares of Transat at the price of $5.00 share, payable at the holder’s option in cash or in Air Canada shares
or a combination thereof, and then form a combined world-class company based in Montréal. Air Canada shares issuable
under the option of payment in shares will be issued on the basis of a price of $17.47 per Air Canada share, translating into
an exchange ratio of 0.2862 Air Canada share per Transat share. The revised arrangement agreement terminates and replaces
the original arrangement agreement between Transat and Air Canada dated June 27, 2019, as subsequently amended on
August 11, 2019.
The transaction will be subject to shareholder approval, including approval by at least two thirds of votes cast by the
shareholders present in person or represented by proxy at the special meeting of shareholders to be held on
December 15, 2020 to approve the transaction.
Closing of the transaction with Air Canada is subject to customary closing conditions, including regulatory approvals,
particularly authorities in Canada and the European Union. Notably, a public interest assessment of the arrangement
regarding national transportation is being undertaken by the Canadian authorities. The Commissioner of Competition
released on March 27, 2020 his advisory report to the Minister of Transport further to the Minister's determination that the
proposed arrangement raises issues with respect to the public interest regarding national transportation. On May 1, 2020,
Transport Canada in turn provided its assessment report to the Minister of Transport. To go ahead, the transaction with Air
Canada will have to receive approval from the Governor in Council, on the Minister of Transport’s recommendation. The
Governor in Council does not have a deadline for issuing a decision and there can be no assurance that the transaction with
Air Canada will be approved before the outside date. On May 25, 2020, the European Commission decided to open an in-
depth (“Phase II”) investigation to assess the transaction with Air Canada with regard to European Union antitrust regulations.
The move to Phase II is part of the European Commission's normal process of assessing the impact of transactions submitted
for its approval when there are concerns that a transaction may effectively reduce competition. The European Commission
released on September 28, 2020 a statement of objections to the arrangement. The provisional deadline by which the
Commission must render its decision is now February 9, 2021. The competition authorities’ assessment process is currently
complicated by the COVID 19 pandemic and the impact it is having on the international commercial aviation market.
Among other things, the vast majority of North American, European and international air carriers have requested financial
assistance measures, but have had to implement reductions in capacity (as the Corporation did). This context could impact
the obtaining of approvals from regulatory authorities, especially regarding the appropriate package of remedies aimed at
obtaining those approvals. Air Canada retains discretion to determine the extent of the remedies it is prepared to offer
(beyond those that it is required to offer under the arrangement agreement). If Air Canada does not come to an agreement
with the regulatory authorities and obtain the required approvals before the outside date of February 15, 2021, the
arrangement agreement may be terminated in accordance with its terms.
Under the revised arrangement agreement, the deadline for obtaining the regulatory approvals is set at February 15, 2021
[the “outside date”]. If the required approvals are obtained and the conditions are met, it is now expected that the
arrangement will be completed before that date. These two circulars are available at www.sedar.com under Transat’s profile.
The hotel development strategy and related objectives are affected by the arrangement as the Corporation has agreed to
limit its commitments and expenses related to the execution of its hotel strategy in the period leading up to the closing of
the arrangement.
The management information circular dated November 12, 2020 contains additional information regarding the revised
arrangement agreement. The management information circular dated July 19, 2019 contains additional information regarding
the previous arrangement.
Annual Report 2020 Transat A.T. Inc. | 19
%
3.1
(6.3)
3.8
6.6
(3.4)
(0.3)
17.5
(62.4)
(4.4)
(6.8)
1,090.5
208.4
166.4
1.8
73.1
1,740.6
18.9
(203.6)
(100.0)
227.4
(848.1)
115.8
(685.6)
(62.1)
(397.4)
Management’s Discussion and Analysis
6. CONSOLIDATED OPERATIONS
(in thousands of dollars)
Revenues
Operating expenses
Costs of providing tourism services
Aircraft fuel
Salaries and employee benefits
Aircraft maintenance
Sales and distribution costs
Airport and navigation fees
Aircraft rent
Other airline costs
Other
Share of net loss (income) of an associate and a joint venture
Depreciation and amortization
Special items
2020
$
1,302,069
431,562
258,947
239,250
110,413
97,086
77,622
23,358
109,424
75,410
1,172
204,112
99,675
2019
2018
Restated(1) Not restated(2)
$
2,848,955
$
2,937,130
808,937
517,588
412,375
229,909
209,344
175,833
46,803
251,560
90,923
1,250
182,321
23,875
863,105
498,512
386,898
237,918
209,921
149,699
124,454
263,272
97,577
105
59,125
8,962
Change
%
(55.7)
(46.7)
(50.0)
(42.0)
(52.0)
(53.6)
(55.9)
(50.1)
(56.5)
(17.1)
(6.2)
12.0
317.5
Operating income (loss)
Financing costs
Financing income
Change in fair value of fuel-related derivatives
and other derivatives
Loss (gain) on asset disposals
Foreign exchange loss (gain)
Income (loss) before income tax expense
Income taxes (recovery)
Current
Deferred
Net income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interests
Earnings (loss) per share
Basic
Diluted
1,728,031
(425,962)
48,049
(13,625)
2,950,718
(13,588)
37,935
(21,332)
2,899,548
(50,593)
2,061
(17,935)
(41.4)
(3,034.8)
26.7
(36.1)
13,715
11,271
3,601
8,664
(9)
(1,110)
(8,360)
(31,064)
(339)
58.3
(125,333.3)
(424.4)
(488,973)
(37,736)
5,044
(1,195.8)
(4,376)
12,168
7,792
(496,765)
1,028
(9,048)
(8,020)
(29,716)
(6,494)
1,545
(4,949)
9,993
(525.7)
234.5
197.2
(1,571.7)
(496,545)
(220)
(496,765)
(32,347)
2,631
(29,716)
6,451
3,542
9,993
(1,435.1)
(108.4)
(1,571.7)
(601.4)
(25.7)
(397.4)
(13.15)
(13.15)
(0.86)
(0.86)
0.17
0.17
(1,429.1)
(1,429.1)
(605.9)
(605.9)
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See section 9. Accounting
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
RESTATEMENT OF COMPARATIVE FIGURES
IFRS 16, Leases, was adopted retrospectively on November 1, 2019 with restatement for each prior reporting period
presented. Accordingly, the consolidated statement of income (loss) for the year ended October 31, 2019 has been restated.
Aircraft maintenance costs, aircraft rent, rent included in other costs, depreciation and amortization, financing costs and
foreign exchange effect for the year ended October 31, 2019 were restated to reflect the new accounting policies. The major
changes related to the adoption of IFRS 16 are explained in note 5 to the consolidated financial statements for the year ended
October 31, 2020.
Annual Report 2020 Transat A.T. Inc. | 20
Management’s Discussion and Analysis
REVENUES
We generate our revenues from outgoing tour operators, air transportation, travel agencies, distribution, incoming tour
operators and services at travel destinations.
For the year ended October 31, 2020, revenues were down $1,635.1 million (55.7%). Starting in mid-March, restrictions on
international travel and government-imposed quarantine measures made travel sales very difficult. The flights operated
during the last two weeks of March were mainly intended for the repatriation of the Corporation’s customers to Canada or
their country of origin, resulting in very significant costs. Thereafter, the Corporation suspended all of its flights as of April 1
and therefore had no more sales from that date, until the partial resumption of airline operations on July 23, 2020. Since
the resumption of airline operations, demand remains very weak due to the COVID-19 pandemic with the Corporation’s
capacity representing a fraction of the 2019 level. These factors caused the fall in revenues. For the winter season, the
decline in revenues was partially offset by an increase in the number of travellers across our programs up to the beginning
of March 2020 as a result of our decision to increase capacity.
OPERATING EXPENSES
Total operating expenses were down $1,222.7 million (41.4%) for the year compared with 2019. This decrease was mainly
attributable to the suspension of our airline operations from April 1 to July 22, 2020 due to the COVID-19 pandemic, followed
by a weak resumption of operations owing to demand well below the last year’s level.
Costs of providing tourism services
Costs of providing tourism services are incurred by our tour operators. They include primarily hotel room costs and the cost
of booking blocks of seats or full flights with carriers other than Air Transat. The $377.4 million decrease (46.7%) resulted
primarily from a sharp decline in the number of packages sold compared with 2019 due to the COVID-19 pandemic. To a
lesser extent, the decrease was accentuated by lower hotel room costs during the winter season.
Aircraft fuel
The aircraft fuel expense decreased by $258.6 million (50.0%) during the year, mainly attributable to the suspension of our
airline operations from April 1 to July 22, 2020, combined with a sharp decline in our capacity following the partial resumption
of airline operations due to the COVID-19 pandemic. The decrease in the aircraft fuel expense was partially offset by the
unfavourable settlement of fuel-related derivative contracts due to the collapse in fuel prices since the second quarter
compared with the prices of contracted hedging instruments. For the winter season, the decrease was accentuated by the
decline in fuel price indices compared with 2019.
Salaries and employee benefits
Salaries and employee benefits were down $173.1 million (42.0%) to $239.3 million for the year ended October 31, 2020. The
decrease resulted mainly from significant temporary layoffs. Also, the Corporation made use of the CEWS for its Canadian
workforce for the period from March 15 to October 31, 2020; accordingly, an amount of $113.6 million was recognized as a
deduction from the salary expense during the year, including $38.8 million for active employees.
Sales and distribution costs
Sales and distribution costs include commissions, which are expenses paid by tour operators to travel agencies for their
services as intermediaries between the tour operator and the consumer, credit card fees, distribution expenses and
marketing expenses. Sales and distribution costs amounted to $97.1 million, down $112.3 million (53.6%) compared with
fiscal 2019. This decrease was attributable to fall in revenues.
Annual Report 2020 Transat A.T. Inc. | 21
Management’s Discussion and Analysis
Aircraft maintenance
Aircraft maintenance costs consist mainly of non-capitalizable engine and airframe maintenance expenses incurred by Air
Transat for aircraft as well as in connection with the provision for return conditions. Compared with 2019, these expenses
decreased by $119.5 million (52.0%) during the year. This decrease was attributable to the suspension of our airline operations
from April 1 to July 22, 2020, combined with a sharp decline in our capacity following the partial resumption of airline
operations due to the COVID-19 pandemic. The decrease was amplified by the lower number of aircraft in our seasonal fleet
compared with 2019, as well as the early retirement of all our Airbus A310s.
Airport and navigation fees
Airport and navigation fees consist mainly of fees charged by airports and air traffic control entities. During the year, these
fees were down $98.2 million (55.9%) compared with 2019. This decrease was attributable to the suspension of our airline
operations from April 1 to July 22, 2020, combined with a sharp decline in our capacity following the partial resumption of
airline operations due to the COVID-19 pandemic.
Aircraft rent
The $23.4 million (50.1%) decrease in aircraft rent for the year was attributable to the lower number of seasonal aircraft
compared with 2019.
Other airline costs
Other airline costs consist mainly of handling, crew, catering costs and other costs related to the airline. Other airline costs
were down $142.1 million (56.5%) for the year, compared with 2019. This decrease was attributable to the suspension of our
airline operations from April 1 to July 22, 2020, combined with the significant decline in our capacity following the partial
resumption of airline operations due to the COVID-19 pandemic.
Other
Other expenses were down $15.5 million (17.1%) during the year, compared with 2019. The decrease resulted from the cost
reduction measures implemented by the Corporation in connection with the COVID-19 pandemic.
Share of net income (loss) of a joint venture
Share of net income (loss) of a joint venture represents our share of the net income (loss) of Desarrollo Transimar, our hotel
joint venture. Our share of net loss of a joint venture for the current fiscal year totalled $1.2 million compared with $1.3 million
for 2019. The operations of our hotel joint venture were suspended from the end of March 2020 until July 9, 2020 due to the
COVID-19 pandemic.
Depreciation, amortization and impairment
Depreciation and amortization expense includes depreciation and amortization as well as impairment losses relating to
property, plant and equipment and intangible assets, excluding special items. Depreciation and amortization expense was up
$21.8 million (12.0%) in fiscal 2020. This increase was mainly attributable to right-of-use assets related to the fleet, following
the commissioning of four Airbus A321neoLRs and three A321ceos in 2020. The increase was partially offset by the early
retirement of all our Airbus A310s.
Annual Report 2020 Transat A.T. Inc. | 22
Management’s Discussion and Analysis
Special items
Special items related to the transaction with Air Canada
Professional fees
Compensation (reversal of compensation) expense
Other special items
Impairment of the fleet (including right-of-use asset)
Impairment of the land in Mexico
Impairment of the invesment in a joint venture
Impairment of trademarks
Provision for return conditions of impaired leased aircraft
Severance
2020
$
2019
$
7,753
(4,491)
3,262
10,302
13,573
23,875
50,817
32,826
3,100
2,384
6,395
891
96,413
99,675
-
-
-
-
-
-
-
23,875
SPECIAL ITEMS RELATED TO THE TRANSACTION WITH AIR CANADA
Special items generally include restructuring charges and other significant unusual items as well as impairment losses. For
the year ended October 31, 2020, professional fees of $7.8 million and a compensation expense reversal of $4.5 million were
recorded in connection with the transaction with Air Canada. The compensation expenses are mainly related to the stock-
based compensation plans which include a change of control clause and to adjustments related to stock-based
compensation plan provisions subsequent to the significant rise in the share price. Compensation expenses recorded as
special items result from Air Canada’s offer, which makes it likely that the change of control criteria included in some of the
Corporation’s stock-based compensation plans will be met, and also reduces the vesting period. The share closing price of
$4.65 as at October 31, 2020 was used to calculate expenses related to the stock-based compensation plans,
when applicable.
Total arrangement costs incurred up to October 31, 2020 in connection with the transaction with Air Canada were
$18.1 million compared to the estimate of $19.0 million as planned in the Management Proxy Circular of November 12, 2020.
The arrangement costs include legal and accounting fees and financial advisory fees, some of which are conditional on the
closing of the transaction.
For the year ended October 31, 2019, professional fees of $10.3 million and compensation expenses of $13.6 million were
recorded in connection with the transaction with Air Canada. The share closing price of $15.37 as at October 31, 2019 was
used to calculate expenses related to the stock-based compensation plans, when applicable.
OTHER SPECIAL ITEMS
Due to the COVID-19 pandemic occurring worldwide, the global tourism industry has faced a collapse in demand. As a result,
the Corporation had to scale back its capacity significantly and recognize impairment charges accordingly. These impairment
losses are included in Special items. Ten leased aircraft, namely five Airbus A330s, three Airbus A321ceos and two
Boeing 737-800s, were written down and will no longer be used until they are returned to the lessors. The Corporation
recognized an asset impairment charge of $50.8 million related to these leased aircraft, which is equal to the total carrying
amount of the right-of-use assets, maintenance components and leasehold improvements of the aircraft. In addition,
adjustments of $6.4 million were recorded in connection with the provision for return conditions of these aircraft. The
Corporation is negotiating with the lessors of some of its aircraft in order to return them early.
The Corporation cannot currently forecast all the impacts of COVID-19 on its hotel development strategy, particularly the
use of its land and the start of eventual construction work. However, the land in Mexico does not meet the required criteria
to be presented as an asset held for sale. Given the uncertainty surrounding future use of the land, an assessment of the
recoverable amount of the land in Mexico compared with its carrying amount has been made. The recoverable amount of the
land was determined based on the fair value less costs to sell, according to a valuation prepared by an independent, external
valuator as at October 12, 2020. The determined recoverable amount of the land in Mexico is less than its carrying amount.
Accordingly, as at October 31, 2020, the Corporation recognized an impairment charge of $32.8 million related to its land in
Annual Report 2020 Transat A.T. Inc. | 23
Management’s Discussion and Analysis
Mexico under Special items in order for the carrying amount of the land to be equal to its recoverable amount as at
October 31, 2020.
Lastly, the Corporation recognized asset impairment charges of $3.1 million related to its investment in a joint venture and
$2.4 million related to its trademarks as well as termination benefits of $0.9 million for employees permanently laid off during
the year ended October 31, 2020.
OPERATING RESULTS
Given the above, we recorded an operating loss of $426.0 million (32.7%) for the year, compared with $13.6 million (0.5%)
for the previous year. Operating results by season are summarized as follows:
(in thousands of dollars)
Winter season
Revenues
Operating expenses
Operating income (loss)
Operating income (loss) (%)
2020
2019
2018
Restated(1) Not restated(2)
Change
2020
2019
$
$
$
%
%
1,264,097
1,318,714
(54,617)
(4.3)
1,544,979
1,597,367
(52,388)
(3.4)
1,515,543
1,562,251
(46,708)
(3.1)
(18.2)
(17.4)
(4.3)
(27.4)
1.9
2.2
(12.2)
(10.0)
Summer season
Revenues
Operating expenses
Operating income (loss)
Operating income (loss) (%)
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See section 9. Accounting
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
1,333,412
1,337,297
(3,885)
(0.3)
(97.3)
(69.8)
(1,057.1)
(35,188.8)
1,392,151
1,353,351
38,800
2.8
37,972
409,317
(371,345)
(977.9)
4.4
1.2
1,098.7
1,056.6
We recognized an operating loss for the winter season amounting to $54.6 million (4.3%) compared with $52.4 million (3.4%)
in 2019. The increase in our operating loss was attributable to the significant reduction in capacity in the second half of the
second quarter due to the COVID-19 pandemic as a result of which the decline in revenues was greater than the decrease in
operating expenses. Up to the beginning of March 2020, before the COVID-19 pandemic adversely impacted our results, our
adjusted operating income was up $63.3 million compared with 2019 due to an improvement in the profitability of the sun
destinations program, our main program during the winter season.
During the summer season, the Corporation recorded an operating loss of $371.3 million (977.9%) compared with operating
income of $38.8 million (2.8%) for the previous year. The fall in operating results was attributable to the suspension of our
airline operations from April 1 to July 22, 2020, combined with the significant decline in our capacity following the partial
resumption of airline operations due to the COVID-19 pandemic. Since the resumption of airline operations, demand remains
very weak due to the COVID-19 pandemic with the Corporation’s capacity representing a fraction of the 2019 level. Despite
the fall in revenues and the cost reduction measures implemented to deal with the COVID-19 pandemic, the Corporation had
to maintain certain fixed costs during the suspension of airline operations; as a result, the fall in revenues was more
pronounced than the decrease in operating expenses. Since the resumption of airline operations, demand remained very
weak and operating expenses exceeded revenues. The decline in operating results was accentuated by the special items and
the unfavourable settlement of fuel-related derivative contracts.
During the winter season, we reported an adjusted operating income of $48.5 million (3.8%), compared with $32.8 million
(2.1%) in 2019. For the summer season, we recorded an adjusted operating loss of $170.7 million (449.5%) compared with
adjusted operating income of $159.6 million (11.5%) in 2019. Overall, for the fiscal year, the Corporation recorded an adjusted
operating loss of $122.2 million (9.4%), compared with an adjusted operating income of $192.4 million (6.6%) in 2019.
Annual Report 2020 Transat A.T. Inc. | 24
Management’s Discussion and Analysis
OTHER EXPENSES AND REVENUES
Financing costs
Financing costs include interest on lease liabilities, long-term debt, the accretion expense of the provision for return
conditions and other interest, standby fees, as well as financial expenses. Financing costs increased by $10.1 million in 2020,
compared with 2019. The increase resulted mainly from interest on the aircraft lease obligation following the commissioning
of four Airbus A321neoLRs in 2020, the costs related to our $250.0 million subordinated short-term credit facility arranged
on October 9, 2020 as well as interest on long-term debt due to the drawdown of our $50.0 million revolving term credit
facility agreement in March 2020.
Financing income
Financing income was down $7.7 million during the year compared with 2019, as a result of decreases in cash and cash
equivalents and interest rates since the prior fiscal year.
Change in fair value of fuel-related derivatives and other derivatives
The change in fair value of fuel-related derivatives and other derivatives corresponds to the change in fair value, for the fiscal
year, of the portfolio of derivative financial instruments held and used by the Corporation to manage its exposure to
fluctuations in fuel prices and foreign exchange. For the year, the fair value of fuel-related derivatives and other derivatives
was down $13.7 million, compared with $8.7 million in 2019. Due to the COVID-19 pandemic and the resulting lack of visibility
on its future needs, the Corporation has not contracted any new fuel-related derivatives since March 2020. The decrease in
fair value of fuel-related derivatives and other derivatives was attributable to the maturing of unfavourable foreign exchange
derivatives and the fall in oil price indices compared with 2019.
Loss (gain) on asset disposals
The loss (gain) on asset disposals relates to asset disposals and lease terminations. Due to the global COVID-19 pandemic,
the global tourism industry has faced a collapse in demand and as a result, the Corporation has early terminated certain
leases. The loss of $11.3 million for the year ended October 31, 2020 was mainly attributable to the loss on the termination
of certain aircraft leases and travel agencies of $18.8 million and $0.6 million, respectively. The loss on termination of aircraft
leases resulted from the reversal of lease liabilities of $12.8 million, property, plant and equipment of $31.3 million and other
assets of $0.3 million. The loss was partially offset by an $8.1 million gain on the disposal of Airbus A310 engines.
Foreign exchange loss (gain)
For the year, we recognized a foreign exchange loss of $3.6 million, compared with a foreign exchange gain of $1.1 million
in 2019. This loss resulted mainly from the unfavourable exchange effect on lease liabilities related to aircraft, following the
weakening of the dollar against the U.S. dollar compared with as at October 31, 2019.
INCOME TAXES
For the year ended October 31, 2020, income tax expense amounted to $7.8 million compared with an income tax recovery
of $8.0 million for the previous year. The effective tax rate was -1.6% for the year ended October 31, 2020 and 21.3% for the
previous year.
Owing to the unfavourable impact of the COVID-19 pandemic on our results and the high level of uncertainty related to the
timing of the recovery in demand for leisure travel, during the second quarter of the year ended October 31, 2020, the
Corporation ceased to recognize deferred tax assets and wrote down deferred tax asset balances whose recognition could
no longer be justified under IFRS. The Corporation also reduced the balance of his deferred tax assets by $18.4 million. The
tax deductions underlying these deferred tax assets remain available for subsequent use against taxable income. The deferred
income tax expense recognized in other comprehensive income (loss) related to the change in fair value of derivative financial
instruments designated as cash flow hedges is offset by a deferred income tax recovery recognized through profit or loss.
Annual Report 2020 Transat A.T. Inc. | 25
Management’s Discussion and Analysis
NET INCOME (LOSS)
Considering the items discussed in the Consolidated operations section, net loss for the year ended October 31, 2020 was
$496.8 million compared with $29.7 million in 2019.
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS AND ADJUSTED NET INCOME (LOSS)
Net loss attributable to shareholders amounted to $496.5 million or $13.15 per share (basic and diluted) compared with
$32.3 million or $0.86 per share (basic and diluted) for the previous year. The weighted average number of outstanding shares
used to compute basic per share amounts was 37,747,000 for fiscal 2020 and 37,673,000 for fiscal 2019 (37,747,000 and
37,673,000, respectively, for diluted per share amounts).
For the year ended October 31, 2020, adjusted net loss amounted to $355.3 million ($9.41 per share) compared with
$9.4 million ($0.25 per share) in 2019.
SELECTED QUARTERLY FINANCIAL INFORMATION
The Corporation’s operations are seasonal in nature; consequently, interim operating results do not proportionately reflect
the operating results for a full year. Revenues decreased compared with the corresponding quarters, with the exception of
the first part of winter (Q1). For the first part of winter (Q1), the higher revenues were mainly attributable to the
10.8% increase in the number of travellers in the sun destinations program, our main program for the winter season. For the
second half of winter (Q2) and the summer, the sharp decline in revenues was attributable to the suspension of our airline
operations from April 1 to July 22, 2020, combined with a sharp decline in our capacity following the partial resumption of
airline operations due to the COVID-19 pandemic.
In terms of operating results, for the first part of winter (Q1), the decrease in our operating loss was primarily due to higher
profitability of the sun destinations program, our main program for the winter season. For the second part of winter (Q2) and
the summer, the increase in operating loss was mainly attributable to the suspension of our airline operations from April 1 to
July 22, 2020 combined with a significant decrease in our capacity following the partial resumption of airline operations due
to the COVID-19 pandemic, as a result of which the decline in revenues was greater than the decrease in operating expenses.
The decline in operating results was accentuated by the special items and the unfavourable settlement of fuel-related
derivative contracts. As a result, the following quarterly financial information may vary significantly from quarter to quarter.
Selected unaudited quarterly financial information
Q1-2019
Q2-2019
Q3-2019
(2)
Q4-2019
Q1-2020 Q2-2020 Q3-2020 Q4-2020
$
$
$
$
$
$
Restated
$
897,413
(3,768)
631
698,916
1,728
(1,197)
693,235
37,072
22,820
692,799
(25,066)
(32,962)
571,298
(29,551)
(179,712)
9,546
(132,013)
(45,721)
28,426
(239,332)
(238,370)
$
647,566
(48,620)
(51,970)
(52,952)
(939)
(1,505)
23,049
(33,805)
(179,548)
(45,115)
(238,077)
(1.41)
(0.02)
(0.04)
0.61
(0.90)
(4.76)
(1.20)
(6.31)
(1.41)
(0.02)
(0.04)
0.62
(0.90)
(4.76)
(1.20)
(6.31)
Adjusted operating income
(loss)(1)
Adjusted net income (loss)(1)
Adjusted net income (loss)
per share(1)
1 See section 2. Non-IFRS financial measures
2 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See section 9. Accounting
(20,303)
(39,208)
30,065
40,356
62,098
27,393
(7,550)
(6,421)
97,537
(0.54)
(1.04)
6,166
(0.17)
0.80
0.16
21,108
(38,792)
(1.03)
(79,941)
(90,735)
(139,848)
(156,392)
(3.70)
(4.14)
Annual Report 2020 Transat A.T. Inc. | 26
(in thousands of dollars,
except per share data)
Revenues
Operating income (loss)
Net income (loss)
Net income (loss)
attributable to
shareholders
Basic earnings (loss)
per share
Diluted earnings (loss)
per share
Management’s Discussion and Analysis
FOURTH-QUARTER HIGHLIGHTS
For the fourth quarter, the Corporation generated $28.4 million in revenues, down $664.8 million (95.9%) from $693.2 million
for the corresponding period of 2019. This decrease was attributable to the significant reduction in the Corporation’s
capacity compared with 2019 due to the COVID-19 pandemic, with demand remaining very weak since the resumption of
airline operations suspension on July 23, 2020. Operations generated an operating loss of $239.3 million compared with
operating income of $37.1 million in 2019. The deterioration in our operating results was mainly attributable to a decline in
revenues that was greater than the decrease in operating expenses. Despite the fall in revenues and the cost reduction
measures implemented to deal with the COVID-19 pandemic, the Corporation had to maintain certain fixed costs. The decline
in operating results was accentuated by special items totalling $96.7 million and the unfavourable settlement of fuel-related
derivative contracts. The special items include impairment charges totalling $86.7 million, comprising $50.8 million for assets
related to leased aircraft that will no longer be used until they are returned to the lessors, $32.8 million for the land in Mexico
and $3.1 million for the investment in a joint venture. The special items also include additional provisions for return conditions
of $6.4 million for leased aircraft that will no longer be used until they are returned to the lessors, professional fees and
reversal of compensation expenses of $2.7 million related to the transaction with Air Canada and termination benefits of
$0.9 million.
We recorded a net loss of $238.4 million in the fourth quarter, compared with net income of $22.8 million in 2019. Net loss
attributable to shareholders was $238.1 million ($6.31 per share, basic and diluted), compared with net income $23.0 million
($0.61 per share, basic and $0.62 per share, diluted) in 2019.
For the fourth quarter, adjusted net loss amounted to $156.4 million ($4.14 per share) compared with adjusted net income
of $30.1 million ($0.80 per share) in 2019.
7. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
BASIS OF PREPARATION AND GOING CONCERN UNCERTAINTY
As part of the preparation of the financial statements, management is responsible for identifying any event or situation that
may cast significant doubt on the Corporation’s ability to continue as a going concern. Significant doubt regarding the
Corporation’s ability to continue as a going concern exists if events or conditions, considered collectively, indicate that the
Corporation will be unable to honour its obligations as they fall due during a period of at least, and not limited to, 12 months
from October 31, 2020. If the Corporation concludes that events or conditions cast significant doubt on its ability to continue
as a going concern, it must assess whether the plans developed to mitigate these events or conditions will remove any
possible significant doubt.
Due to the global COVID-19 pandemic, the Corporation’s operations have been severely disrupted and its financial results
significantly impacted. As a result, the Corporation incurred a net loss of $496.8 million for the year ended October 31, 2020
and, as at that date, the Corporation’s current liabilities exceeded the total of its current assets by $163.2 million. However,
as it is described in note 14 to the consolidated financial statements, the Corporation has a new $250.0 million subordinated
short-term credit facility. This new credit facility may be drawn down in tranches at any moment prior to February 28, 2021,
subject to certain pre-requisites and borrowing requirements. These conditions include certain requirements related to
minimum unrestricted cash before and after a drawdown on the facility. Furthermore, the suspension of the application of
financial ratios under the Corporation’s revolving term credit facility and the new short-term loan facility expires on January
30, 2021, after which time, absent of any extension, the Corporation could be in default of its obligations and the term of its
borrowings could be accelerated. The new short-term credit facility will mature at the earliest date between March 31, 2021
and the closing of the arrangement with Air Canada.
Annual Report 2020 Transat A.T. Inc. | 27
Management’s Discussion and Analysis
The global air transportation and tourism industry has faced a collapse in traffic and demand. Travel restrictions, uncertainty
about when borders will reopen, both in Canada and at certain destinations the Corporation flies to, the imposition of
quarantine measures both in Canada and other countries, as well as concerns related to the pandemic and its economic
impacts are creating significant demand uncertainty, at least for fiscal 2021. In response to the first wave of the pandemic,
the Corporation temporarily suspended its airline operations from April 1 to July 22, 2020. Subsequently, the Corporation
implemented reduced summer and winter programs and is continuously making adjustments based on the level of demand
and decisions made by health and state authorities. The Corporation cannot predict all the impacts of COVID-19 on its
operations and results, or precisely when the situation will improve. The Corporation has implemented a series of
operational, commercial and financial measures, including cost reduction, aimed at preserving its cash. The Corporation is
monitoring the situation daily to adjust these measures as it evolves. However, until the Corporation is able to resume
operations at a sufficient level, the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows
from operations and operating results. While the likelihood of the availability of a vaccine in the near future makes it possible
to hope for the resumption of operations at a certain level during 2021, the Corporation does not expect such level to reach
the pre-pandemic level before 2023.
While the Corporation is making every effort and remains confident that the transaction with Air Canada will be completed,
it cannot be certain of this outcome. Should the transaction not be completed, the Corporation’s ability to continue as a
going concern for the next 12 months involves significant judgment and is dependent on its ability to obtain financing in the
aggregate amount of approximately $500.0 million, the impact of the COVID-19 pandemic and related government
restrictions on the Corporation’s operations and liquidity (including the Corporation’s ability to resume normal operations
at a sufficient level), the Corporation’s ability to increase revenues to generate positive cash flows from operations, and the
continued support of its suppliers, lessors, credit card processors and other creditors. Should the transaction not take place,
management is therefore seeking to secure financing that would be required before the maturity of the new subordinated
short-term credit facility (currently, the maturity date is March 31, 2021) and is currently discussing with potential lenders,
including government authorities. These discussions include a possible application under the Large Employer Emergency
Financing Facility (LEEFF). Management could also try to extend the maturity of the new subordinated short-term credit
facility to give itself more time to arrange the required overall financing. Management is also continuing to monitor possible
government assistance programs, including sectoral financial support that could include loans and possibly other types of
support announced by Canada’s Minister of Transport. At the same time, the Corporation is negotiating with its lessors to
amend lease terms and conditions.
There can be no assurance that additional funds available under the existing short-term credit facility will be sufficient to
finance the Corporation’s operations until the maturity of the credit facilities, that the Corporation will be able to borrow
sufficient amounts to meet its needs again, or that it will be able to do so on acceptable terms, or that suppliers, lessors,
credit card processors and other creditors will continue to support the Corporation. The COVID-19 pandemic significantly
strained the Corporation’s ability to return to profitability. Therefore, there can be no assurance that the Corporation will
be able to generate positive cash flow from operating activities in the next twelve months.
The situation indicates material uncertainty casting significant doubt on the Corporation’s ability to continue as a going
concern and, thereby, realize its assets and repay its debt in its normal course of business.
The consolidated financial statements as at October 31, 2020 have been prepared on a going concern basis which assumes
that the Corporation will continue to be in operation for the foreseeable future and will be able to realize its assets and
discharge its liabilities, and meet its obligations in the normal course of business. The consolidated financial statements as
at October 31, 2020 and for the year then ended do not include adjustments to the value and classification of assets, liabilities
and recorded expenses that would otherwise be required if the going concern basis proved to be inappropriate. Such
adjustments may be significant.
Annual Report 2020 Transat A.T. Inc. | 28
Management’s Discussion and Analysis
CONSOLIDATED FINANCIAL POSITION
As at October 31, 2020, cash and cash equivalents totalled $426.4 million, compared with $564.8 million as at
October 31, 2019. Cash and cash equivalents in trust or otherwise reserved amounted to $308.6 million as at the end of
fiscal 2020, compared with $352.8 million in 2019. The Corporation’s statement of financial position reflected $163.2 million
in negative working capital, for a ratio of 0.84, compared with $131.8 million in working capital and a ratio of 1.13 as at
October 31, 2019.
Total assets decreased by $308.4 million (13.3%) from $2,324.5 million as at October 31, 2019 to $2,016.1 million as at
October 31, 2020. This decrease is explained in the financial position table provided below. Equity decreased by
$491.1 million, from $557.5 million as at October 31, 2019 to $66.3 million as at October 31, 2020. This decrease resulted
primarily from the $496.5 million net loss attributable to shareholders, partially offset by an $8.7 million unrealized gain on
cash flow hedges and a $1.3 million foreign exchange gain on the translation of the financial statements of foreign
subsidiaries.
October 31, October 31,
2020
2019 Difference Main reasons for significant differences
Assets
Cash and cash equivalents
Cash and cash equivalents in trust or
otherwise reserved
Restated
(1)
$
$
$
426,433
308,647
564,844
352,771
(138,411)
(44,124)
Trade and other receivables
95,334
137,944
(42,610)
See the Cash flows section
Lower business volume due to the COVID-19
pandemic, partially offset by the issuance of
travel credits
Collection of cash security deposits receivable
from lessors and lower business volume due to
the COVID-19 pandemic, partially offset by CEWS
receivable and withholdings by credit card
processors
Income taxes receivable
17,477
16,523
954
Increase in income taxes recoverable given
losses carried back
Inventories
Prepaid expenses
10,024
47,164
15,847
74,489
(5,823)
(27,325)
Deposits
153,375
183,902
(30,527)
Decrease in fuel inventory
Decrease in prepayments to hotel operators due
to the COVID-19 pandemic
Decrease in deposits for hotel stays and aircraft
maintenance
Deferred tax assets
—
28,148
(28,148)
Write-down of deferred tax assets
Property, plant and equipment
916,382
891,445
24,937
Intangible assets
25,509
36,852
(11,343)
Derivative financial instruments
964
4,870
(3,906)
Investments
14,509
16,533
(2,024)
New aircraft and real estate leases, partially
offset by impairment and depreciation
Impairment and amortization for the year,
partially offset by additions
Maturing of foreign exchange derivatives and fuel
related derivatives during the year
Impairment and share of net loss of a joint
venture, partially offset by capital contributions
Other assets
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See section 9. Accounting
No significant difference
253
(69)
322
Annual Report 2020 Transat A.T. Inc. | 29
Management’s Discussion and Analysis
October 31, October 31,
2020
2019 Difference Main reasons for significant differences
Liabilities
Trade and other payables
Restated
(1)
$
$
$
232,243
311,065
(78,822)
Long-term debt and lease liabilities
903,886
665,929
237,957
Provision for return conditions
143,598
155,120
(11,522)
Income taxes payable
203
4,244
(4,041)
Derivative financial instruments
10,055
12,081
(2,026)
Customer deposits and deferred revenues
608,890
561,404
47,486
Other liabilities
50,215
47,444
2,771
Decrease in business volume due to the COVID-
19 pandemic
New aircraft and real estate leases and
drawdown of the revolving term credit facility,
partially offset by principal repayments on lease
obligations
Increase related to the passage of time and
increase in the number of leased aircraft,
partially offset by reversals related to lease
terminations
Increase in income taxes recoverable given
losses carried back
Maturing of foreign exchange derivatives,
partially offset by unfavourable change in fuel
prices related to contracted derivatives
Increase in travel credits offset by a decrease in
reservations
Increase in the defined benefit obligation
following the decrease in the discount rate
Deferred tax liabilities
674
9,752
(9,078)
Increase in deferred non-capital losses
Equity
Share capital
Share-based payment reserve
Retained earnings (deficit)
Unrealized gain on cash flow hedges
221,012
15,948
(164,138)
(522)
221,012
15,948
336,993
(9,176)
—
—
(501,131)
8,654
No difference
No difference
Net loss
Reclassification of net loss on financial
instruments designated as cash flow hedges
Cumulative exchange differences
(5,993)
(7,326)
1,333
Foreign exchange gain on translation of financial
statements of foreign subsidiaries
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See section 9. Accounting
Annual Report 2020 Transat A.T. Inc. | 30
Management’s Discussion and Analysis
CASH FLOWS
(in thousands of dollars)
Cash flows related to operating activities
2020
$
2019
2018
Restated(1) Not restated(2)
$
$
Change
2020
2019
%
%
Cash flows related to investing activities
Cash flows related to financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See Section 9. Accounting.
2 The figures in the consolidated statement of income (loss) for the year ended October 31, 2018 have not been restated under IFRS 16, as discussed in
Section 9. Accounting, which makes the comparison with figures for 2019 and 2020 not meaningful.
(46,136)
(60,414)
(33,374)
1,513
(138,411)
216,021
(163,779)
(81,993)
941
(28,810)
68,804
(93,644)
(430)
(982)
(26,252)
(121.4)
63.1
59.3
60.8
(380.4)
214.0
(74.9)
(18,968.1)
195.8
(9.7)
Operating activities
Operating activities used $46.1 million in cash flows, compared with $216.0 million in 2019. The decrease resulted from a
$315.5 million decline in the net loss before operating items not involving an outlay (receipt) of cash, combined with a
$38.1 million decrease in the net change in the provision for return conditions. The decrease was partially offset by a
$61.2 million increase in the net change in non-cash working capital balances related to operations and a $30.2 million
increase in the net change in other assets and liabilities related to operations.
The deterioration in cash from operating activities resulted mainly from the suspension of our airline operations from April 1
to July 22, 2020, combined with a significant decline in our capacity following the partial resumption of airline operations
due to the COVID-19 pandemic.
Investing activities
Cash flows used in investing activities totalled $60.4 million for the year, down $103.4 million compared with 2019. Our
additions to property, plant and equipment and intangible assets decreased $102.5 million in 2020 compared with last year,
resulting primarily from the investment reduction measures implemented by the Corporation in connection with the
COVID-19 pandemic, as well as lower maintenance and leasehold improvements capitalized on aircraft than in 2019. In 2020,
the Corporation purchased a spare engine for an Airbus A321neoLR in the amount of $16.6 million. In 2019, the Corporation
acquired a second parcel of land in Puerto Morelos, Mexico, adjacent to the first parcel acquired in 2018, for $15.8 million,
as well as acquisitions related to fleet expansion, including the purchase of an Airbus A321neoLR replacement engine for
$16.8 million. In 2020, our cash and cash equivalents reserved balance increased by $5.0 million.
Financing activities
Cash flows used in financing activities amounted to $33.4 million compared with $82.0 million in 2019. In March 2020, the
Corporation drew down $50.0 million under its revolving term credit facility agreement. The payments on lease liabilities
increased by $2.2 million in 2020, primarily as a result of the commissioning of four Airbus A321neoLRs and three
Airbus A321ceos in 2020. In 2020, payments on lease liabilities included lease cancellation penalties totalling $9.9 million
made in 2020. The increase was partially offset by deferred payments on aircraft and other leases. During the year ended
October 31, 2019, the Corporation received $27.2 million in lease incentives.
Annual Report 2020 Transat A.T. Inc. | 31
Management’s Discussion and Analysis
FINANCING
As at December 11, 2020, the Corporation had several types of funding, consisting primarily of a revolving term credit facility
and lines of credit for issuing letters of credit.
On October 9, 2020, the Corporation amended its $50 million revolving credit facility agreement for operating purposes. The
amended agreement, which expires in 2022, may be extended for a year at each anniversary date subject to lender approval
and the balance becomes immediately payable in the event of a change in control. Under the terms of the agreement, funds
may be drawn down by way of bankers’ acceptances or bank loans, denominated in Canadian dollars, U.S. dollars, euros or
pounds sterling. The agreement is secured by a first movable hypothec on the universality of assets, present and future, of
the Corporation’s Canadian, Mexican and European subsidiaries, subject to certain exceptions. The credit facility bears
interest at the bankers’ acceptance rate, the financial institution’s prime rate or LIBOR, plus a premium. The terms of the
agreement require the Corporation to comply with certain financial ratios and conditions. As at October 31, 2020, the
Corporation benefited from a temporary suspension of the application of certain financial ratios and conditions by its lenders
until January 30, 2021 and $50 million was drawn down under this credit facility.
On October 9, 2020, the Corporation entered into a $250 million subordinated short-term credit agreement for operating
purposes. Under the agreement, which expires on March 31, 2021, or becomes immediately due in the event of a change of
control, drawdowns may be made until February 28, 2021 in the form of bankers’ acceptances or bank loans, in Canadian
dollars, subject to certain conditions, including certain cash and cash equivalent requirements before and after a drawdown
under the credit facility. The agreement is secured by a second movable hypothec on the universality of assets, present and
future, of the Corporation’s Canadian, Mexican and European subsidiaries, subject to certain exceptions. The credit facility
bears interest at the bankers’ acceptance rate, the financial institution’s prime rate, plus a premium. As at October 31, 2020,
the Corporation benefited from a temporary suspension of the application of certain financial ratios and conditions by its
lenders until January 30, 2021 and the credit facility was undrawn.
Off-balance sheet arrangements
In the normal course of business, Transat enters into arrangements and incurs obligations that will impact the Corporation’s
future operations and liquidity, some of which are reflected as liabilities in the consolidated financial statements and others
in the notes to the financial statements.
Obligations that are not reported as liabilities are considered off-balance sheet arrangements. These contractual
arrangements are entered into with non-consolidated entities and consist of the following:
Guarantees (see notes 14 and 25 to the audited consolidated financial statements)
Leases related to undelivered aircraft for which commitments have been made with a term of less than
12 months and/or for low value assets (see note 25 to the audited consolidated financial statements)
Purchase obligations (see note 25 to the audited consolidated financial statements)
Annual Report 2020 Transat A.T. Inc. | 32
Management’s Discussion and Analysis
Off-balance sheet arrangements that can be estimated, excluding agreements with suppliers and other obligations,
amounted to approximately $872.2 million as at October 31, 2020 ($1,286.4 million as at October 31, 2019) and are detailed
as follows:
OFF-BALANCE SHEET ARRANGEMENTS
(in thousands of dollars)
Guarantees
Irrevocable letters of credit
Collateral security contracts
Operating leases
Obligations under operating leases
Agreements with suppliers
2020
2019
(1)
Restated
$
$
23,813
468
25,375
472
847,872
872,153
28,659
900,812
1,260,579
1,286,426
56,830
1,343,256
1 The Corporation adopted IFRS 16, Leases, on November 1, 2019, and restated the 2019 figures. See Section 9. Accounting.
In the normal course of business, guarantees are required in the travel industry to provide indemnifications and guarantees
to counterparties in transactions such as leases, irrevocable letters of credit and collateral security contracts. Historically,
Transat has not made any significant payments under such guarantees. Leases are entered into to enable the Corporation to
lease rather than acquire certain items.
The Corporation has a $75.0 million annually renewable revolving credit facility for issuing letters of credit in respect of which
the Corporation must pledge cash totalling 100% of the amount of the issued letters of credit as collateral security. As at
October 31, 2020, $60.3 million had been drawn down under the facility, of which $56.3 million was to secure obligations
under senior executive defined benefit pension agreements; this irrevocable letter of credit is held by a third-party trustee.
In the event of a change of control, the irrevocable letter of credit issued to secure obligations under senior executive
defined benefit pension agreements will be drawn down.
The Corporation also has a guarantee facility renewable in 2021. Under this agreement, the Corporation may issue collateral
security contracts with a maximum three-year term and for a total amount of $35.0 million. This facility allows the
Corporation, among other things, to issue collateral security contracts to some suppliers to whom letters of credit were
previously issued and for which the Corporation had to pledge cash for the total amount of the outstanding letters of credit.
As at October 31, 2020, $22.8 million was drawn down under this credit facility for issuing letters of credit to some of our
service providers.
For its U.K. operations, the Corporation has a bank line of credit for issuing letters of credit secured by deposits of
£3.3 million [$5.6 million], which has been fully drawn down.
As at October 31, 2020, the off-balance sheet arrangements, excluding agreements with suppliers and other obligations, had
decreased by $414.3 million compared with October 31, 2019. This decrease resulted primarily from the addition of four
Airbus A321neoLRs to our fleet in 2020, the revision of rents to be paid and the payments made in connection with our
seasonal fleet during the period, partially offset by the weakening of the dollar against the U.S. dollar.
Subject to obtaining additional financing as discussed in section 7. Financial position, liquidity and capital resources and
note 2 to the consolidated financial statements, we believe that the Corporation will be able to meet its obligations with cash
on hand, cash flows from operations and drawdowns under existing credit facilities.
Annual Report 2020 Transat A.T. Inc. | 33
Management’s Discussion and Analysis
CONTRACTUAL OBLIGATIONS BY YEAR
Years ending October 31
Contractual obligations
Long-term debt
Lease liabilities
Leases (off-balance sheet)
Agreements with suppliers
and other obligations
Debt levels
2021
$
2022
$
2023
$
2024
$
2025
$
2026 and
beyond
$
Total
$
—
190,989
20,344
49,980
136,447
48,738
—
128,076
70,718
—
107,365
70,618
—
99,442
70,618
—
416,551
566,836
49,980
1,078,870
847,872
10,649
221,982
10,267
245,432
7,138
205,932
5,648
183,631
7,845
177,905
36,974
1,020,361
78,521
2,055,243
The Corporation reported $50.0 million in long-term debt on the statement of financial position.
The Corporation’s total debt amounted to $903.9 million, up $238.0 million compared with 2019, due mainly to additions of
aircraft to our fleet over the past 12 months, the drawdown of our $50.0 million revolving credit facility in March 2020 and
the weakening of the dollar against the U.S. dollar.
Total net debt increased by $376.4 million, from $101.1 million as at October 31, 2019 to $477.5 million as at October 31, 2020.
The increase in total net debt resulted from the increase in total debt, combined with higher cash and cash equivalent
balances than as at October 31, 2019.
Outstanding shares
As at October 31, 2020, the Corporation had three authorized classes of shares: an unlimited number of Class A Variable
Voting Shares, an unlimited number of Class B Voting Shares and an unlimited number of preferred shares. The preferred
shares are non-voting and issuable in series, with each series including the number of shares, designation, rights, privileges,
restrictions and conditions as determined by the Board of Directors.
As at December 4, 2020, there were 37,747,090 total voting shares outstanding. Class A Variable Voting Shares and Class B
Voting Shares of the Corporation are traded on the Toronto Stock Exchange under a single ticker symbol: “TRZ.”
Stock options
As at December 4, 2020, there were a total of 1,738,570 stock options outstanding, 1,557,042 of which were exercisable.
8. OTHER
FLEET
As at October 31, 2020, Air Transat’s fleet consisted of nineteen Airbus A330s (332, 345 or 375 seats), six Airbus A321neoLRs
(199 seats), seven Airbus A321ceos (199 seats) and two Boeing 737-800s (189 seats). Due to the COVID-19 pandemic and the
resulting significant capacity reductions, three Boeing 737-800s and one Airbus A330 were returned to lessors early and the
Corporation made the decision to retire all of its Airbus A310 aircraft early during the fiscal year ended October 31, 2020. In
addition, ten leased aircraft, consisting of five Airbus A330s, three Airbus A321ceos and two Boeing 737-800s, will no longer
be used until they are returned to the lessors.
During winter 2020, the Corporation also had seasonal rentals for five Airbus A321ceos (190 seats) and five Boeing 737-800s
(189 seats).
During the year ended October 31 October 2020, the Corporation took delivery of four Airbus A321neoLRs, which are central
to the transformation of its feet. On November 10, 2020, the Corporation took delivery of an additional Airbus A321neoLR.
Annual Report 2020 Transat A.T. Inc. | 34
Management’s Discussion and Analysis
9. ACCOUNTING
CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements requires management to make estimates and judgments about the
future. We periodically review these estimates, which are based on historical experience, changes in the business
environment and other factors, including expectations of future events, that management considers reasonable under the
circumstances. Our estimates involve judgments we make based on the information available to us. However, accounting
estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected
in future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year
are described below. The Corporation based its assumptions and estimates on parameters available when the consolidated
financial statements were prepared. However, existing circumstances and assumptions about future developments may
change due to market events or to circumstances beyond the Corporation’s control. Such changes are reflected in the
assumptions when they occur.
This discussion addresses only those estimates that we consider important based on the degree of uncertainty and the
likelihood of a material impact if we had used different estimates. There are many other areas in which we use estimates
about uncertain matters.
Impact of COVID-19 pandemic on significant accounting estimates and judgments
Due to the magnitude and global scale of the COVID-19 pandemic, the estimates used and judgments made by management
in preparing the Corporation’s financial statements may change in the short term and the effect of such changes may be
material, which could result in, among other things, impairment of certain assets and/or an increase in certain liabilities. In
addition, these risks could have a significant adverse impact on the Corporation’s operating results and financial position in
the coming months.
Depreciation and impairment of non-financial assets
DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are depreciated over their estimated useful lives taking into account their residual value.
Fleet right-of-use assets, aircraft, aircraft components and leasehold improvements account for a major subclass of
property, plant and equipment. Depreciation expense depends on several assumptions including the period over which the
aircraft will be used, the fleet renewal schedule and the estimate of the residual value of aircraft and aircraft components
at the time of their anticipated disposal.
Changes in estimated useful life and residual value of aircraft could have a significant impact on depreciation expense.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment exists when the carrying amount of an asset or cash-generating unit [“CGU”], in the case of goodwill, exceeds its
recoverable amount, which is the higher of fair value less costs to sell the asset or CGU and value in use. To identify CGUs,
management has to take into account the contributions made by each subsidiary and the inter-relationships among them in
light of the Corporation’s vertical integration and the goal of providing a comprehensive offering of tourism services in the
markets served by the Corporation.
Annual Report 2020 Transat A.T. Inc. | 35
Management’s Discussion and Analysis
The Corporation assesses at each reporting date whether there is any indication that an asset or a CGU may be impaired. If
any indication exists, or when annual impairment testing for an asset or a CGU is required, the Corporation estimates the
recoverable amount of the asset or CGU. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell
and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets; in this case, the impairment test is carried out at the level of
the CGU. Value in use is calculated using estimated net cash flows, typically based on detailed projections over a five-year
period with subsequent years extrapolated using a growth assumption. The estimated net cash flows are discounted to their
present value using a discount rate before income taxes that reflects current market assessments of the time value of money
and the risk specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into
account, if available. If no such transactions can be identified, an appropriate valuation model may be used. Where the
carrying amount of an asset or a CGU exceeds its recoverable amount, the asset or the CGU is considered impaired and is
written down to its recoverable amount. Impairment losses are recognized through profit or loss.
As at October 31, 2020, the Corporation determined that the declines in revenues and demand due to the COVID-19
pandemic and the resulting significant capacity reductions are indications of impairment of its CGUs. Accordingly, the
Corporation performed an impairment test on its CGUs. The recoverable amount of the CGUs was determined based on fair
value less costs to sell, using the transaction price of $5.00 per share under the arrangement with Air Canada dated
October 9, 2020. There can be no assurance that the transaction with Air Canada will be completed on the terms and
conditions described in the circular or at all. Should the transaction not be completed, the Corporation’s share price could
fall. No impairment in the carrying amount of the Corporation’s CGUs was recognized, as their recoverable amount remains
higher than their carrying amount.
Due to significant reductions in capacity related to the COVID-19 pandemic, ten leased aircraft, consisting of five Airbus
A330s, three Airbus A321ceos and two Boeing 737-800s, will no longer be used until they are returned to the lessors. An
impairment charge representing the entire carrying amount of the right-of-use assets, maintenance components and
leasehold improvements for these aircraft was recognized in the consolidated statement of loss under Special items; these
impairment charges totalled $50.8 million.
Due to the COVID-19 pandemic occurring worldwide, the global tourism industry has faced a collapse in demand. The
Corporation cannot currently forecast all the impacts of COVID-19 on its hotel development strategy, particularly the use of
its land and the start of eventual construction work. However, the land in Mexico does not meet the required criteria to be
presented as an asset held for sale. Given the uncertainty surrounding future use of the land, an assessment of the
recoverable value of the land held in Mexico compared with its carrying amount was performed. The recoverable amount of
the land was measured using fair value less costs of disposal. The fair value less costs of disposal was estimated based on
Level 3 inputs, a valuation prepared by an external and independent valuator as at October 12, 2020. The recoverable amount
determined for the land in Mexico is less than its carrying amount. Accordingly, as at October 31, 2020, the Corporation
recognized a $32.8 million impairment charge related to the land in Mexico under Special items in order for the carrying
amount of the land to be equal to its recoverable amount of $50.7 million as at October 31, 2020.
As at October 31, 2020, the Corporation determined that the declines in Desarrollo Transimar’s revenues and demand due
to the COVID-19 pandemic were objective evidence of impairment of its investment in a joint venture. Accordingly, the
Corporation performed an impairment test on its investment to compare its recoverable amount with its carrying amount.
The recoverable amount of the investment was determined based on the fair value less costs to sell. Fair value less costs to
sell was established based on a valuation prepared by an external and independent appraiser as at October 31, 2020, using a
discounted cash flow model based on Level 3 inputs. The cash flows used are management’s most plausible projections given
current and expected market conditions. The recoverable amount of the investment determined is less than its carrying
amount. Accordingly, as at October 31, 2020, the Corporation recognized a $3.1 million impairment charge related to its
investment under Special items in order for the carrying amount of the investment to be equal to its recoverable amount as
at October 31, 2020.
As at October 31, 2020, the pre-tax discount rate used for the investment’s impairment test was 7.1%.
The Corporation performed its annual impairment test to determine whether the carrying amount of trademarks was higher
than their recoverable amount. After performing the test, the Corporation recognized $2.4 million in asset impairment
charges in respect of its trademarks.
No event or change in situation arising during the year ended October 31, 2020 could have required an additional impairment
loss in respect of non-current assets.
Annual Report 2020 Transat A.T. Inc. | 36
Management’s Discussion and Analysis
Fair value of derivative financial instruments
The fair value of derivative financial instruments is the amount for which the instrument could be exchanged between
knowledgeable, willing parties in an arm’s length transaction. The Corporation determines the fair value of its derivative
financial instruments using the purchase or selling price, as appropriate, in the most advantageous active market to which
the Corporation has immediate access. The Corporation also takes into account its own credit risk and the credit risk of the
counterparty in determining fair value for its derivative financial instruments based on whether they are financial assets or
financial liabilities. When the market for a derivative financial instrument is not active, the Corporation determines the fair
value by applying valuation techniques, such as using available information on market transactions involving other
instruments that are substantially the same, discounted cash flow analysis or other techniques, where appropriate. The
Corporation ensures, to the extent practicable, that its valuation technique incorporates all factors that market participants
would consider in setting a price and that it is consistent with accepted economic methods for pricing financial instruments,
including the credit risk of the party involved.
Discount rate of lease liabilities
The Corporation uses its incremental borrowing rate to calculate lease liabilities. The Corporation estimates the incremental
borrowing rate at commencement of the lease by considering several factors, including the risk-free rate at lease inception,
the Corporation’s creditworthiness, the lease currency, the lease term and the nature of the leased property. Given that
various assumptions are used in determining the discount rate of lease liabilities, the calculation involves some inherent
measurement uncertainty.
Provision for return conditions
Aircraft- and equipment-related leases contain obligations arising from the conditions under which the assets must be
returned to the lessor on expiry of the lease [the “return conditions”]. The Corporation records a provision arising from the
return conditions of leased aircraft and engines upon commencement of the lease based on the degree of use until
maintenance to meet the return condition or until expiry of the lease. The provision is adjusted for any changes in the related
forecasted maintenance costs and in the significant accounting estimates and judgments used; these changes are recorded
under “Aircraft maintenance” in the consolidated statement of loss in the period in which they occur. The provision is
discounted using the risk-free pre-tax Canadian government bond rate as at the reporting date for a term equal to the
average remaining term to maturity before the related cash outflow.
The Corporation makes deposits to lessors based on the use of the leased aircraft in connection with certain future
maintenance work, namely maintenance deposits with lessors. Deposits made between the last maintenance performed by
the Corporation and expiry of the lease, as well as certain deposits made in excess of the actual cost of maintenance work,
will not be refunded to the Corporation when the maintenance is performed. These deposits are included in the provision
for return conditions of leased aircraft and engines.
The estimates used to determine the provision for return conditions are based on historical experience, historical costs and
repairs, information from external suppliers, forecasted aircraft utilization, expected timing of repairs, the U.S. dollar
exchange rate and other facts and reasonable assumptions in the circumstances. Given that various assumptions are used in
determining the provision for return conditions, the calculation involves some inherent measurement uncertainty. Actual
results will differ from estimated results based on assumptions.
Annual Report 2020 Transat A.T. Inc. | 37
Management’s Discussion and Analysis
Employee future benefits
The Corporation offers defined benefit pension arrangements to certain senior executives. Pension expense is based on
actuarial calculations performed annually by independent actuaries using the projected unit credit method. The
determination of benefit expense requires assumptions such as the discount rate to measure obligations, expected mortality
and expected rate of future compensation. Actual results will differ from estimated results based on assumptions. Plan
obligations are discounted using current market interest rates. Given that various assumptions are used in determining the
cost and obligations associated with employee future benefits, the actuarial valuation process involves some inherent
measurement uncertainty. Actual results will differ from estimated results based on assumptions.
A 0.25 percentage point increase in the actuarial assumptions below would have the following impacts, all other actuarial
assumptions remaining the same:
Increase (decrease)
Discount rate
Rate of increase in eligible earnings
Taxes
Cost of retirement
benefits for the year
ended October 31,
2020
$
(6)
15
Retirement benefit
obligations as at
October 31, 2020
$
(1,483)
75
Due to the COVID-19 pandemic, its adverse impact on our results and the significant uncertainty related to the timing of the
return of demand for leisure travel, during the second quarter of the year ended October 31, 2020, the Corporation ceased
to recognize deferred tax assets and reduced the carrying amount of deferred tax asset balances for which it was no longer
able to justify recognition under IFRS. In addition, the Corporation measured the available indicators to determine whether
sufficient taxable income could be realized to utilize the deferred tax assets recorded before the second quarter of the year
ended October 31, 2020. As discussed in Section 7. Financial position, liquidity and capital resources of this MD&A and note 2
to the consolidated financial statements, due to the COVID-19 pandemic, the losses generated during the fiscal year ended
October 31, 2020 and the significant uncertainty related to the timing of the return of demand for leisure travel are adverse
indications that deferred tax assets may be realized. For the year ended October 31, 2020, these adverse indications
outweighed the historical favourable indications and the Corporation reduced the balance of its deferred tax assets by
$18.4 million. The tax deductions underlying these deferred tax assets remain available for future use against taxable income.
From time to time, the Corporation is subject to audits by tax authorities that give rise to questions regarding the tax
treatment of certain transactions. Certain of these matters could entail significant costs that will remain uncertain until one
or more events occur or fail to occur. Although the outcome of such matters is not predictable with assurance, the tax claims
and risks for which there is a probable unfavourable outcome are recognized by the Corporation using the best possible
estimates of the amount of the loss. The tax deductibility of losses reported by the Corporation in previous fiscal years with
regard to investments in ABCP was challenged by tax authorities. No provisions are made in connection with this issue, which
could result in expenses of approximately $16.2 million, as the Corporation intends to vigorously defend itself with respect
thereto and firmly believes it has sufficient facts and arguments to obtain a favourable final outcome. However, the
Corporation already paid $15.1 million to the tax authorities in respect of this matter during the fiscal year ended
October 31, 2015 and objected to the notices of assessment received. This amount is recognized as income taxes receivable
as at October 31, 2020 and 2019.
Annual Report 2020 Transat A.T. Inc. | 38
Management’s Discussion and Analysis
FINANCIAL INSTRUMENTS
In the normal course of business, the Corporation is exposed to credit and counterparty risk, liquidity risk and market risk
arising from changes in certain foreign exchange rates, changes in fuel prices and changes in interest rates. The Corporation
manages these risk exposures on an ongoing basis. In order to limit the effects of changes in foreign exchange rates, fuel
prices and interest rates on its revenues, expenses and cash flows, the Corporation can avail itself of various derivative
financial instruments. The Corporation’s management is responsible for determining the acceptable level of risk and only
uses derivative financial instruments to manage existing or anticipated risks, commitments or obligations based on its
past experience.
Foreign exchange risk management
The Corporation is exposed to foreign exchange risk, primarily as a result of its many arrangements with foreign-based
suppliers, lease liabilities, fuel purchases, long-term debt and revenues in foreign currencies, and fluctuations in exchange
rates mainly with respect to the U.S. dollar, the euro and the pound sterling against the Canadian dollar and the euro, as the
case may be. Approximately 64% [74% in 2019] of the Corporation’s costs are incurred in a currency other than the
measurement currency of the reporting unit incurring the costs, whereas approximately 13% [19% in 2019] of revenues are
earned in a currency other than the measurement currency of the reporting unit making the sale. To safeguard the value of
commitments and anticipated transactions, the Corporation has a foreign currency risk management policy that authorizes
the use of forward exchange forward contracts and other types of derivative financial instruments for the purchase and/or
sale of foreign currencies based on anticipated foreign exchange rate trends, expiring in generally less than 18 months. Due
to the COVID-19 pandemic and the resulting lack of visibility on its future needs, the Corporation has not contracted any new
foreign exchange derivatives since March 2020. The Corporation will reassess the situation periodically.
The Corporation documents certain foreign exchange derivatives as hedging instruments and regularly demonstrates that
these instruments are sufficiently effective to continue using hedge accounting. These foreign exchange derivatives are
designated as cash flow hedges.
All derivative financial instruments are recorded at fair value in the consolidated statement of financial position. For the
derivative financial instruments designated as cash flow hedges, changes in value of the effective portion are recognized in
Other comprehensive income (loss) in the consolidated statement of comprehensive loss. Any ineffectiveness within a cash
flow hedge is recognized through profit or loss as it arises in the account Change in fair value of fuel-related derivatives and
other derivatives. Should the hedging of a cash flow hedge relationship become ineffective, previously unrealized gains and
losses remain within Unrealized gain (loss) on cash flow hedges until the hedged item is settled and future changes in value
of the derivative are recognized in income prospectively. The change in value of the effective portion of a cash flow hedge
remains in Accumulated other comprehensive income (loss) until the related hedged item is settled, at which time amounts
recognized in Unrealized gain (loss) on cash flow hedges are reclassified to the same item in the consolidated statement of
income (loss) in which the hedged item is recognized.
Management of fuel price risk
The Corporation is particularly exposed to fluctuations in fuel prices. Due to competitive pressures in the industry, there can
be no assurance that the Corporation would be able to pass along any increase in fuel prices to its customers by increasing
prices, or that any eventual price increase would fully offset higher fuel costs, which could in turn adversely impact its
business, financial position or operating results. To mitigate fuel price fluctuations, the Corporation has implemented a fuel
price risk management policy that authorizes using foreign exchange forward contracts, and other types of derivative
financial instruments, expiring in generally less than 18 months. Due to the COVID-19 pandemic and the resulting lack of
visibility on its future needs, the Corporation has not contracted any new related to fuel-related derivatives since
March 2020. The Corporation will reassess the situation periodically.
The derivative financial instruments used for fuel purchases are measured at fair value at the end of each period, and the
unrealized gains or losses arising from remeasurement are recorded and reported under Change in fair value of fuel-related
derivatives and other derivatives in the consolidated statement of income (loss). When realized, at maturity of fuel-related
derivative financial instruments, any gains or losses are reclassified to Aircraft fuel.
Annual Report 2020 Transat A.T. Inc. | 39
Management’s Discussion and Analysis
Credit and counterparty risk
Credit risk is primarily attributable to the potential inability of customers, service providers, aircraft and engine lessors and
financial institutions, including the other counterparties to cash equivalents and derivative financial instruments, to
discharge their obligations.
Trade accounts receivable included under Trade and other receivables in the statement of financial position totalled
$5.6 million as at October 31, 2020. Trade accounts receivable consist of balances receivable from a large number of
customers, including travel agencies. Trade accounts receivable generally result from the sale of vacation packages to
individuals through travel agencies and the sale of seats to tour operators dispersed over a wide geographic area. No other
customer represented more than 10% of total accounts receivable. As at October 31, 2020, approximately 18% of accounts
receivable were over 90 days past due, whereas approximately 77% were current, that is, under 30 days. Historically, the
Corporation has not incurred any significant losses in respect of its trade accounts receivable.
The other receivables include receivables from two credit card processors totalling $19.2 million. The credit risk for these
receivables is insignificant.
Pursuant to certain agreements entered into with its service providers consisting primarily of hotel operators, the
Corporation pays deposits to capitalize on special benefits, including pricing, exclusive access and room allotments. As of
October 31, 2020, these deposits totalled $9.3 million. These deposits are offset by purchases of person-nights at these
hotels. Risk arises from the fact that these hotels might not be able to honour their obligations to provide the agreed number
of person-nights. The Corporation strives to minimize its exposure by limiting deposits to recognized and reputable hotel
operators in its active markets. These deposits are spread across a large number of hotels and suppliers and, historically,
the Corporation has not been required to write off a considerable amount for its deposits with suppliers.
Under the terms of its aircraft and engine leases, the Corporation pays deposits when aircraft and engines are commissioned,
particularly as collateral for remaining lease payments. These deposits totalled $40.5 million as at October 31, 2020 and will
be returned on lease expiry. The Corporation is also required to pay cash security deposits to lessors over the lease term to
guarantee the serviceable condition of aircraft. These cash security deposits with lessors are generally returned to the
Corporation following receipt of documented proof that the related maintenance has been performed by the Corporation.
As at October 31, 2020, the cash security deposits with lessors that had been claimed totalled $19.0 million and were included
under Trade and other receivables. Historically, the Corporation has not written off any significant amount of deposits and
claims for cash security deposits with aircraft and engine lessors. The credit risk for these receivables is insignificant.
For financial institutions including the various counterparties, the maximum credit risk as at October 31, 2020 related to cash
and cash equivalents, including cash and cash equivalents in trust or otherwise reserved and derivative financial instruments
accounted for in assets. These assets are held or traded with a limited number of financial institutions and other
counterparties. The Corporation is exposed to the risk that the financial institutions and other counterparties with which it
holds securities or enters into agreements could be unable to honour their obligations. The Corporation minimizes risk by
entering into agreements only with large financial institutions and other large counterparties with appropriate credit ratings.
The Corporation’s policy is to invest solely in products that are rated R1-Mid or better (by Dominion Bond Rating Service
[“DBRS”]), A1 (by Standard & Poor’s) or P1 (by Moody’s) and rated by at least two rating firms. Exposure to these risks is closely
monitored and maintained within the limits set out in the Corporation’s various policies. The Corporation revises these
policies on a regular basis.
The Corporation does not believe it was exposed to a significant concentration of credit risk as at October 31, 2020.
Liquidity risk
The Corporation is exposed to the risk of being unable to honour its financial commitments by the deadlines set out under
the terms of such commitments and at a reasonable price [refer to Section 7. Financial position, liquidity and capital
resources]. The Corporation has a Treasury Department in charge, among other things, of ensuring sound management of
available cash resources, financing and compliance with deadlines within the Corporation’s scope of consolidation. With
senior management’s oversight, the Treasury Department manages the Corporation’s cash resources based on financial
forecasts and anticipated cash flows. The Corporation has implemented an investment policy designed to safeguard its
capital and instrument liquidity and generate a reasonable return. The policy sets out the types of allowed investment
instruments, their concentration, acceptable credit rating and maximum maturity.
Annual Report 2020 Transat A.T. Inc. | 40
Management’s Discussion and Analysis
Interest rate risk
The Corporation is exposed to interest rate fluctuations, primarily due to its variable-rate credit facility. The Corporation
manages its interest rate exposure and could potentially enter into swap agreements consisting in exchanging variable rates
for fixed rates.
Furthermore, interest rate fluctuations could have an effect on the Corporation’s interest income derived from its cash and
cash equivalents.
CHANGES IN ACCOUNTING POLICIES
IFRS 16, Leases
IFRS 16, Leases, supersedes IAS 17, Leases. IFRS 16 introduces a single lessee accounting model under which most of
lease-related assets and liabilities are recognized in the statement of financial position. For the lessor, substantially all the
current accounting requirements remain unchanged.
Considering that the Corporation is committed under numerous leases, the adoption of IFRS 16 has a significant impact on
its consolidated financial statements. Under its leases, the Corporation recognizes a right-of-use asset and a liability at the
present value of future lease payments. Depreciation and amortization of the right-of-use asset and interest expense on the
lease liability replaces rent expense related to leases.
IFRS 16 was applied retrospectively on November 1, 2019 with an adjustment to the opening consolidated statement of
financial position as at November 1, 2018 and the consolidated statement of income (loss) for the quarter and nine-month
period ended on July 31, 2019. The accounting policies and the main changes related to the adoption of IFRS 16 are explained
in note 4 to the consolidated financial statements for the year ended October 31, 2020.
On May 28, 2020, the IASB issued COVID-19-Related Rent Concessions – Amendment to IFRS 16. Under certain conditions,
this amendment allows a lessee to recognize any COVID-19 related rent concession in the same way it would account for the
change under IFRS 16 if the change were not a lease modification. The Corporation applied the provisions of this amendment
to all of its leases in its consolidated financial statements for the year ended October 31, 2020. The adoption of this new
amendment had no significant impact on the Corporation’s consolidated statement of income (loss).
IFRIC 23, Uncertainty over Income Tax Treatments
In June 2017, the IASB issued IFRIC 23, Uncertainty over Income Tax Treatments, which clarifies how to apply the recognition
and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over income tax treatments. IFRIC 23 sets
out the circumstances in which uncertain tax treatments should be treated separately or together, and the assumptions to
consider in the assessment of an uncertain tax treatment to determine whether it is probable that a taxation authority will
accept the treatment. Application of IFRIC 23 is effective for the Corporation’s annual reporting period beginning on
November 1, 2019. The adoption of this new IFRIC interpretation has no significant impact on the Corporation’s consolidated
financial statements.
Annual Report 2020 Transat A.T. Inc. | 41
Management’s Discussion and Analysis
10. RISKS AND UNCERTAINTIES
This section provides an overview of the general risks as well as specific risks to which Transat and its subsidiaries are
exposed, and which are likely to have a significant impact on the Corporation’s financial position, operating results and
activities. Since the beginning of the COVID-19 pandemic, a number of risks have materialized and are discussed first in this
section. The risks related to the transaction with Air Canada are also presented separately due to the significance of this
transaction for the Corporation. This section concludes by elaborating on the other risks that are still present, regardless of
the extraordinary circumstances that the Corporation is currently experiencing.
This section does not purport to cover all contingencies or to describe all factors that are likely to affect the Corporation or
its activities. Moreover, the risks and uncertainties described may or may not materialize, and may develop differently or
have consequences other than those contemplated in this MD&A. Additional risks and uncertainties not currently known to
the Corporation or that are currently considered immaterial could also materialize in the future and adversely affect
the Corporation.
RISK GOVERNANCE
To improve its risk management capacities, the Corporation has set up a framework for identifying, assessing and managing
the different risks applicable to its industry and to companies in general. This framework is based on the following principles:
Promote a culture of risk awareness at the head office and in subsidiaries; and
Integrate risk management into strategic, financial and operating objectives.
For each risk, an owner has been designated as accountable for designing and implementing measures to mitigate the
consequences of risks for which he or she is responsible, and/or limit the likelihood of these risks materializing. This owner
is the first line of defence from a risk management standpoint. The Corporation’s support services, namely the Finance, Legal
Affairs, IT Security and Human Resources functions, constitute a second line of defence through their involvement in the
design and operation of the complementary risk mitigating actions. Lastly, the Internal Audit department is the third line of
defence to provide independent assurance on the effectiveness and efficiency of controls over these mitigating actions.
In addition, the Corporation has adopted an ongoing risk management process that includes a quarterly assessment of risk
exposures for the Corporation and its subsidiaries, under the oversight of the Audit Committee (financial risks), the Human
Resources and Compensation Committee (human resource risks) and the Risk Management and Corporate Governance
Committee (strategic and operational risks).
Managing these risks is also shared between members of the Corporation’s management and the members of the Board of
Directors using consistent mapping and language in order to eliminate a silo approach to risk management. As a result of the
COVID-19 pandemic, all risks to which the Corporation is exposed have been re-assessed in detail by the Corporation’s
officers. As part of this essential process, risks were reprioritized based on their level of probability of occurrence and their
quantitative and qualitative impact on the Corporation’s business. The outcome comprised a total of 57 risks, rated in order
of importance: red for the 16 high-priority risks, orange for the 6 priority risks, yellow for the 15 moderate risks and green
for the 20 low risks. These risks were then grouped according to the subject matter for ease of reference, as set out in the
following paragraphs.
KEY RISKS
An overview of each of the key risk categories is provided below, along with a description of the main measures to reduce
the occurrence and mitigate, where possible, the potential impact of these risks on the Corporation’s business objectives.
Although insurance coverage is purchased for some of these risks, and operational mitigating actions are in place, there can
be no assurance that these actions would effectively reduce risks that could have an adverse impact on the Corporation’s
financial position, reputation and/or ability to achieve its strategic and operational objectives.
Annual Report 2020 Transat A.T. Inc. | 42
Management’s Discussion and Analysis
RISKS RELATING TO THE ABILITY TO CONTINUE AS A GOING CONCERN
As indicated in note 2 to the consolidated financial statements, there are material uncertainties that cast significant doubt
about the Corporation’s ability to continue as a going concern and, therefore, realize its assets and discharge its liabilities in
the normal course of business. The consolidated financial statements as at October 31, 2020, have been prepared on a going
concern basis which assumes that the Corporation will continue in operation for the foreseeable future and will be able to
realize its assets and discharge its liabilities and meet its obligations in the normal course of business. The consolidated
financial statements as at October 31, 2020 and for the year then ended do not include any adjustments to the carrying
amounts and classification of assets, liabilities and recorded expenses that would otherwise be necessary if the going
concern basis of presentation were inappropriate. Such adjustments may be significant.
While the Corporation is making every effort and remains confident that the transaction with Air Canada will be completed,
it cannot be certain of this outcome. Should the transaction not be completed, the Corporation’s ability to continue as a
going concern for the next 12 months involves significant judgment and is dependent on its ability to obtain financing in the
aggregate amount of approximately $500.0 million, the impact of the COVID-19 pandemic and related government
restrictions on the Corporation’s operations and liquidity (including the Corporation’s ability to resume normal operations
at a sufficient level), the Corporation’s ability to increase revenues to generate positive cash flows from operations, and the
continued support of its suppliers, lessors, credit card processors and other creditors. Should the transaction not take place,
management is therefore seeking to secure financing that would be required before the maturity of the new subordinated
short-term credit facility (currently, the maturity date is March 31, 2021) and is currently discussing with potential lenders,
including government authorities. These discussions include a possible application under the Large Employer Emergency
Financing Facility (LEEFF). Management could also try to extend the maturity of the new subordinated short-term credit
facility to give itself more time to arrange the required overall financing. Management is also continuing to monitor possible
government assistance programs, including sectoral financial support that could include loans and possibly other types of
support announced by Canada’s Minister of Transport. At the same time, the Corporation is negotiating with its lessors to
amend lease terms and conditions.
There can be no assurance that additional funds available under the existing short-term credit facility will be sufficient to
finance the Corporation’s operations until the maturity of the credit facilities, that the Corporation will be able to borrow
sufficient amounts to meet its needs again, or that it will be able to do so on acceptable terms, or that suppliers, lessors,
credit card processors and other creditors will continue to support the Corporation. The COVID-19 pandemic significantly
strained the Corporation’s ability to return to profitability. Therefore, there can be no assurance that the Corporation will
be able to generate positive cash flow from operating activities in the next twelve months.
COVID-19-RELATED RISKS
This section provides an overview of the specific risks to which Transat and its subsidiaries have been and/or will be exposed
as a result of the COVID-19 pandemic. Since government authorities imposed various restrictions on cross-border travel, the
Corporation’s airline operations were suspended from April 1 to July 22, 2020 and its tour operator’s activities have been
reduced to a minimum. This resulted in a significant reduction in cash flow from operations despite the mitigation measures
taken by the Corporation. This situation is likely to continue until a normal recovery in consumer travel demand. While the
likelihood of the availability of a vaccine in the near future makes it possible to hope for the resumption of operations at a
certain level during 2021, the Corporation does not expect such level to reach the pre-pandemic level before 2023.
The crisis surrounding the COVID-19 pandemic is rapidly evolving and is affecting the entire global tourism industry as well
as the air transportation sector. The extent of the potential impact of COVID-19 on the Corporation and its operations will
depend on the evolution of the pandemic, which is still highly uncertain and cannot be accurately predicted, including the
spread of the virus, the duration of the outbreak, its impact on the discretionary spending of our customers, government
travel and border restrictions, and the effectiveness of measures taken by the governments of various countries to manage
the pandemic. The outlook for travel demand to destinations served by the Corporation for early 2021 remains very difficult
to determine given the restrictions imposed by governments and concerns about cross-border travel related to the COVID-19
virus. The Corporation is monitoring the situation very closely and continues to take appropriate measures as the COVID-19
pandemic evolves.
Annual Report 2020 Transat A.T. Inc. | 43
Management’s Discussion and Analysis
The potential negative impacts of the COVID-19 pandemic include but are not limited to:
A significant reduction or even elimination of demand for the Corporation’s products and services, both
for its flights offered on Air Transat and for its vacation packages, resulting from, among other things,
government travel and border restrictions, travellers’ concerns about COVID-19, new constraints imposed
on travellers at airports and on flights due to COVID-19 such as mask wearing and temperature screening,
lower discretionary consumer spending, job losses or salary reductions resulting from a decline in
economic activity, service disruptions resulting from COVID-19 and changes in consumer travel patterns,
which could have a material adverse effect on cash flows from operations;
Disruptions in operations related to the inability of the Corporation’s employees, its subcontractors or
other business partners to work in a normal manner as a result of COVID-19 restrictions, including
quarantines;
Refund of customer deposits pursuant to legislative and regulatory enforcement actions or litigation,
including class action lawsuits, seeking refunds for cancelled airline tickets and trips subject to travel credit
offers and any resulting material adverse impact on the Corporation’s cash position. Recently, Canadian
federal authorities have indicated their willingness to financially support the Canadian airline industry
subject to the refunding of travel credits. The Corporation would thus be exposed to the risk of having to
make refunds or of not having access to financial support;
Impact of new laws, new regulations and other government interventions resulting from the COVID-19
pandemic, including travel-related measures requiring physical distancing that could result in additional
costs to the Corporation, a lower load factor and increases in the price of the Corporation’s products and
services that could adversely affect demand for such products and services;
Negative impact on global credit and capital markets that could limit the Corporation’s ability to refinance
or renew its obligations and other agreements that are maturing at pre-pandemic or otherwise reasonable
terms and conditions;
The Corporation’s inability to meet the financial ratios required under its credit facilities and commitments
made to its credit card processors or obtain an extension of the suspension of their application, resulting
in more onerous credit terms or repayment obligations that could adversely affect its cash flows;
Tighter credit conditions proposed by the Corporation’s business partners to manage their own cash flows;
Write-down of assets as well as non-recurring expenses resulting from adjustments to the Corporation’s
cost structure;
Significant volatility in fuel prices and exchange rates and the resulting negative impact on the value of the
Corporation’s derivative contracts used to manage fuel-price and foreign exchange risk;
Given the large number of early terminations completed to date, and the decision to pay only legal
indemnities, the Corporation is more exposed to a risk of legal action by these employees;
Amounts that may be withheld by credit card processors would delay the availability of these funds for the
Corporation, creating additional adverse pressure on the Corporation’s cash flows;
Inability to reach an agreement with the regulatory authorities in terms of solutions or remedies to the
concerns raised regarding competition as part of the regulatory approval process for the arrangement with
Air Canada given the current widespread context where a large number of travel industry players have
announced capacity reductions and requested financial assistance measures, which could adversely affect
the ability to obtain the regulatory approvals necessary for the arrangement.
Annual Report 2020 Transat A.T. Inc. | 44
Management’s Discussion and Analysis
Among other things, following the suspension of all its flights from April 1, 2020 and despite a very small-scale resumption of
certain flights as of July 23, 2020, the Corporation, like many other air transportation and travel players affected by
government travel and border restrictions resulting from COVID-19, decided to offer travel credits to affected consumers,
included in Customer deposits and deferred revenue. These measures were rejected by many consumers, who would have
preferred to receive refunds. In some jurisdictions, such as Europe and the United States, governments have adopted
measures to force airlines to refund airline tickets and travel for affected consumers who request so. As a result, the
Corporation reimbursed consumers who booked on a web platform in certain European countries, and only for the flight
segment departing from Europe, representing a minimal portion of the Corporation’s customer deposits. The majority of the
Corporation’s customer deposits were made by Canadian consumers in connection with flight and travel reservations for the
upcoming fall and winter seasons. If the Corporation is unable to offer the flights or trips covered by these reservations, it
could face refund requests for a significant portion of its customer deposits, which would have a material adverse effect on
its liquidity position. Canadian government authorities have not adopted similar measures, but if they do, substantially all of
the Corporation’s customer deposits could be subject to such claims, which would have an equivalent impact on the
Corporation’s liquidity. During the year ended October 31, 2020, the Corporation was the subject of certain class actions in
connection with the reimbursement of customer deposits for flights cancelled in connection with the COVID-19 pandemic.
Some of these class actions could entail significant costs which will remain uncertain until one or more events occur or not.
To date, the outcome of these class actions is impossible to predict with certainty and the financial effect that could result
from it cannot be reliably estimated. Most of the amounts that may have to be paid in connection with class actions are
included in Customer deposits and deferred revenue. If the Corporation had to pay an amount related to class actions, the
unfavourable effect of the settlement would be recognized in the consolidated statement of income and could have a very
unfavourable effect on cash.
In addition, in the normal course of business, the Corporation is facing a number of short-term maturities related to service
contracts with credit card processors, as well as its $50.0 million guarantee facility. These agreements will have to be
renewed or replaced under market conditions prevailing at the time of their expiry, which could result in more onerous
borrowing and operating terms and conditions for the Corporation or an inability to renew or replace such instruments.
Since March, the Corporation has been negotiating with its aircraft lessors as well as with the owners of the premises it
occupies to defer a certain number of monthly rent payments. In addition, the Corporation is negotiating with its suppliers
to obtain cost reductions and changes to its payment terms, and has implemented measures to reduce expenses and
investments. The Corporation has obtained a temporary suspension of the application of certain financial ratios from lenders
under its $50.0 million revolving term credit facility. The Corporation has also been subject to tighter credit conditions by
some credit card processors. The Corporation cannot guarantee that it will be able to favourably negotiate concessions and
deferrals with its aircraft lessors, owners of premises, suppliers, lenders and other partners or, if applicable, that it will be
able to extend the maintenance of such measures.
If the suspension of operations is extended, the lack of operating revenues resulting therefrom could also jeopardize the
Corporation’s ability to meet its financial ratios under its credit facilities and agreements with its credit card processors or
obtain an extension of the suspension of their application, leading to more onerous and restrictive credit terms or repayment
obligations if it cannot come to an agreement on adjustments to existing agreements. Such repayment obligations could have
a material adverse effect on the Corporation’s financial position. Furthermore, the exercise of the option by its holder after
October 31, 2020, the non-controlling interest in Trafictours Canada could also affect the Corporation’s cash.
The COVID-19 pandemic started adversely impacting the Corporation as early as March 2020, resulting in a significant
reduction in cash flows from operations. The Corporation also had to continue to absorb fixed costs such as those related
to employee salaries and benefits, leasing and maintenance of its fleet of aircraft, engines and other equipment, leasing of
office and airport space and financing costs. Although the Corporation has implemented certain measures to mitigate these
impacts, as described in greater detail in this MD&A, the situation will affect its liquidity position until it is able to resume
operations at a sufficient level. The Corporation may have to take supplementary measures, including borrowing in addition
to its existing facilities. The Corporation may have difficulty in accessing sources of financing or reasonable terms and
conditions of financing due to, among other things, the significant reduction in its operations, the outlook for the airline and
travel industry, market conditions, the Corporation’s current debt level and the availability of assets to secure borrowings.
Similarly to the vast majority of air carriers and other travel industry players in the normal course of their operations following
the impacts of COVID-19, the Corporation continues to review various financing options to increase its cash position in order
to deal with possible disruption resulting from COVID-19, including obtaining financing from private and government financial
institutions and the Large Employer Emergency Financing Facility (LEEFF). The Corporation cannot guarantee it will have
access to such sources of financing or acceptable financing terms, or that such supplementary measures will enable it to
mitigate the risks arising from the COVID-19 pandemic, including those mentioned above.
Annual Report 2020 Transat A.T. Inc. | 45
Management’s Discussion and Analysis
Due to the magnitude and global scale of the COVID-19 pandemic, the estimates used and judgments made by management
in preparing the Corporation’s financial statements may change in the short term and the effect of such changes may be
material, which could result in, among other things, impairment of certain assets and/or an increase in certain liabilities. In
addition, these risks could have a significant adverse impact on the Corporation’s operating results and financial position in
the coming months.
RISKS RELATED TO THE TRANSACTION WITH AIR CANADA
On June 27, 2019, Transat concluded a definitive arrangement agreement that provides for Air Canada’s acquisition of all
issued and outstanding shares of Transat, which was amended first on August 11, 2019 by the conclusion of an amending
agreement, and second on October 9, 2020, by a downward revision to the purchase price. This transaction involves many
risks which have been presented in the arrangement Circular of November 12, 2020 [the “circular”], which is available at
www.sedar.com.
The main risks are as follows:
Conditions precedent and required approvals
There can be no certainty, nor can Transat provide any assurance, that all conditions precedent to the arrangement will be
satisfied or waived, nor can there be any certainty of the timing of their satisfaction or waiver. Failure to complete the
arrangement could have a material adverse effect on the trading price of the voting shares.
The completion of the arrangement is subject to a number of conditions precedent, some of which are outside Transat’s
control, including receipt of the final court order authorizing the arrangement and receipt of the key regulatory approvals.
Other conditions precedent which are outside of Transat’s control include, without limitation, the receipt of the required
shareholder approval, holders of no more than 10% of the issued and outstanding voting shares having exercised dissent
rights and the receipt of the other regulatory approvals.
Concerning the key regulatory approvals, the Competition Bureau released on March 27, 2020 its advisory report to the
Minister further to the Minister’s determination that the proposed arrangement raises issues with respect to the public
interest. The European Commission released on September 28, 2020 a statement of objections to the arrangement.
The Corporation is working with Air Canada to address the concerns raised by the Canadian and European agencies with a
view of obtaining their approval of the arrangement, including with respect to remedies that may be proposed by Air Canada
to address such concerns. However, Air Canada retains discretion to determine the extent of the remedies it is prepared to
offer (beyond those that it is required to offer under the arrangement agreement). If Air Canada does not come to an
agreement with the regulatory authorities and obtain the key regulatory approvals before the outside date, the arrangement
agreement may be terminated in accordance with its terms with the payment by Air Canada of the reverse termination fee
(provided the other conditions required for such payment are otherwise met, including that all other conditions precedent
to closing have been complied with).
The process to obtain the key regulatory approvals is complicated by the COVID-19 pandemic and the impact it is having on
the international commercial aviation market. 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
requested financial assistance measures, but have had to implement reductions in capacity (as the Corporation did). This
context could impact the obtaining of the key regulatory approvals, especially regarding the appropriate package of remedies
aimed at obtaining those approvals.
The revised arrangement agreement also contains a new closing condition that Transat’s level of net indebtedness, consisting
of certain liabilities less certain assets as agreed with Air Canada, not exceed a certain specified threshold. Many factors
could impact the level of net indebtedness during the period leading up to the effective time, and there can be no certainty
that Transat will comply with the requisite threshold as of the effective time.
Annual Report 2020 Transat A.T. Inc. | 46
Management’s Discussion and Analysis
There are no assurances that the transaction will be completed on the terms and conditions described in the circular or at
all. If the transaction proposed under the arrangement is not completed for any reason, there is a risk that Transat’s lenders,
lessors, credit card processors, clients and other trade partners become more preoccupied by Transat’s financial position,
prospects and ability to execute its strategic plan as a going concern, which could result in more onerous credit terms,
repayment obligations, an inability to refinance maturing indebtedness or find new sources of financing, restricted access
to goods and services, and/or reduced business, all of which could significantly and adversely affect Transat’s cash flows and
ability to continue as a going concern.
In addition, failure to complete the transaction proposed under the arrangement for any reason could materially negatively
impact the market price of the Corporation’s securities. If the transaction proposed under the arrangement is not completed
for any reason, there can be no assurance that management will be successful in its efforts to identify and implement other
strategic alternatives that would be in the best interests of the Corporation and its stakeholders within the context of existing
economic, market, regulatory and competitive conditions in the industries in which the Corporation operates, on favourable
terms and timing or at all, and, if implemented, that such actions would have the intended results. We also have incurred
significant transaction and related costs in connection with the transaction proposed under the arrangement, and additional
significant or unanticipated costs may be incurred.
Restrictive covenants of the Corporation until the effective time and uncertainty may adversely
affect the Corporation’s business
Since having entered into the 2019 arrangement agreement, the Corporation has been subject to certain restrictive
covenants which have been maintained or enhanced under the revised arrangement agreement, including investments
relating to its hotel strategy. These restrictions have prevented and may continue to prevent the Corporation from pursuing
other business opportunities. Moreover, the uncertainty regarding the satisfaction of all required conditions, including the
key regulatory approvals, may bring clients and suppliers to delay or defer decisions concerning their business with the
Corporation, which may adversely affect the business and operations of the Corporation, regardless of whether the
arrangement is ultimately completed. Similarly, this uncertainty may adversely affect the Corporation’s ability to attract or
retain key personnel. Given the length of time lapsed since the 2019 arrangement agreement was entered into and the length
of time anticipated before the key regulatory approvals are obtained, and the risks that such approvals may not be obtained,
a termination of the arrangement agreement could materially and adversely affect the business of the Corporation and its
ability to carry out its strategic plan.
Moreover, although the Corporation has been able to put in place the subordinated short-term credit facility and
amendments to its revolving term credit facility, such arrangements are for a limited duration and will need to be replaced
if the arrangement is not consummated on or before the outside date. In particular, the subordinated short-term credit
facility matures on the earlier of March 31, 2021 and the closing of the arrangement. Furthermore, the suspension of the
application of financial ratios under the Corporation’s revolving term credit facility and the subordinated short-term credit
facility expires on January 30, 2021, after which time, absent any extension, the Corporation could be in default of its
obligations and the term of its borrowings could be accelerated. Pursuant to the terms of the arrangement agreement, the
Corporation’s ability to put in place new sources of financing is restricted and requires Air Canada’s consent. As a result, if
the requisite shareholder and regulatory approvals are not obtained and the arrangement is not consummated on or prior
to the outside date, the Corporation will need to address the challenges posed by its cash position and the maturing lending
facilities. If the Corporation is not able to renew maturing facilities at acceptable conditions or find financing alternatives,
its financial position and business prospects could be materially and adversely affected.
Termination in certain circumstances, including if the arrangement resolution is not approved by the
shareholders, and termination fee
Each of Transat and Air Canada has the right, in certain circumstances, including if the arrangement resolution is not
approved by shareholders, in addition to termination rights relating to the failure to satisfy the conditions of closing, to
terminate the arrangement agreement. Accordingly, there can be no certainty, nor can Transat provide any assurance, that
the arrangement agreement will not be terminated by either of Transat or Air Canada prior to the completion of the
arrangement. Transat’s business, financial condition or results of operations could also be subject to various material adverse
consequences, including that Transat may remain liable for significant costs relating to the arrangement including, among
others, financial advisory, legal, accounting and printing expenses. Under the arrangement agreement, Transat is required to
pay to Air Canada the termination fee in the event that the arrangement agreement is terminated following the occurrence
of a termination fee event and Air Canada is required to pay to Transat the reverse termination fee in the event that the
arrangement agreement is terminated following the occurrence of a reverse termination fee event.
Annual Report 2020 Transat A.T. Inc. | 47
Management’s Discussion and Analysis
Moreover, although the Corporation has been able to put in place the subordinated short-term credit facility and
amendments to its revolving term credit facility, such arrangements are for a limited duration and will need to be replaced
if the arrangement is not consummated on or before the outside date. In particular, the subordinated short-term credit
facility matures on the earlier of March 31, 2021 and the closing of the arrangement. Furthermore, the suspension of the
application of financial ratios under the Corporation’s revolving term credit facility and the subordinated short-term credit
facility expires on January 30, 2021, after which time, absent any extension, the Corporation could be in default of its
obligations and the term of its borrowings could be accelerated. Pursuant to the terms of the arrangement agreement, the
Corporation’s ability to put in place new sources of financing is restricted and requires Air Canada’s consent. As a result, if
the requisite shareholder and regulatory approvals are not obtained and the arrangement is not consummated on or prior
to the outside date, the Corporation will need to address the challenges posed by its cash position and the maturing lending
facilities. If the Corporation is not able to renew maturing facilities at acceptable conditions or find financing alternatives,
its financial position and business prospects could be materially and adversely affected, and there may be a significant risk
as to the viability of the Corporation and its ability to continue operating as a going concern, which could force Transat to
proceed with a reorganization of operations that could reduce substantially all of the value of its equity.
Furthermore, if the arrangement is not approved by shareholders and otherwise not consummated, there is a risk that
Transat’s lenders, lessors, credit card processors, clients and other trade partners become more preoccupied by Transat’s
financial position, prospects and ability to execute its strategic plan as a going concern, which could result in more onerous
credit terms, repayment obligations, an inability to refinance maturing indebtedness or find new sources of financing,
restricted access to goods and services, and/or reduced business, all of which could significantly and adversely affect
Transat’s cash flows and ability to continue as a going concern.
Uncertainty surrounding the arrangement
As the arrangement is dependent upon satisfaction of a number of conditions precedent, its completion is uncertain. In
response to this uncertainty, Transat’s clients may delay or defer decisions concerning Transat. Any delay or deferral of those
decisions by clients could adversely affect the business and operations of Transat, regardless of whether the arrangement is
ultimately completed. Similarly, uncertainty may adversely affect Transat’s ability to attract or retain key personnel. In the
event the arrangement agreement is terminated, the Corporation’s relationships with customers, suppliers, creditors,
lessors, employees and other stakeholders may be adversely affected. Changes in such relationships could adversely affect
the business and operations of the Corporation.
RISKS RELATED TO HOTEL DEVELOPMENT
Transat had started investing in the hotel industry in 2018 to take advantage of this activity’s currently favourable position in
its tourism chain. However, as a result of the arrangement agreement with Air Canada, the investments required for such
hotel development were suspended. If the said transaction does not occur, the delayed resumption of hotel development
could reduce the positive impacts expected initially and, consequently, the results of operations of the Corporation could
be adversely affected. The decision to pursue hotel development will also depend on the Corporation’s cash position and its
financing capacity in the current environment affected by the COVID-19 pandemic. Also, in the event that the Corporation
decides to develop its hotel business, we may be exposed to risks which may include, among others: construction delays and
cost overruns which may increase the cost of the project; difficulties in obtaining zoning, occupancy and other required
governmental permits and authorizations; strikes or other local labour issues; development fees incurred for projects that
are not completed; significant investments with no immediate corresponding revenues; natural risks such as earthquakes,
hurricanes, floods or fires which may negatively impact a resort; the ability to raise capital, including construction financing;
and government restrictions with respect to the nature and size of a hotel project.
As a result of the foregoing, the Corporation cannot guarantee that any hotel development project would be completed on
time or within the budget limits. In addition, there is a risk that the rate of return on investments will be inferior to the
returns expected when the project is undertaken. Consequently, the results of operations from such hotel development
could be negatively affected, which could in turn have a material adverse effect on the Corporation’s business, financial
position, liquidity, results of operations and prospects.
Annual Report 2020 Transat A.T. Inc. | 48
Management’s Discussion and Analysis
ECONOMIC AND GENERAL RISKS
The holiday travel industry is sensitive to global, national, regional and local economic conditions. Economic factors such as
a significant downturn in the economy, a recession or a decline in consumer purchasing power or the employment rate in
North America, Europe or key international markets could have a negative impact on our business and operating results by
affecting demand for our products and services. To date, signs of recovery in the tourism industry are weak for the
destinations served by the Corporation, and financial markets could continue their negative economic growth.
Seasonal planning of flight and person-night capacity is a risk in the tourism industry. For the Corporation, it entails
forecasting traveller demand in advance and anticipating trends in future preferred destinations. Poor planning for those
needs could unfavourably impact our business, financial situation and operating results.
Our operating results could also be adversely affected by factors beyond Transat’s control, including the following: extreme
weather conditions, climate-related or geological disasters, war, political instability, terrorism whether actual or
apprehended, epidemics or disease outbreaks, consumer preferences and spending patterns, consumer perceptions of
destination-based service and airline safety, demographic trends, disruptions to air traffic control systems, and costs of
safety, security and environmental measures. Furthermore, our revenues are sensitive to events affecting domestic and
international air travel as well as the level of car rentals and hotel and cruise reservations.
COMPETITION RISKS
Regardless of the risks arising from the transaction with Air Canada, Transat operates in an industry in which competition
has always been intense. Air carriers and tour operators have expanded their presence in markets long served by Transat.
Some of them are larger, with strong brand name recognition and an established presence in specific geographic areas,
substantial financial resources and preferred relationships with travel suppliers. We also face competition from travel
suppliers selling directly to travellers at very competitive prices. The Corporation could thus be unable to compete
successfully against existing or potential competitors, and intense competition could have a material adverse effect on its
operations, prospects, revenues and profit margin.
In addition, traveller needs dictate how our industry evolves. In recent years, travellers have demanded higher value, better
product selection and personalized service, all at competitive prices. Widespread adoption of the Internet now makes it
easier for travellers to access information on travel products and services directly from suppliers, thus bypassing not only
tour operators such as Transat, but also retail travel agents through whom we generate a portion of our revenues. Since our
available seat capacity and person-nights are also influenced by market forces, our business model is called into question in
some respects. The Corporation’s inability to rapidly meet those expectations in a proactive manner could adversely impact
its competitive positioning while reducing profitability of its products.
Further, given that we rely to some extent on retail travel agencies for access to travellers and revenues, any consumer shift
away from travel agencies and toward direct purchases from travel suppliers could impact the Corporation.
These competitive pressures could adversely impact our revenues and margins since we would likely have to match
competitors’ prices. The Corporation’s performance in all of the countries in which it operates will depend on its continued
ability to offer quality products at competitive prices.
Annual Report 2020 Transat A.T. Inc. | 49
Management’s Discussion and Analysis
REPUTATION RISK
The ability to maintain favourable relationships with its existing customers and attract new customers greatly depends on
Transat’s service offering and its reputation. While the Corporation has already implemented sound governance practices,
including a code of ethics, and developed certain mechanisms over the years to prevent its reputation from being adversely
affected, there can be no assurance that Transat will continue to enjoy a good reputation or that events beyond its control,
such as the COVID-19 pandemic, will not tarnish its reputation. The loss or tarnishing of its reputation could have a material
unfavourable effect on the Corporation’s operations, prospects, financial position and operating results.
In addition, the market and travellers are increasingly demanding that a public company, such as Transat, be recognized as a
socially responsible company in all respects. Over the years, the Corporation has adopted multiple measures to obtain such
recognition, including its Travelife certification program, its agreement with SAF+ Consortium, its new fleet of more efficient,
less polluting Airbus A321neoLR aircraft, its support for local populations in the countries in which the Corporation operates,
and its ISO and LEED certifications. Despite these initiatives, it is possible that, in the eyes of certain organizations,
institutions or shareholders, the Corporation may not fully meet the definition of a socially responsible company, which
could also tarnish the Corporation’s reputation.
FINANCIAL RISKS
The travel industry in general and our operations in particular are seasonal. As a result, our quarterly operating results are
subject to fluctuations. In our view, comparisons of our operating results between quarters or between six-month periods
are not necessarily meaningful and should not be relied on as indicators of future performance. Furthermore, due to the
economic and general factors described herein, as well as those discussed in the Risks section in relation to COVID-19, our
operating results in future periods could fall short of the expectations of securities analysts and investors, thus affecting the
market price of our shares.
The availability of financing under our existing credit facilities is subject to compliance with certain financial ratios and
conditions. There can be no guarantee that, in the future, our ability to use our existing credit facilities or to obtain additional
financing will not be jeopardized. Moreover, financial market volatility could limit access to credit and raise borrowing costs,
hampering access to additional funding under satisfactory terms and conditions. Our business, financial position and
operating results could thus be adversely affected.
Transat is particularly exposed to fluctuations in fuel costs. Due to competitive pressures in the industry, there can be no
assurance that we would be able to pass along any increase in fuel prices to our customers by increasing fares, or that any
such fare increase would offset higher fuel costs, which could in turn adversely impact our business, financial position or
operating results.
Transat has significant non-cancellable lease obligations relating to its aircraft fleet. If revenues from aircraft operations
were to decrease, the payments to be made under our existing lease agreements could have a substantial impact on
our business.
Transat is exposed, due to its many arrangements with foreign-based suppliers, to fluctuations in exchange rates mainly
concerning the U.S. dollar, the euro and the pound sterling against the Canadian dollar. These exchange rate fluctuations
could increase our operating costs or decrease our revenues. Changes in interest rates could also impact interest income
from our cash and cash equivalents as well as interest expenses on our variable-rate debt instruments, which in turn could
affect our interest income and interest expenses.
In the normal course of business, we receive customer deposits and advance payments. If funds from advance payments
were to diminish or be unavailable to pay our suppliers, we would be required to secure alternative capital funding. There
could be no assurance that additional funding would be available under terms and conditions suitable to the Corporation,
which could adversely affect our business. Moreover, these advance payments generate interest income for Transat. In
accordance with our investment policy, we are required to invest these deposits and advance payments exclusively in
investment-grade securities. Any failure of these investment securities to perform at historical levels could reduce our
interest income.
Annual Report 2020 Transat A.T. Inc. | 50
Management’s Discussion and Analysis
As a Corporation that processes information with respect to credit cards used by our customers, we must comply with the
regulatory requirements of our credit card processors. Failure to comply with certain financial ratios or certain rules
regarding deposits or bank card data security may result in penalties or in the suspension of service by credit card
processors. The inability to use credit cards could have a significant negative impact on our reservations and consequently
on our operating results and profitability.
Last, it is sometimes difficult to foresee how certain Canadian or international tax laws will be interpreted by the appropriate
tax authorities. Subsequent to interpretation of these laws by the different authorities, the Corporation may have to review
its own interpretations of tax laws, which in turn could have an adverse impact on our profit margin.
KEY SUPPLIES AND SUPPLIER RISKS
Despite being well positioned due to our vertical integration, we depend on third parties who supply us with certain
components of our packages. Any significant interruption in the flow of goods and services from these suppliers, which may
be outside our control, could have a significant adverse impact on our business, financial position and operating results.
Our dependence, among others, on Airbus, Rolls-Royce, General Electric, Lufthansa Technik, A.J. Walter and Pratt & Whitney
means that we could be adversely affected by problems connected with Airbus aircraft and Rolls-Royce or General Electric
engines, including defective material, mechanical problems or negative perceptions among travellers. The Corporation also
relies on certain suppliers for its information system security and maintenance. See the Technological Risks section.
We are also dependent on a large number of hotels. In general, these suppliers can terminate or modify existing agreements
with us on relatively short notice. The potential inability to replace these agreements, to find similar suppliers, or to
renegotiate agreements at reduced rates could have an adverse effect on our business, financial position and operating
results.
Furthermore, any decline in the quality of travel products or services provided by these suppliers, or any perception by
travellers of such a decline, could adversely affect our reputation. Any loss of contracts, changes to our pricing agreements,
access restrictions to travel suppliers’ products and services or negative shifts in public opinion regarding certain travel
suppliers resulting in lower demand for their products and services could have a significant effect on our results.
Annual Report 2020 Transat A.T. Inc. | 51
Management’s Discussion and Analysis
AVIATION RISKS
To carry on business or extend its outreach, the Corporation requires access to aircraft that are largely operated by its
subsidiary Air Transat. This fleet consists primarily of aircraft leased for several years, sometimes under renewable leases,
with varying renewal dates and conditions. If the Corporation were unable to renew its leases for long-term or seasonal
leasing, secure timely access to appropriate aircraft under adequate conditions or retire certain aircraft as anticipated, such
an outcome could adversely affect the Corporation.
Our focus on three types of Airbus aircraft could result in significant downtime for part of our fleet if mechanical problems
arise or if the regulator releases any mandatory inspection or maintenance directives applicable to our types of aircraft. If
our operations are disrupted due to aircraft unavailability, the loss of associated revenues could have an adverse impact on
our business, financial position and operating results.
An incident involving one of our aircraft during our operations could give rise to repair costs or major replacement costs for
the damaged aircraft, service interruption, and claims. Consequently, such an event could have an unfavourable impact on
the Corporation’s reputation.
The Corporation also requires access to airport facilities in its source markets and multiple destinations. In particular, the
Corporation must have access to takeoff and landing slots and gates under conditions that allow it to be competitive.
Accordingly, any difficulty in securing such access or disruptions in airport operations caused, for instance, by labour
conflicts or other factors could adversely affect our business.
With the privatization of airports and air navigation authorities in Canada, airports and air navigation authorities have
imposed significant increases in airport user fees and air navigation fees, particularly since some of these airports are located
in U.S. border towns and are not subject to such fees. If these user and navigation fees were to increase substantially, our
business, financial position and operating results could be adversely affected, which would result in certain routes being
conceded to our U.S. competitors.
TECHNOLOGICAL RISKS
Transat relies heavily on various information and telecommunications technologies to operate its business, increase its
revenues and reduce its operating expenses. Our business depends on our ability to manage reservation systems, including
handling high telephone call volumes on a daily basis, monitor product profitability and inventory, adjust prices quickly,
access and protect information, distribute our products to retail travel agents and other travel intermediaries, and stave off
information system intrusions. Rapid changes in these technologies and growing demand for web-based or mobile
reservations could require higher-than-anticipated capital expenditures to improve customer service, which could impact
our operating results.
These technology systems may be vulnerable to a variety of sources of failure, interruption or misuse, including by reason of
third-party suppliers’ acts or omissions, natural disasters, terrorist attacks, telecommunication systems failures, power
failures, computer viruses, computer hacking, unauthorized or fraudulent users, and other operational and security issues.
Furthermore, the exploitation of system vulnerabilities is increasingly sophisticated and frequent and requires constant
management of and developments in the measures taken. While Transat continues to invest in initiatives, including security
initiatives and disaster recovery plans, these measures may not be adequate or implemented properly or in a timely manner.
Any systems failures or outages could materially and adversely affect the Corporation’s operations and its customer
relationships and could have an adverse effect on the Corporation’s reputation, its operating results and financial position.
Furthermore, several of those information technology systems depend on third-party providers, such as Softvoyage, Datalex
and Radixx. Those suppliers sell more external solutions (through partnerships or cloud services) requiring additional control
measures. If these providers were to become incapable of maintaining or improving efficient technology solutions in a
profitable and timely manner, the Corporation would be unable to react effectively to information security attacks, obtain
new systems to meet growth in its customer base or support new products offered by the Corporation. Consequently, such
situations could generate additional expenses, which would unfavourably impact the Corporation’s financial position.
Annual Report 2020 Transat A.T. Inc. | 52
Management’s Discussion and Analysis
CYBER ATTACK RISKS
The Corporation gathers, uses and retains over a fixed period of time large amounts of customer data for commercial,
marketing and other purposes in our various computer systems. This data is stored and processed in our facilities and in
third-party facilities, including, for example, in a cloud-based environment hosted by a third party. The integrity and
protection of the data of our customers, employees and business, as well as the continued operation of our systems and
other third-party service providers, are essential to our operations. Security and privacy regulations and contractual
obligations are increasingly demanding.
Despite our efforts to protect against unauthorized access to our systems and sensitive information, due to the scope and
complexity of their information technology structure, our reliance on third parties to support and protect our structure and
data, and a constantly evolving cyber threat environment, our systems and those of third parties we rely on are subject to
disruptions, failures, unauthorized access, cyber terrorism, employee errors, negligence, fraud or other misuse. In addition,
given the sophistication of hackers to gain unauthorized access to our sensitive information, we may be unable to detect the
violation for long periods of time, or even not at all. Such events, whether accidental or intentional, could result in the theft,
unauthorized access or disclosure, loss, misuse or unlawful use of customer data that could damage our reputation, disrupt
our services or result in business loss, as well as repair and other costs, fines, investigations, legal actions or proceedings.
As a result, future incidents could have a material adverse effect on the Corporation, including our business, financial
condition, liquidity and operating results.
REGULATORY RISKS
The industry in which Transat operates is subject to extensive Canadian and foreign government regulations. These relate to,
among other things, security, safety, consumer rights, permits, licensing, intellectual property rights, privacy, competition,
pricing and the environment. Consequently, Transat’s future results may vary depending on the actions of government
authorities with jurisdiction over our operations. These actions include the granting and timing of certain government
approvals or licences; the adoption of regulations impacting customer service standards (such as new passenger security
standards); the adoption of more stringent noise restrictions or curfews; and the adoption of provincial regulations impacting
the operations of retail and wholesale travel agencies. In addition, the adoption of new or different regulatory frameworks
or amendments to existing legislation or regulations and tax policy changes could affect our operations, particularly as
regards hotel room taxes, car rental taxes, airline taxes and airport fees.
In the fight against climate change, the International Civil Aviation Organization (ICAO) has established an international model
whereby taxes would be imposed on greenhouse gas emissions to offset emissions. For domestic air travel, the federal
government plans to introduce new legislation that would be accompanied by regulations to implement a carbon pricing
system. In particular, this could require the Corporation’s airline to use a minimum percentage of sustainable clean fuel. The
impact of this new legislation on the aviation industry is not clear at this time, nor the potential financial implications for Air
Transat. However, if this legislation does materialize, additional costs could result, which the Corporation might be unable
to fully pass on through its product selling prices. In such a scenario, its margin would be adversely affected.
In the course of our business in the air carrier and travel industry, the Corporation is exposed to claims and legal proceedings,
including class action suits. Litigation and claims could adversely affect our business and operating results.
Lastly, as previously described in the Risks Related to the Transaction with Air Canada section, Air Canada’s acquisition of
the issued and outstanding shares of Transat is subject to regulatory approval. To date, there can be no assurance that the
acquisition would be carried out or would be carried out in accordance with terms and conditions imposed by the regulators.
Annual Report 2020 Transat A.T. Inc. | 53
Management’s Discussion and Analysis
HUMAN RESOURCE RISKS
Labour costs constitute one of Transat’s largest operating cost items. There can be no assurance that Transat will be able to
maintain such costs at levels that do not negatively affect its business, results from operations and financial position.
The Corporation’s ability to achieve its business plan is a function of the experience of its key executives and employees, and
their expertise in the tourism, travel and air carrier industries. The loss of key employees could adversely affect our business
and operating results. Further, our recruitment program, salary structure, performance management programs, succession
plan, retention plan, as well as our training plan carry risks that could have adverse effects on our ability to attract and retain
the skilled resources needed to sustain the Corporation’s growth and success. Retention risk is all the more likely amid the
COVID-19 pandemic, which is putting strong pressure on all of the Corporation’s employees, given the outlook of a very slow
recovery in the tourism industry.
As at October 31, 2020, the Corporation had 5,100 employees, nearly 75% of whom were inactive as at that date. Canadian
employees, both active and inactive, benefit from employee assistance programs subsidized by the Canadian government.
The Corporation’s Air Transat subsidiary is the only subsidiary with unionized employees, who are governed by six collective
agreements, three of which will expire in 2021 and two in 2022. The Air Line Pilots Association agreement, which expired on
May 1, 2020, has been extended for a one-year term until April 30, 2021. Furthermore, it is possible that negotiations to
renew these collective agreements could give rise to work stoppages or slowdowns or higher labour costs in the coming
years that could unfavourably impact our operations and operating income.
INSURANCE COVERAGE RISKS
We hold and maintain full force insurance policies for amounts conforming to industry standards. Our liability insurance for
our tour operator and travel agency activities covers the liability for bodily harm or property damage suffered by travellers
or third parties. In the context of our activities as a tour operator, we use reasonable efforts to ensure that our service
providers also have insurance covering bodily harm or property damage suffered by travellers. Furthermore, in collaboration
with an insurer, we established a voluntary professional liability insurance (errors and omissions) plan for our franchisees.
We also hold and maintain in full force insurance policies for amounts in accordance with airline industry standards and in
compliance with applicable statutory requirements and the covenants of our aircraft lease agreements. Our liability
insurance for airline operations covers liability related to damages resulting from injury or death of passengers, as well as to
damage suffered by third parties. The limit for any single event is US$1.25 billion with the exception of war risk bodily
injury/property damage to third parties excluding passengers where the limit is US$250 million for any single event in the
aggregate. In this latter regard, additional insurance is carried and maintained for war risk bodily injury/property damage to
third parties excluding passengers covering the excess of US$250 million up to the limit of US$1.0 billion for any single event
in the aggregate.
In addition, the Corporation has directors’ and officers’ liability insurance and professional liability insurance to pay the
amounts the Corporation may be required to disburse in connection with lawsuits specifically involving directors and officers,
not the Corporation.
However, there can be no assurance of all risks being covered in this manner or our ability to secure coverage providing
favourable levels and conditions at an acceptable cost.
Although we have never faced a liability claim for which we did not have adequate insurance coverage, there can be no
assurance that our coverage will be sufficient to cover larger claims or that the insurer concerned will be solvent at the time
of any covered loss. In addition, there can be no assurance that we will be able to obtain coverage at acceptable levels and
cost in the future. These uncertainties could adversely affect our business and operating results.
Annual Report 2020 Transat A.T. Inc. | 54
Management’s Discussion and Analysis
11. CONTROLS AND PROCEDURES
The implementation of the Canadian Securities Administrators National Instrument 52-109 represents a continuous
improvement process, which has prompted the Corporation to formalize existing processes and control measures and
introduce new ones. Transat has chosen to make this a corporate-wide project, which will result in operational improvements
and better management.
In accordance with this instrument, the Corporation has filed certificates signed by the President and Chief Executive Officer
and the Vice-President, Finance and Administration and Chief Financial Officer that, among other things, report on the
design and effectiveness of disclosure controls and procedures (“DC&P”) and the design and effectiveness of internal control
over financial reporting (“ICFR”).
The President and Chief Executive Officer and the Vice-President, Finance and Administration and Chief Financial Officer
have designed DC&P or caused them to be designed under their supervision to provide reasonable assurance that material
information relating to the Corporation has been made known to them and that information required to be disclosed in the
Corporation’s filings is recorded, processed, summarized and reported within the prescribed time periods under
securities legislation.
Also, the President and Chief Executive Officer and the Vice-President, Finance and Administration and Chief Financial
Officer have designed ICFR or have caused it to be designed under their supervision to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for financial reporting purposes in
accordance with IFRS.
EVALUATION OF DC&P AND ICFR
An evaluation of the design and operating effectiveness of DC&P and ICFR was carried out under the supervision of the
President and Chief Executive Officer and the Vice-President, Finance and Administration and Chief Financial Officer. This
evaluation consisted of a review of documentation, audits and other procedures that management considered appropriate
in the circumstances. Among other things, the evaluation took into consideration the Corporate Disclosure Policy, the code
of professional ethics, the sub-certification process and the operation of the Corporation’s Disclosure Committee.
Based on this evaluation and using the criteria set by the Committee of Sponsoring Organizations of the Treadway
Commission on Internal Control – Integrated Framework (COSO-Framework 2013) and in connection with the preparation of
its year-end financial statements, the two certifying officers concluded that the design of DC&P and ICFR were effective as
at October 31, 2020.
Lastly, no significant changes in ICFR occurred during the fourth quarter ended October 31, 2020 that materially affected
the Corporation’s ICFR.
12. OUTLOOK
Impact of the coronavirus on outlook – In the current situation, it is impossible for the moment to predict the impact of the
COVID-19 pandemic on future bookings, the partial resumption of flight operations and financial results.
The Corporation has implemented a series of operational, commercial and financial measures, including cost reduction,
aimed at preserving its cash. The Corporation continues to monitor the situation daily to adjust these measures as it evolves.
Please see the Risks and Uncertainties section of this MD&A for a more detailed discussion of the main risks and uncertainties
facing the Corporation.
Consequently, for the time being, the Corporation is providing no outlook for winter 2021.
Annual Report 2020 Transat A.T. Inc. | 55
Annual Report 2020
MANAGEMENT’S REPORT
The consolidated financial statements and MD&A of Transat A.T. Inc., and all other information in the financial report, are
the responsibility of management and have been reviewed and approved by the Board of Directors.
The consolidated financial statements have been prepared by management in accordance with IFRS issued by the
International Accounting Standards Board. The MD&A has been prepared in accordance with the requirements of the
Canadian Securities Administrators. Management’s responsibility in these respects includes the selection of appropriate
accounting principles as well as the exercise of sound judgment in establishing reasonable and fair estimates in accordance
with IFRS and the requirements of the Canadian Securities Administrators, and which are adequate in the circumstances.
The financial information presented throughout the MD&A and elsewhere in this Annual Report is consistent with that
appearing in the consolidated financial statements.
The Corporation and its affiliated companies have set up accounting and internal control systems designed to provide
reasonable assurance that the Corporation’s assets are safeguarded against loss or unauthorized use and that its books of
account may be relied upon for the preparation of consolidated financial statements and the MD&A.
The Board of Directors is responsible for the financial information presented in the consolidated financial statements and
the MD&A, primarily through its Audit Committee. The Audit Committee, which is appointed by the Board of Directors and
comprised entirely of independent and financially literate directors, reviews the annual consolidated financial statements
and the MD&A and recommends their approval to the Board of Directors. The Audit Committee is also responsible for
analyzing, on an ongoing basis, the results of the audits by the external auditors, the accounting methods and policies used
as well as the internal control systems set up by the Corporation. These consolidated financial statements have been audited
by Ernst & Young LLP. Their report on the consolidated financial statements appears on the next page.
Jean-Marc Eustache
Chairman of the Board,
President and Chief Executive Officer
Denis Pétrin
Vice-President, Finance and Administration
and Chief Financial Officer
Annual Report 2020 Transat A.T. Inc. | 56
Annual Report 2020
INDEPENDANT AUDITOR’S REPORT
To the Shareholders of Transat A.T. Inc.,
Opinion
We have audited the consolidated financial statements of Transat A.T. Inc. and its subsidiaries (the “Group”), which comprise
the consolidated statement of financial position as at October 31, 2020 and 2019 and as at November 1, 2018, and the
consolidated statements of loss, the consolidated statements of comprehensive loss, the consolidated statements of
changes in equity and the consolidated statements of cash flows for the years ended October 31, 2020 and 2019, and notes
to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at October 31, 2020 and 2019 and as at November 1, 2018, and its consolidated financial
performance and its consolidated cash flows for the years ended October 31, 2020 and 2019 in accordance with International
Financial Reporting Standards (”IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 to the consolidated financial statements, which indicates that the Group incurred a net loss of
$496.8 million for the year ended October 31, 2020 and, as of that date, the Corporation’s current liabilities exceeded its
total assets by $163.2 million. As stated in note 2, these events or conditions, along with other matters as set forth in note 2,
indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Emphasis of Matter – Adoption of a new accounting standard
We draw attention to note 5 to the consolidated financial statements, which describes the adoption of IFRS 16, Leases. Our
opinion is not modified in respect of this matter.
Other Information
Management is responsible for the other information. The other information comprises:
Management’s Discussion and Analysis
The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and the Annual Report prior to the date of this auditor’s report. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact in this auditor’s report. We have nothing to report in this regard.
Annual Report 2020 Transat A.T. Inc. | 57
Annual Report 2020
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
Annual Report 2020 Transat A.T. Inc. | 58
Annual Report 2020
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Sylvain Boucher.
Montréal, Canada
December 11, 2020
1 CPA auditor, CA, public accountancy permit No. A113209
Annual Report 2020 Transat A.T. Inc. | 59
TRANSAT A.T. INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
[Note 2, Uncertainty related to going concern]
As at
October 31,
2020
(in thousands of Canadian dollars)
Note
$
As at
October 31,
2019
Restated
[note 5]
$
As at
November 1,
2018
Restated
[note 5]
$
ASSETS
Cash and cash equivalents
Cash and cash equivalents in trust or otherwise reserved
Trade and other receivables
Income taxes receivable
Inventories
Prepaid expenses
Derivative financial instruments
Current portion of deposits
Current assets
Cash and cash equivalents reserved
Deposits
Income taxes receivable
Deferred tax assets
Property, plant and equipment
Intangible assets
Derivative financial instruments
Investments
Other assets
Non-current assets
LIABILITIES
Trade and other payables
Income taxes payable
Customer deposits and deferred revenues
Derivative financial instruments
Current portion of lease liabilities
Current portion of provision for return conditions
Current liabilities
Long-term debt and lease liabilities
Provision for return conditions
Other liabilities
Derivative financial instruments
Deferred tax liabilities
Non-current liabilities
EQUITY
Share capital
Share-based payment reserve
Retained earnings (deficit)
Unrealized gain (loss) on cash flow hedges
Cumulative exchange differences
See accompanying notes to consolidated financial statements
On behalf of the Board,
6
7
8
9
6
9
21
21
10
11
8
12
13
8
14
15
14
15
16
8
21
17
426,433
252,379
95,334
2,377
10,024
47,164
964
16,471
851,146
56,268
136,904
15,100
—
916,382
25,509
—
14,509
253
564,844
301,547
137,944
1,423
15,847
74,489
4,870
17,765
1,118,729
51,224
166,137
15,100
28,148
891,445
36,852
—
16,533
322
593,654
287,735
133,626
11,405
14,464
63,706
20,413
20,250
1,145,253
51,184
166,026
15,100
16,105
721,504
42,689
84
16,084
186
1,164,925
2,016,071
1,205,761
2,324,490
1,028,962
2,174,215
232,243
203
608,890
10,055
147,980
14,963
311,065
4,244
561,404
10,431
99,814
—
1,014,334
986,958
755,906
128,635
50,215
—
674
566,115
155,120
47,444
1,650
9,752
935,430
780,081
221,012
15,948
(164,138)
(522)
(5,993)
221,012
15,948
336,993
(9,176)
(7,326)
312,273
1,117
517,352
2,766
71,250
—
904,758
493,920
128,528
41,128
679
11,739
675,994
219,684
18,017
362,590
1,971
(8,799)
66,307
2,016,071
557,451
2,324,490
593,463
2,174,215
Director
Director
Annual Report 2020 Transat A.T. Inc. | 60
TRANSAT A.T. INC.
CONSOLIDATED STATEMENTS OF LOSS
[Note 2, Uncertainty related to going concern]
Years ended October 31
(in thousands of Canadian dollars, except per share amounts)
Revenues
Operating expenses
Costs of providing tourism services
Aircraft fuel
Salaries and employee benefits
Aircraft maintenance
Sales and distribution costs
Airport and navigation fees
Aircraft rent
Other airline costs
Other
Share of net loss (income) of a joint venture
Depreciation and amortization
Special items
Operating loss
Financing costs
Financing income
Change in fair value of fuel-related derivatives and other derivatives
Loss (gain) on asset disposals
Foreign exchange loss (gain)
Loss before income tax expense
Income taxes (recovery)
Current
Deferred
Net loss for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interests
Earnings (loss) per share
Basic
Diluted
See accompanying notes to consolidated financial statements
Note
18
18, 22
14
12
18
19
14
20
21
17
2020
$
2019
Restated
[note 5]
$
1,302,069
2,937,130
431,562
258,947
239,250
110,413
97,086
77,622
23,358
109,424
75,410
1,172
204,112
99,675
808,937
517,588
412,375
229,909
209,344
175,833
46,803
251,560
90,923
1,250
182,321
23,875
1,728,031
2,950,718
(425,962)
48,049
(13,625)
13,715
11,271
3,601
(488,973)
(4,376)
12,168
7,792
(496,765)
(13,588)
37,935
(21,332)
8,664
(9)
(1,110)
(37,736)
1,028
(9,048)
(8,020)
(29,716)
(496,545)
(220)
(496,765)
(32,347)
2,631
(29,716)
(13.15)
(13.15)
(0.86)
(0.86)
Annual Report 2020 Transat A.T. Inc. | 61
TRANSAT A.T. INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
[Note 2, Uncertainty related to going concern]
Years ended October 31
2020
2019
Restated
[note 5]
$
Note
$
21
23
21
(496,765)
(29,716)
(1,191)
12,925
(3,080)
8,654
1,333
1,333
(827)
(3,837)
(4,664)
5,323
(491,442)
(29,621)
14,455
4,019
(11,147)
1,473
1,473
(4,631)
1,225
(3,406)
(13,080)
(42,796)
(491,885)
443
(491,442)
(45,428)
2,632
(42,796)
(in thousands of Canadian dollars)
Net loss for the year
Other comprehensive income (loss)
Items that will be reclassified to net income
Change in fair value of derivatives designated as cash flow hedges
Reclassification to net income
Deferred taxes
Foreign exchange gain on translation of
financial statements of foreign subsidiaries
Items that will never be reclassified to net income
Retirement benefits – Net actuarial gains
(losses)
Deferred taxes
Total other comprehensive income (loss)
Comprehensive loss for the year
Attributable to:
Shareholders
Non-controlling interest
See accompanying notes to consolidated financial statements
Annual Report 2020 Transat A.T. Inc. | 62
TRANSAT A.T. INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Note 2, Uncertainty related to going concern]
Accumulated other
comprehensive income
(loss)
Share
capital
Share-
based
payment
reserve
Retained
earnings
(deficit)
Unrealized
gain (loss)
on cash
flow hedges
Restated
Restated
Cumulative
exchange
differences
[note 5]
$
362,590
(32,347)
(3,406)
(35,753)
—
—
—
—
[note 5]
$
1,971
—
(11,147)
(11,147)
—
—
—
—
$
(8,799)
—
1,472
1,472
—
—
—
—
—
—
(120)
(19)
1,612
Non-
controlling
Total
interests Total equity
Restated
[note 5]
$
593,463
(32,347)
(13,081)
(45,428)
940
268
(19)
1,612
Restated
[note 5]
$
593,463
(29,716)
(13,080)
(42,796)
940
268
(19)
1,612
$
—
2,631
1
2,632
—
—
—
—
(3,542)
—
—
—
—
—
10,156
—
—
1,328
—
(2,069)
—
10,156
—
—
—
—
—
—
—
—
—
—
1
1
(3,542)
—
—
(2,892)
(3,542)
(2,892)
10,156
(10,156)
—
—
10,417
10,417
1
9,416
(1)
(2,632)
—
6,784
(in thousands of Canadian dollars)
Balance as at November 1, 2018
Net income (loss) for the year
Other comprehensive income (loss)
$
$
219,684
—
—
18,017
—
—
Comprehensive income (loss) for
the year
Issued from treasury
Exercise of options
Vesting of PSUs
Share-based payment expense
Reclassification of PSUs
as financial liability
Dividends
Fair value changes in non-
controlling interest liabilities
Reclassification of non-controlling
interest liabilities
Reclassification of non-controlling
interest exchange difference
—
940
388
—
—
—
—
—
—
Balance as at October 31, 2019
221,012
15,948
336,993
(9,176)
(7,326)
557,451
—
557,451
Net loss for the year
Other comprehensive income (loss)
Comprehensive income (loss) for
the year
Dividends
Fair value changes in non-
controlling interest liabilities
Reclassification of non-controlling
interest liabilities
Reclassification of non-controlling
interest exchange difference
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(496,545)
(4,664)
(501,209)
—
—
8,654
8,654
—
—
670
(496,545)
4,660
(220)
663
(496,765)
5,323
670
—
(491,885)
—
443
(849)
(491,442)
(849)
78
—
—
78
—
—
—
—
—
—
663
663
78
—
663
741
(78)
—
1,147
1,147
(663)
(443)
—
298
Balance as at October 31, 2020
See accompanying notes to consolidated financial statements
221,012
15,948
(164,138)
(522)
(5,993)
66,307
—
66,307
Annual Report 2020 Transat A.T. Inc. | 63
TRANSAT A.T. INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Note 2, Uncertainty related to going concern]
Years ended October 31
2020
(in thousands of Canadian dollars)
Note
$
2019
Restated
[note 5]
$
OPERATING ACTIVITIES
Net loss for the year
Non-cash operating items:
Depreciation and amortization
Change in fair value of fuel-related derivatives and other derivatives
Loss (gain) on asset disposals
Foreign exchange loss (gain)
Asset impairment
Share of net loss (income) of a joint venture
Deferred taxes
Employee benefits
Share-based payment expense
Net change in non-cash working capital balances related to operations
Net change in provision for return conditions
Net change in other assets and liabilities related to operations
Cash flows related to operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment and other intangible assets
Increase in cash and cash equivalent reserved
Consideration received on business disposals, net of cash disposed of
Capital contribution to a joint venture
Proceeds from sale of assets
Cash flows related to investing activities
FINANCING ACTIVITIES
Proceeds from borrowings
Proceeds from issuance of shares
Repurchase of shares related to stock-based compensation
Repayment of lease liabilities
Dividends paid by a subsidiary to a non-controlling shareholder
Cash flows related to financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplementary information (as reported in operating activities)
Net income taxes paid (recovered)
Interest paid
See accompanying notes to consolidated financial statements
18
20
19
12
23
12
20
14
14
(496,765)
(29,716)
204,112
13,715
11,271
3,601
89,127
1,172
12,168
3,009
—
(158,590)
95,202
(11,522)
28,774
182,321
8,664
(9)
(1,110)
—
1,250
(9,048)
2,927
1,612
156,891
34,006
26,592
(1,468)
(46,136)
216,021
(61,422)
(5,044)
—
(2,042)
8,094
(163,933)
(40)
1,884
(1,690)
—
(60,414)
(163,779)
49,980
—
—
(82,505)
(849)
(33,374)
1,513
(138,411)
564,844
426,433
—
1,208
(19)
(80,290)
(2,892)
(81,993)
941
(28,810)
593,654
564,844
(245)
1,769
(11,831)
912
Annual Report 2020 Transat A.T. Inc. | 64
Transat A.T. Inc.
Notes to Consolidated Financial Statements
October 31, 2020 and 2019
[Amounts are expressed in thousands of Canadian dollars, except for per share amounts or unless specified otherwise]
Note 1 Corporate information
Transat A.T. Inc. [the “Corporation”], headquartered at 300 Léo-Pariseau Street, Montréal, Québec, Canada, is incorporated
under the Canada Business Corporations Act. The Corporation’s Class A Variable Voting Shares and Class B Voting Shares are
traded on the Toronto Stock Exchange under a single ticker symbol, namely “TRZ”.
The Corporation is an integrated company specializing in the organization, marketing and distribution of holiday travel in the
tourism industry. The core of its business consists of a tour operator based in Canada which is vertically integrated with its
other services of air transportation, distribution through a dynamic travel agency network, value-added services at travel
destinations and accommodations.
The consolidated financial statements of Transat A.T. Inc. for the year ended October 31, 2020 were approved by the
Corporation’s Board of Directors on December 11, 2020.
Note 2 Uncertainty related to going concern
As part of the preparation of the financial statements, management is responsible for identifying any event or situation that
may cast significant doubt on the Corporation’s ability to continue as a going concern. Significant doubt regarding the
Corporation’s ability to continue as a going concern exists if events or conditions, considered collectively, indicate that the
Corporation will be unable to honour its obligations as they fall due during a period of at least, and not limited to, 12 months
from October 31, 2020. If the Corporation concludes that events or conditions cast significant doubt on its ability to continue
as a going concern, it must assess whether the plans developed to mitigate these events or conditions will remove any
possible significant doubt.
Due to the global COVID-19 pandemic, the Corporation’s operations have been severely disrupted and its financial results
significantly impacted. As a result, the Corporation incurred a net loss of $496,765 for the year ended October 31, 2020 and,
as at that date, the Corporation’s current liabilities exceeded the total of its current assets by $163,188. However, as it is
described in note 14 to the consolidated financial statements, the Corporation has a new $250,000 subordinated short-term
credit facility. This new credit facility may be drawn down in tranches at any moment prior to February 28, 2021, subject to
certain pre-requisites and borrowing requirements. These conditions include certain requirements related to minimum
unrestricted cash before and after a drawdown on the facility. Furthermore, the suspension of the application of financial
ratios under the Corporation’s revolving term credit facility and the new short-term loan facility expires on January 30, 2021,
after which time, absent any extension, the Corporation could be in default of its obligations and the term of its borrowings
could be accelerated. The new short-term credit facility will mature at the earliest date between March 31, 2021 and the
closing of the arrangement with Air Canada.
The global air transportation and tourism industry has faced a collapse in traffic and demand. Travel restrictions, uncertainty
about when borders will reopen, both in Canada and at certain destinations the Corporation flies to, and the imposition of
quarantine measures both in Canada and other countries, as well as concerns related to the pandemic and its economic
impacts are creating significant demand uncertainty, at least for fiscal 2021. In response to the first wave of the pandemic,
the Corporation temporarily suspended its airline operations from April 1 to July 22, 2020. Subsequently, the Corporation
implemented reduced summer and winter programs and is continuously making adjustments based on the level of demand
and decisions made by health and state authorities. Transat cannot predict all the impacts of COVID-19 on its operations and
results, or precisely when the situation will improve. The Corporation has implemented a series of operational, commercial
and financial measures, including cost reduction, aimed at preserving its cash. The Corporation is monitoring the situation
daily to adjust these measures as it evolves. However, until the Corporation is able to resume operations at a sufficient level,
the COVID-19 pandemic will have significant negative impacts on its revenues, cash flows from operations and operating
results. While the likelihood of the availability of a vaccine in the near future makes it possible to hope for the resumption of
operations at a certain level during 2021, the Corporation does not expect such level to reach the pre-pandemic level
before 2023.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
While the Corporation is making every effort and remains confident that the transaction with Air Canada will be completed,
it cannot be certain of this outcome. Should the transaction not be completed, the Corporation’s ability to continue as a
going concern for the next 12 months involves significant judgment and is dependent on its ability to obtain additional
financing before the maturity of the new subordinated short-term credit facility (currently, the maturity date is
March 31, 2021), either through new sources of financing, including the amendment and renewal of its new subordinated
short-term credit facility, the impact of the COVID-19 pandemic and related government restrictions on the Corporation’s
operations and liquidity (including the Corporation’s ability to resume normal operations at a sufficient level), the
Corporation’s ability to increase revenues to generate positive cash flows from operations, and the continued support of its
suppliers, lessors, credit card processors and other creditors. Should the transaction not take place, management is
therefore seeking to secure financing that would be required before the maturity of the new subordinated short-term credit
facility (currently, the maturity date is March 31, 2021) and is currently discussing with potential lenders, including government
authorities. These discussions include a possible application under the Large Employer Emergency Financing Facility (LEEFF).
Management could also try to extend the maturity of the new subordinated short-term credit facility to give itself more time
to arrange the required overall financing. Management is also continuing to monitor possible government assistance
programs, including sectoral financial support that could include loans and possibly other types of support announced by
Canada’s Minister of Transport. At the same time, the Corporation is negotiating with its lessors to amend lease terms and
conditions.
There can be no assurance that additional funds available under the existing short-term credit facility will be sufficient to
finance the Corporation’s operations until the maturity of the credit facilities, that the Corporation will be able to again
borrow sufficient amounts to meet its needs, or that it will be able to do so on acceptable terms, or that suppliers, lessors,
credit card processors and other creditors will continue to support the Corporation. The COVID-19 pandemic significantly
strained the Corporation’s ability to return to profitability. As a result, there can be no assurance that the Corporation will
be able to generate positive cash flows from operating activities in the next twelve months.
The situation indicates material uncertainty casting significant doubt on the Corporation’s ability to continue as a going
concern and, thereby, realize its assets and repay its debt in its normal course of business.
These consolidated financial statements have been prepared on a going concern basis which assumes that the Corporation
will continue to be in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities,
and meet its obligations in the normal course of business. These consolidated financial statements as at October 31, 2020
and for the year then ended do not include adjustments to the value and classification of assets, liabilities and recorded
expenses that would otherwise be required if the going concern basis proved to be inappropriate. Such adjustments may
be significant.
Note 3
Significant accounting policies
Basis of preparation
These consolidated financial statements of the Corporation and its subsidiaries have been prepared in accordance with
International Financial Reporting Standards [“IFRS”], as issued by the International Accounting Standards Board [“IASB”] and
as adopted by the Accounting Standards Board of Canada.
These consolidated financial statements are presented in Canadian dollars, the Corporation’s functional currency, except
where otherwise indicated. Each entity of the Corporation determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency.
These consolidated financial statements have been prepared on a going concern basis, using historical cost accounting,
except for certain financial assets and liabilities classified as financial assets/liabilities at fair value through profit or loss and
measured at fair value.
Basis of consolidation
The consolidated financial statements include the financial statements of the Corporation and its subsidiaries.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
SUBSIDIARIES
Subsidiaries are entities over which the Corporation has control. Control is achieved where the Corporation has the power
to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Subsidiaries
are fully consolidated from the date of acquisition, being the date on which the Corporation obtains control, and continue
to be consolidated until the date when such control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries as follows:
Cost is measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred
or assumed at the date of exchange, excluding transaction costs which are expensed as incurred;
Identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date;
The excess of acquisition cost over the fair value of the identifiable net assets acquired is recorded
as goodwill;
If the acquisition cost is less than the fair value of the net assets acquired, the fair value of the net assets
is re-assessed and any remaining difference is recognized directly in the statement of income;
Contingent consideration is measured at fair value on the acquisition date, with subsequent changes in the
fair value recorded through the statement of income when the contingent consideration is a
financial liability;
Upon gaining control in a step acquisition, the existing ownership interest is re-measured to fair value
through the statement of income; and
For each business combination including the non-controlling interest, the acquirer measures the non-
controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s
identifiable net assets.
The non-controlling interest, which represent the portion of net income and net assets in subsidiaries that are not 100%
owned by the Corporation, is reported separately within equity in the consolidated statement of financial position. The non-
controlling interest in respect of which shareholders hold an option entitling them to require the Corporation to buy back
their shares is reclassified from equity to liabilities, deeming exercise of the option. The carrying amount of the reclassified
interest is also adjusted to match its estimated redemption value. Any changes in the estimated redemption value are
recognized as equity transactions in retained earnings.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company and using
consistent accounting policies. All balances, transactions and unrealized gains and losses resulting from intragroup
transactions and all intragroup dividends are fully eliminated on consolidation.
INVESTMENT IN A JOINT VENTURE
A joint venture is an entity in which the parties that have joint control over the entity have rights to the net assets of the
entity. The Corporation’s investment in a joint venture is accounted for using the equity method as follows:
Investment is initially recognized at cost;
Investment in an associate includes goodwill identified on acquisition, net of any accumulated
impairment loss;
The Corporation’s share of post-acquisition net income (loss) is recognized in the statement of income and
is also added to (netted against) the carrying amount of the investment; and
Gains on transactions between the Corporation and the joint venture are eliminated to the extent of the
Corporation’s interest in this entity and losses are eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
Foreign currency translation
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the functional
currency spot rate of exchange at the reporting date.
Foreign exchange gains and losses resulting from the settlement of such transactions as well as from the translation of
monetary assets and liabilities not denominated in the functional currency of the subsidiary are recognized in the statement
of income, except for qualifying cash flow hedges, which are deferred and presented as Unrealized gain (loss) on cash flow
hedges in Accumulated other comprehensive income (loss) in the statement of changes in equity.
GROUP COMPANIES
Assets and liabilities of entities with functional currencies other than the Canadian dollar are translated at the period-end
rates of exchange, and the results of their operations are translated at average rates of exchange for the period. The exchange
differences arising from translation are recognized in Cumulative exchange differences in Accumulated other comprehensive
income (loss) in equity. On disposal of an interest, the exchange difference component relating to that particular interest is
recognized in net income.
Cash equivalents
Cash equivalents consist primarily of term deposits and bankers’ acceptances that are highly liquid and readily convertible
into known amounts of cash with initial maturities of less than three months.
Inventories
Inventories, consisting primarily of supplies and fuel, are valued at the lower of cost, determined using the first-in, first-out
method, and net realizable value. Net realizable value is the estimated selling price in the normal course of business less
estimated costs to sell. Replacement cost may be indicative of net realizable value.
Lease term
The Corporation is party to leases, primarily for aircraft, aircraft engines, real estate and automotive equipment. At the
commencement date of the lease, the Corporation recognizes a right-of-use asset and a lease liability at the present value
of future lease payments, using the Corporation’s incremental borrowing rate. The Corporation has elected to separate lease
and non-lease components of lease agreements.
Initial measurement of lease liabilities includes fixed lease payments and variable lease payments that depend on an index or
a rate, during the non-cancellable period of the lease and for extension options reasonably certain to be exercised by the
Corporation. The initial value of lease liabilities is reduced by lease incentives receivable.
The initial value of right-of-use assets is obtained through the calculation of lease liabilities. Right-of-use assets are
recognized in accordance with IAS 16, Property, Plant and Equipment, and depreciated over the term of the lease.
The Corporation presents right-of-use assets under Property, plant and equipment and lease liabilities under Lease liabilities
in the consolidated statement of financial position. The current portion of lease liabilities is reported under Current
liabilities.
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Notes to Consolidated Financial Statements
Variable lease payments that do not depend on an index or a rate are recognized as a lease expense in the consolidated
statement of income (loss) in the period during which the even or condition that triggers the payment occurs. Expenses
associated with lease payments under leases with terms of less than 12 months and low-value leases are recognized as lease
expenses in the consolidated statement of income (loss) on a straight-line basis over the term of the lease.
Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated depreciation and provision for impairment, if any. Right-
of-use assets under leases are recognized at the lower of the current value of future lease payments, using the Corporation’s
incremental borrowing rate and fair value.
Depreciation on property, plant and equipment with finite lives is calculated on a straight-line basis, unless otherwise
specified, and serves to write down the cost of the assets to their estimated residual value over their expected useful lives
as follows:
Aircraft equipment, including spare engines and rotable spare parts
Office furniture and equipment
Right-of-use assets and leasehold improvements
Administrative building
5–10 years or use
3–10 years
Lease term or useful life
10-20 years
Land and property, plant and equipment under construction or development are not depreciated.
The fleet includes owned aircraft and improvements to leased aircraft. A portion of the cost of owned aircraft is allocated to
the “major maintenance activities” subclass, which relates to airframe, engine and landing gear overhaul costs, and the
remaining cost is allocated to Aircraft. Aircraft and major maintenance activities are depreciated taking into account their
expected estimated residual value. Aircraft are depreciated on a straight-line basis over seven- to ten-year periods, and
major maintenance activities are depreciated according to the type of maintenance activity on a straight-line basis or based
on the use of the corresponding aircraft until the next related major maintenance activity, or their expected useful lives.
Subsequent major maintenance activity expenses are capitalized as major maintenance activities and are depreciated
according to their type. Expenses related to other maintenance activities, including unexpected repairs, are recognized in
net income (loss) as incurred. Improvements to aircraft under operating leases are depreciated on a straight-line basis over
the shorter of the corresponding lease term and their useful life.
Estimated residual values and useful lives are reviewed annually and adjusted as appropriate.
RIGHT-OF-USE ASSETS
For leased aircrafts, on initial recognition, right-of-use assets are broken down between the airframe, engines and major
maintenance components. Eligible maintenance costs related to engines and major maintenance components are capitalized
and depreciated over the shorter of the lease term or expected useful life. The total of these items is recorded under
Right-of-use assets related to the fleet. Subsequently, eligible maintenance costs over the lease term are capitalized and
depreciated over the shorter of the lease term or expected useful life.
The Corporation is party to real estate leases, in particular for spaces in airports, offices and travel agencies. Moreover, the
Corporation is party to equipment and aircraft engine leases, including automotive equipment. Right-of-use assets are
recognized in respect of such leases, except for leases with terms of less than 12 months and leases with substantial
substitution rights.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets acquired at the
date of acquisition. Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment
losses. For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Corporation’s cash-generating units [“CGUs”] that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Intangible assets
Intangible assets are recorded at cost. The cost of intangible assets acquired in a business combination is recorded at fair
value as at the acquisition date. Internally generated intangible assets include developed or modified application software.
These costs are capitalized when the following criteria are met:
It is technically feasible to complete the software product and make it available for use;
Management intends to complete the software product and use it;
The Corporation has ability to use the software product;
It can be demonstrated how the software product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and use the software product
are available;
The expenditures attributable to the software product during its development can be reliably measured.
Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related
to the specific project.
Following initial recognition, intangible assets are carried at cost less any accumulated depreciation and impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized on a straight-line basis over their respective useful economic lives, as follows:
Software
Customer lists
3–10 years
7–10 years
Intangible assets with finite useful lives are assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are
reviewed at least annually and adjusted as appropriate.
Intangible assets with indefinite useful lives, consisting mainly of trademarks, are not amortized but are tested for impairment
at least annually. The indefinite useful life of those assets is reviewed annually, at a minimum, to determine whether events
and circumstances continue to support an indefinite useful life assessment for the assets. If they do not, the change in useful
life assessment from indefinite to finite is made on a prospective basis.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity
instrument of another party. Financial assets of the Corporation include cash and cash equivalents, cash and cash equivalents
in trust or otherwise reserved, trade and other receivables other than amounts receivable due from government, deposits
on leased aircraft and engines, and derivative financial instruments with a positive fair value. Financial liabilities of the
Corporation include trade and other payables other than amounts due to government, long-term debt, lease liabilities,
derivative financial instruments with a negative fair value and the put option held by the non-controlling interest.
Financial assets and financial liabilities, including derivative financial instruments, are initially measured at fair value.
Subsequent to initial recognition, financial assets and financial liabilities are measured based on their classification: financial
assets/liabilities at fair value through profit or loss, at fair value through other comprehensive income (loss), or at amortized
cost. The classification of financial assets is determined based on the business model under which risks are managed and
the contractual cash flow characteristics of the financial assets. Financial liabilities are classified by default at amortized cost
except for derivative financial instruments and non-controlling interests. Derivative financial instruments, including
embedded derivative financial instruments that are not closely related to the host contract, are classified as financial assets
or liabilities at fair value through profit or loss unless they are designated within an effective hedging relationship; in that
event, they are classified as financial assets or liabilities at fair value through other comprehensive income (loss).
CLASSIFICATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities at fair value through profit or loss
Financial assets, financial liabilities and derivative financial instruments classified as financial assets or liabilities at fair value
through profit or loss are measured at fair value at the period-end date. Gains and losses realized on disposal and unrealized
gains and losses from changes in fair value are reflected in the consolidated statement of income (loss) as incurred.
Financial assets and financial liabilities at fair value through other comprehensive income (loss)
Derivative financial instruments designated within an effective hedging relationship classified as financial assets or financial
liabilities at fair value through other comprehensive income (loss) are measured at fair value as at the reporting date.
Amortized cost
Financial assets and financial liabilities classified at amortized cost are measured at amortized cost using the effective
interest method.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
The Corporation uses derivative financial instruments to hedge against future foreign currency fluctuations in relation to its
lease payments, receipts of revenues from certain tour operators and disbursements pertaining to certain operating
expenses in foreign currencies. For hedge accounting purposes, the Corporation designates some of its foreign currency
derivatives as hedging instruments.
The Corporation formally documents all relationships between the hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging transactions. This process includes linking all derivative
financial instruments to forecasted cash flows or to a specific asset or liability. The Corporation also formally documents and
assesses, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments are highly effective in
offsetting the changes in the fair value or cash flows of the hedged items.
These derivative financial instruments are designated as cash flow hedges.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
All derivative financial instruments are recorded at fair value in the consolidated statement of financial position. The
Corporation has defined a hedging ratio of 1:1 for its hedging relationships. For the derivative financial instruments designated
as cash flow hedges, changes in the fair value of the effective portion are recognized in Other comprehensive income (loss)
in the consolidated statement of comprehensive income. Any ineffective portion within a cash flow hedge is recognized in
net income (loss), as incurred, under Change in fair value of fuel-related derivatives and other derivatives. Should the cash
flow hedge cease to be effective, previously unrealized gains and losses remain within Accumulated other comprehensive
income (loss) as Unrealized gain (loss) on cash flow hedges until the hedged item is settled, and future changes in value of
the derivative instrument are recognized in income prospectively. The change in value of the effective portion of a cash flow
hedge remains in Accumulated other comprehensive income (loss) as Unrealized gain (loss) on cash flow hedges until the
related hedged item is settled, at which time amounts recognized in Unrealized gain (loss) on cash flow hedges are reclassified
to the same consolidated statement of income (loss) account in which the hedged item is recognized.
The Corporation enters into foreign currency contract options and designates the intrinsic value of these contracts as cash
flow hedging on future purchases of foreign currencies. The time value of these options, including premiums paid, is
recognized in Other comprehensive income (loss) in the consolidated statement of comprehensive income (loss) for effective
hedging relationships. The time value of these options, including premiums paid, remains in Accumulated other
comprehensive income (loss) as “Unrealized gain (loss) on cash flow hedges” until the settlement of the underlying hedged
item, at which time the premiums paid accounted for under “Unrealized gain (loss) on cash flow hedges” are reclassified
under the same account in the consolidated statement of income (loss) than the underlying hedged item.
For derivative financial instruments designated as fair value hedges, periodic changes in fair value are recognized in the same
account in the consolidated statement of income (loss) as the hedged item.
DERIVATIVE FINANCIAL INSTRUMENTS THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING
In the normal course of business, the Corporation also uses fuel-related derivatives to manage its exposure to unstable fuel
prices as well as certain foreign currency derivatives to offset the future risks of fluctuations in foreign currencies that have
not been designated for hedge accounting. These derivatives are measured at fair value at the end of each period, and the
unrealized gains or losses on remeasurement are recorded and presented under Change in fair value of fuel-related
derivatives and other derivatives in the consolidated statement of income (loss). When realized, at maturity of fuel-related
derivative financial instruments, any gains or losses are reclassified to Aircraft fuel. When realized, at maturity of foreign
currency derivatives that do not qualify for hedge accounting, any gains or losses are reclassified to the same consolidated
statement of income (loss) account in which the hedged item is recognized.
It is the Corporation’s policy not to speculate on derivative financial instruments; accordingly, these instruments are normally
purchased for risk management purposes and held to maturity.
TRANSACTION COSTS
Transaction costs related to financial assets and financial liabilities classified as financial assets or liabilities at fair value
through profit or loss are expensed as incurred. Transaction costs related to financial assets or to financial liabilities
classified at amortized cost are reflected in the carrying amount of the financial asset or financial liability and are then
amortized over the estimated useful life of the instrument using the effective interest method.
FAIR VALUE
The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to
quoted prices in an active market at the close of business on the reporting date. For financial instruments where there is no
active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length
market transactions, reference to the current fair value of another instrument that is substantially the same, discounted
cash flow analysis or other valuation models.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
The Corporation categorizes its financial assets and liabilities measured at fair value into one of three different levels
depending on the observability of the inputs used in the measurement.
Level 1: This level includes assets and liabilities measured at fair value based on unadjusted quoted prices for identical
assets and liabilities in active markets accessible to the Corporation at the measurement date.
Level 2: This level includes valuations determined using directly or indirectly observable inputs other than quoted prices
included within Level 1. Derivative instruments in this category are valued using models or other industry standard
valuation techniques derived from observable market inputs.
Level 3: This level includes valuations based on inputs which are less observable, unavailable or where the observable data
does not support a significant portion of the instruments’ fair value.
Impairment of financial assets classified at amortized cost
The Corporation assesses at each reporting date whether there is any objective evidence that a financial asset or a group of
financial assets classified at amortized cost is impaired. A financial asset or a group of financial assets is deemed to be
impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset [an incurred loss event] and that incurred loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that can be reliably estimated. In addition, the Corporation
assesses expected credit losses related to its financial assets classified at amortized cost. Accordingly, the Corporation must
determine whether credit risk has increased significantly by comparing the risk of a default occurring on the asset as at each
reporting date with the risk of a default occurring on the asset as at the initial recognition date, taking into account the
information it has been able to obtain, including relevant forward-looking information. Impairment losses are recognized
through profit or loss. For Trade and other receivables, the Corporation applies the simplified approach permitted by IFRS 9
which requires that full lifetime expected credit losses be recognized starting from initial recognition.
Impairment of non-financial assets
The Corporation assesses at each reporting date whether there is any indication that an asset or a CGU may be impaired. If
any indication exists, or when annual impairment testing for an asset or a CGU is required, the Corporation estimates the
recoverable amount of the asset or CGU. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell
and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets; in which case, the impairment test is performed at the CGU
level. Value in use is calculated using estimated net cash flows, typically based on detailed projections over a five-year period
with subsequent years extrapolated using a growth assumption. The estimated net cash flows are discounted to their present
value using a discount rate before income taxes that reflects current market assessments of the time value of money and the
risk specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate valuation model may be used. Where the carrying amount
of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered impaired and is written down to its
recoverable amount. Impairment losses are recognized through profit or loss. The following criteria are also applied in
assessing impairment of specific assets:
INTANGIBLE ASSETS
Intangible assets with indefinite useful lives, such as trademarks, are tested for impairment annually and when circumstances
indicate that the carrying value may be impaired.
REVERSAL OF IMPAIRMENT LOSSES
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or have decreased. If such indication exists, the Corporation
estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount or exceed
the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been
recognized for the asset in prior years. The reversal is recognized in the statement of income (loss). Impairment losses relating
to goodwill cannot be reversed in future periods.
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Transat A.T. Inc.
Notes to Consolidated Financial Statements
Provisions
Provisions are recognized when the Corporation has a present, legal or constructive obligation as a result of a past event, it
is probable that an outflow of resources will be required to settle the obligation and the cost can be reliably estimated.
Provisions are measured at their present value.
PROVISION FOR RETURN CONDITIONS
Aircraft- and equipment-related leases contain obligations arising from the conditions under which the assets must be
returned to the lessor on expiry of the lease [the “return conditions”]. The Corporation records a provision arising from the
return conditions of leased aircraft and engines upon commencement of the lease based on the degree of use until
maintenance to meet the return condition or until expiry of the lease. The provision is adjusted to reflect any change in the
related maintenance expenses anticipated and the significant accounting estimates and judgments used; these changes are
accounted for under “Aircraft maintenance” in the consolidated statement of income (loss) in the period during which they
are incurred. The provision is discounted using the risk-free pre-tax Canadian government bond rate as at the reporting date
for a term equal to the average remaining term to maturity before the related cash outflow.
The Corporation makes deposits to lessors based on the use of the leased aircraft in connection with certain future
maintenance work, namely maintenance deposits with lessors. Deposits made between the last maintenance performed by
the Corporation and expiry of the lease, as well as certain deposits made in excess of the actual cost of maintenance work,
will not be refunded to the Corporation when the maintenance is performed. These deposits are included in the provision
for return conditions of leased aircraft and engines.
Employee future benefits
The Corporation offers defined benefit pension arrangements to certain senior executives. Pension expense is based on
actuarial calculations performed annually by independent actuaries using the projected unit credit method. The
determination of benefit expense requires assumptions such as the discount rate to measure obligations, expected mortality
and expected rate of future compensation. Actual results will differ from estimated results based on assumptions. The vested
portion of past service cost arising from plan amendments is recognized immediately in the statement of income (loss). The
unvested portion is amortized on a straight-line basis over the average remaining period until the benefits vest.
The liability recognized in the consolidated statement of financial position is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized
past service costs. The present value of the defined benefit obligation is determined by discounting the estimated future
cash outflows using interest rates of high-quality corporate bonds that have terms to maturity approximating the term of the
related pension liability. All actuarial gains and losses that arise in calculating the present value of the defined benefit
obligation and the fair value of plan assets are recognized immediately in Retained earnings and included in the statement
of comprehensive income (loss).
Contributions to defined contribution pension plans are expensed as incurred, which is as the related employee service
is rendered.
Revenue recognition
The Corporation recognizes revenue when it satisfies the performance obligation, that is, when the service is transferred to
the customer and the customer obtains control of that service. Amounts received from customers for services not yet
rendered, including amounts received from customers for trips that had to be cancelled and for which the Corporation has
issued travel credits, are included in current liabilities as Customer deposits and deferred revenues.
Annual Report 2020 Transat A.T. Inc. | 74
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Revenue from contracts with customers includes revenue from passenger air transportation, revenue from the land portion
of holiday packages and commission revenue from travel agencies. Revenue from passenger air transportation is recognized
when such transportation is provided. Revenue from the land portion of holiday packages includes hotel services, among
others, and the related costs are recognized when the corresponding services are rendered over the course of the stay.
Commission revenue from travel agencies is recognized when passengers depart.
Other revenue includes, among others, aircraft subleasing, cargo and franchising revenue.
Revenue for which the Corporation provides multiple services, such as air transportation, hotel and travel agency services,
is recognized once the service is provided to the customer based on the Corporation’s accounting policy for revenue
recognition. These different services are considered as separate units of accounting, as each service has value to the
customer on a stand-alone basis, and the selling price is allocated using the expected cost plus a reasonable market
margin approach.
BREAKDOWN OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The Corporation has determined that it conducts its activities in a single industry segment, namely holiday travel. With
respect to geographic areas, the Corporation operates mainly in the Americas, and serves two main programs that also
represent its two main product lines: the transatlantic program and the Americas program, which includes the sun
destinations program.
CONTRACT BALANCES
Contract balances with customers are included in Trade and other receivables, Prepaid expenses and Customer deposits
and deferred revenues in the consolidated statement of financial position. Trade accounts receivable included under Trade
and other receivables comprise receivables related to passenger air transportation, the land portion of holiday packages and
commissions. Payment is generally received before services are provided, but some tour operators make payments after
services are provided. Amounts receivable from credit card processors are included in Trade and other receivables. Contract
assets in Prepaid expenses include additional costs incurred to earn revenue from contracts with customers, consisting of
hotel room costs, costs related to the worldwide distribution system and credit card fees. These costs are capitalized upon
payment and expensed when the related revenue is recognized. Customer deposits and deferred revenues represent
amounts received from customers for services not yet provided.
Given that contracts with customers have a duration of one year or less, the Corporation applies the practical expedient set
forth in paragraph 121 of IFRS 15, Revenue from Contracts with Customers, under which no information is disclosed about the
remaining performance obligations that are part of a contract that has a duration of one year or less.
Government grants
When there is reasonable assurance that grant-related conditions will be met and grants will be received, the Corporation
recognizes income-related government grants as deduction from the related expenses.
Income Taxes
The Corporation provides for income taxes using the liability method. Under this method, deferred tax assets and liabilities
are calculated based on differences between the carrying value and tax basis of assets and liabilities and measured using
substantively enacted tax rates and laws expected to be in effect when the differences reverse.
Deferred tax assets and liabilities are recognized directly through profit or loss, other comprehensive income (loss), or equity
based on the classification of the item to which they relate.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all
deductible temporary differences, carryforwards of unused tax credits and unused tax losses, to the extent that it is probable
that taxable income will be available against which the deductible temporary differences, and the carryforwards of unused
tax credits and unused tax losses can be utilized.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Annual Report 2020 Transat A.T. Inc. | 75
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Share-based payment plans
The Corporation offers to certain employees various equity-settled and cash-settled share-based compensation plans under
which it receives services from employees.
EQUITY-SETTLED TRANSACTIONS
For equity-settled share-based compensation [stock option plan and performance share unit plan], including share-based
payment transactions with a net settlement feature to satisfy withholding tax obligations, the compensation expense is based
on the grant date fair value of the share-based awards expected to vest over the period in which the performance and/or
service conditions are fulfilled, with a corresponding increase in the share-based payment reserve. Compensation expense
related to the stock option plan is calculated using the Black-Scholes model, whereas the performance share unit expense
is measured based on the closing price of the shares of the Corporation on the Toronto Stock Exchange at the grant date
adjusted to take into account the terms and conditions upon which the units were granted. For awards with graded vesting,
the fair value of each tranche is recognized through profit or loss over its respective vesting period. Any consideration paid
by employees on exercising these awards and the corresponding portion previously credited to the share-based payment
reserve are credited to share capital.
CASH-SETTLED TRANSACTIONS
For cash-settled share-based compensation [deferred share unit plan and restricted share unit plan], the expense is
determined based on the fair value of the liability at the end of the reporting period until the award is settled. The value of
the compensation is measured based on the closing price of the shares of the Corporation on the Toronto Stock Exchange
adjusted to take into account the terms and conditions upon which the units were granted, and is based on the units that
are expected to vest. The expense is recognized over the period in which the performance or service conditions are satisfied.
At the end of each reporting period, the Corporation re-assesses its estimates of the number of awards that are expected
to vest and recognizes the impact of the revisions through profit or loss.
EMPLOYEE SHARE PURCHASE PLANS
The Corporation’s contributions to the employee share purchase plans [stock ownership incentive and capital accumulation
plan and permanent stock ownership incentive plan] consist of shares acquired in the marketplace by the Corporation. These
contributions are measured at cost and are recognized over the period from the acquisition date to the date that the award
vests to the participant. Any consideration paid by the participant to purchase shares under the share purchase plan is
credited to share capital.
Earnings per share
Basic earnings per share is computed based on net income attributable to shareholders of the Corporation, divided by the
weighted-average number of Class A Variable Voting Shares and Class B Voting Shares outstanding during the year.
Diluted earnings per share is calculated by adjusting net income (loss) attributable to shareholders of the Corporation for
any changes in income or expense that would result from the exercise of dilutive elements. The weighted-average number
Class A Variable Voting Shares and Class B Voting Shares outstanding is increased by the weighted-average number of
additional Class A Variable Voting Shares and Class B Voting Shares that would have been outstanding assuming the exercise
of all dilutive elements.
Annual Report 2020 Transat A.T. Inc. | 76
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 4
Significant accounting estimates and judgments
The preparation of consolidated financial statements requires management to make estimates and judgments about the
future. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. However, accounting estimates
could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in
future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year
are described below. The Corporation based its assumptions and estimates on parameters available when the consolidated
financial statements were prepared. However, existing circumstances and assumptions about future developments may
change due to market events or to circumstances beyond the Corporation’s control. Such changes are reflected in the
assumptions when they occur.
Impact of COVID-19 pandemic on significant accounting estimates and judgments
Due to the magnitude and global scale of the COVID-19 pandemic, the estimates used and judgments made by management
in preparing the Corporation’s financial statements may change in the short term and the effect of such changes may be
material, which could result in, among other things, impairment of certain assets and/or an increase in certain liabilities. In
addition, these risks could have a significant adverse impact on the Corporation’s operating results and financial position in
the coming months.
Amortization and impairment of non-financial assets
DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are depreciated over their estimated useful lives taking into account their residual value. The
right-of-use assets of the fleet, the aircraft, their components and leasehold improvement are significant sub-categories of
property, plant and equipment. Depreciation expense depends on several assumptions including the period over which the
aircraft will be used, the fleet renewal schedule and the estimate of the residual value of aircraft and aircraft components at
the time of their anticipated disposal.
Changes in estimated useful life and residual value of aircraft could have a significant impact on depreciation expense.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment exists when the carrying amount of an asset or CGU, in the case of goodwill, exceeds its recoverable amount,
which is the higher of fair value less costs to sell the asset or CGU and value in use. To identify CGUs, management has to
take into account the contributions made by each subsidiary and the inter-relationships among them in light of the
Corporation’s vertical integration and the goal of providing a comprehensive offering of tourism services in the markets
served by the Corporation. The fair value less costs to sell calculation is based on available data from arm’s length
transactions for similar assets or observable market prices less incremental costs to sell. The value in use calculation is based
on a discounted cash flow model. Cash flows are derived from the budget or financial forecasts for the next five fiscal years
and do not include restructuring activities that the Corporation is not yet committed to or significant future investments that
will enhance the performance of the asset of the CGU being tested. The recoverable amount is most sensitive to the discount
rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for
extrapolation purposes. The key assumptions used to determine the recoverable amount for the various CGUs, including a
sensitivity case analysis, are discussed in notes 10, 11 and 12.
Annual Report 2020 Transat A.T. Inc. | 77
Transat A.T. Inc.
Notes to Consolidated Financial Statements
As at October 31, 2020, the Corporation has determined that the significant declines in revenues and demand owing to the
COVID-19 pandemic, and the resulting significant reductions in capacity are indications of impairment of its CGUs.
Accordingly, the Corporation performed an impairment test on its CGUs. The recoverable amount of CGUs was determined
based on fair value less costs to sell and using a transaction price of $5.00 per share under the arrangement with Air Canada
dated October 9, 2020. There can be no assurance that the transaction with Air Canada will be completed on the terms and
conditions described in the circular or at all. Should the transaction not be completed, the Corporation’s share price could
fall. No impairment of the carrying amount of the Corporation’s CGUs was recognized as their recoverable amount remain
higher than their carrying amount.
Impairment tests of the fleet of aircraft that will not be used between now and the expiry of their lease, the land held in
Mexico, the investment in a joint venture and trademarks were performed independent of the test performed on the
Corporation’s CGUs. These tests gave rise to the recognition of impairment charges of $50,817 related to the fleet, $32,826
related to the land in Mexico, $3,100 related to the investment in a joint venture and $2,384 related to the trademarks as
special items [see notes 10, 11, 12 and 19]. Given that various assumptions are used in determining impairment charges, some
inherent measurement uncertainty exists regarding such charges. Actual results will differ from estimated results based
on assumptions.
Fair value of derivative financial instruments
The fair value of derivative financial instruments is the amount for which the instrument could be exchanged between
knowledgeable, willing parties in an arm’s length transaction. The Corporation determines the fair value of its derivative
financial instruments using the purchase or selling price, as appropriate, in the most advantageous active market to which
the Corporation has immediate access. The Corporation also takes into account its own credit risk and the credit risk of the
counterparty in determining fair value for its derivative financial instruments based on whether they are financial assets or
financial liabilities. When the market for a derivative financial instrument is not active, the Corporation determines the fair
value by applying valuation techniques, such as using available information on market transactions involving other
instruments that are substantially the same, discounted cash flow analysis or other techniques, where appropriate. The
Corporation ensures, to the extent practicable, that its valuation technique incorporates all factors that market participants
would consider in setting a price and that it is consistent with accepted economic methods for pricing financial instruments,
including the credit risk of the party involved.
Discount rate of lease liabilities
The Corporation uses its incremental borrowing rate to calculate lease liabilities. The Corporation estimates the incremental
borrowing rate at the commencement of the lease by considering several factors, including the risk-free rate at lease
inception, the Corporation’s creditworthiness, the lease currency, the lease term and the nature of the leased property.
Given that various assumptions are used in determining the discount rate of lease liabilities, the calculation involves some
inherent measurement uncertainty.
Provision for return conditions
The estimates used to determine the provision for return conditions are based on historical experience, historical costs and
repairs, information from external suppliers, forecasted aircraft utilization, expected timing of repairs, the U.S. dollar
exchange rate and other facts and reasonable assumptions in the circumstances. Given that various assumptions are used in
determining the provision for return conditions, the calculation involves some inherent measurement uncertainty. Actual
results will differ from estimated results based on assumptions.
Employee future benefits
The cost of defined benefit pension plans and other post-employment benefits and the present value of the associated
obligations are determined using actuarial valuations. These actuarial valuations require the use of assumptions such as the
discount rate to measure obligations, expected mortality and expected rate of future compensation. Given that various
assumptions are used in determining the cost and obligations associated with employee future benefits, the actuarial
valuation process involves some inherent measurement uncertainty. Actual results will differ from estimated results based
on assumptions.
Annual Report 2020 Transat A.T. Inc. | 78
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax legislation and the amount
and timing of future taxable income. Given the Corporation’s wide range of international business relationships, differences
arising between actual results and the assumptions made, or future changes in such assumptions, could give rise to future
adjustments in the amounts of income taxes previously reported. Such interpretive differences may arise in a variety of areas
depending on the conditions specific to the respective tax jurisdiction of the Corporation’s subsidiaries. The Corporation
establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the
respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of
previous tax audits and interpretations of tax regulations by the taxable entity and the responsible tax authority.
Deferred income tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will
be available against which the losses can be utilized. Significant judgment is required by management to determine the
amount of deferred income tax assets that can be recognized, based upon the likely timing and the level of future taxable
income together with future tax planning strategies.
Due to the COVID-19 pandemic, its adverse impact on our results and the significant uncertainty related to the timing of the
return of demand for leisure travel, during the second quarter of the year ended October 31, 2020, the Corporation ceased
to recognize deferred tax assets and reduced the carrying amount of deferred tax asset balances for which it was no longer
able to justify recognition under IFRS. In addition, the Corporation measured the available indicators to determine whether
sufficient taxable income could be realized to utilize the deferred tax assets recorded before the second quarter of the year
ended October 31, 2020. As discussed in note 2, due to the COVID-19 pandemic, the losses generated during the fiscal year
ended October 31, 2020 and the significant uncertainty related to the timing of the return of demand for leisure travel are
adverse indications that deferred tax assets may be realized. For the year ended October 31, 2020, these adverse indications
outweighed the historical favourable indications and the Corporation reduced the balance of its deferred tax assets by
$18.4 million. The tax deductions underlying these deferred tax assets remain available for future use against taxable income.
Note 5 Changes in accounting policies
IFRS 16, Leases
IFRS 16, Leases, supersedes IAS 17, Leases. IFRS 16 introduces a single lessee accounting model under which most of lease-
related assets and liabilities are recognized in the statement of financial position. For the lessor, substantially all the current
accounting requirements remain unchanged.
Considering that the Corporation is committed under numerous leases, the adoption of IFRS 16 has a significant impact on
its consolidated financial statements. For its leases, the Corporation recognizes a right-of-use asset and a liability at the
present value of future lease payments. Depreciation and amortization of the right-of-use asset and interest expense on the
lease liability replace rent expense related to leases.
IFRS 16 was applied retrospectively on November 1, 2019 with restatement for each prior reporting period presented. The
opening consolidated statement of financial position as at November 1, 2018 and the consolidated statement of loss for the
year ended October 31, 2019 have been restated. The Corporation has elected to apply the permitted capitalization
exemptions for leases with terms of less than 12 months and leases of low value assets. The accounting policies resulting
from the adoption of IFRS 16 are discussed below.
FLEET
As at October 31, 2020, the Corporation operated 31 aircraft under leases [31 and 27 as at October 31, 2019 and 2018,
respectively] for which right-of-use assets and lease liabilities are recognized under IFRS 16; these aircraft are part of the
permanent fleet. During the winter season, the Corporation also has aircraft under leases for a period of approximately six
months; these aircraft are part of the seasonal fleet. The Corporation has elected to apply the provisions of IFRS 16 for the
seasonal fleet to continue to recognize the expenses associated with these leases under Aircraft rent on a straight-line basis
over the lease term.
Annual Report 2020 Transat A.T. Inc. | 79
Transat A.T. Inc.
Notes to Consolidated Financial Statements
For the permanent fleet, on initial recognition, right-of-use assets are broken down and eligible maintenance costs are
capitalized and depreciated over the shorter of the lease term or expected useful life. Subsequently, eligible maintenance
costs over the lease term are capitalized and depreciated over the shorter of the lease term or expected useful life. As a
result, the maintenance expense of leased aircraft decreased and the depreciation expense increased following the adoption
of IFRS 16.
All aircraft-related operating leases are denominated in U.S. dollars. The lease obligation in respect of leased aircraft and
the provision for return conditions are denominated in U.S. dollars and must be revalued at the prevailing exchange rate as
at the reporting date. Accordingly, the volatility of the foreign exchange gain (loss) recognized in the consolidated statement
of income (loss) was higher upon application of IFRS 16.
The Corporation is party to leases for aircraft engines. Right-of-use assets and lease liabilities are recognized under IFRS 16
in respect of such leases, except for leases with terms of less than 12 months and leases of low value assets.
REAL ESTATE AND OTHER LEASES
The Corporation is party to real estate leases, in particular for spaces in airports, offices and travel agencies. Right-of-use
assets and lease liabilities are recognized under IFRS 16 in respect of such leases, except for leases with terms of less than
12 months and leases with substantial substitution rights.
The Corporation is party to equipment leases, including automotive equipment. Right-of-use assets and lease liabilities are
recognized under IFRS 16 in respect of such leases, except for short-term leases and leases of low value assets.
PROVISION FOR RETURN CONDITIONS
Aircraft- and equipment-related leases contain obligations arising from the conditions under which the assets must be
returned to the lessor on expiry of the lease. The Corporation records a provision arising from the return conditions of leased
aircraft and engines upon commencement of the lease based on the degree of use until maintenance to meet the return
condition or until expiry of the lease. The provision is adjusted to reflect any change in the related maintenance expenses
anticipated and the significant accounting estimates and judgments used; these changes are accounted for under “Aircraft
maintenance” in the consolidated statement of income in the period during which they are incurred. The provision is
discounted using the risk-free pre-tax Canadian government bond rate as at the reporting date for a term equal to the
average remaining term to maturity before the related cash outflow.
The Corporation makes deposits to lessors based on the use of the leased aircraft in connection with certain future
maintenance work. Deposits made between the last maintenance performed by the Corporation and expiry of the lease, as
well as certain deposits made in excess of the actual cost of maintenance work, will not be refunded to the Corporation
when the maintenance is performed. These deposits are included in the provision for return conditions of leased aircraft
and engines.
COVID-19 RELATED RENT CONCESSIONS, AMENDMENT TO IFRS 16
On May 28, 2020, the IASB issued COVID-19-Related Rent Concessions – Amendment to IFRS 16. Under certain conditions,
this amendment allows a lessee to recognize any COVID-19 related rent concession in the same way it would account for the
change under IFRS 16 if the change were not a lease modification. The Corporation has applied the provisions of this
amendment to all of its leases in its consolidated financial statements for the year ended October 31, 2020. The adoption of
this new amendment had no significant impact on the Corporation’s consolidated statement of income (loss).
CONSOLIDATED STATEMENT OF INCOME (LOSS) PRESENTATION
Consolidated statement of income (loss) presentation was also amended to better reflect the nature of operating expenses.
Certain operating expenses formerly reported under “Other airline costs” are now reported under “Airport and navigation
fees”. This change in consolidated statement of income (loss) presentation had no impact on operating results.
Annual Report 2020 Transat A.T. Inc. | 80
Transat A.T. Inc.
Notes to Consolidated Financial Statements
IMPACT ON PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
The cumulative effect of the adoption of IFRS 16 on the consolidated statement of financial position, the consolidated
statement of income (loss) and the consolidated statement of cash flows is detailed in the following tables.
Consolidated statements of financial position
(in thousands of Canadian dollars)
ASSETS
Trade and other receivables
Prepaid expenses
Current assets
Deposits
Deferred tax assets
Property, plant and equipment
Other assets
Non-current assets
LIABILITIES
Trade and other payables
Current portion of provision for overhaul of leased
aircraft
Current portion of lease liabilities
Current liabilities
Provision for overhaul of leased aircraft
Provision for return conditions
Lease liabilities
Other liabilities
Deferred tax liabilities
Non-current liabilities
EQUITY
Retained earnings
As at
November
1, 2018
After
adjustments
$
Real estate
and other
$
Fleet
$
(7,339)
(5,165)
(12,504)
124,284
(270)
481,745
(26,310)
579,449
566,945
986
(19)
967
—
1,421
38,281
(189)
133,626
63,706
1,145,253
166,026
16,105
721,504
186
39,513
40,480
1,028,962
2,174,215
As at
November
1, 2018
$
139,979
68,890
1,156,790
41,742
14,954
201,478
26,685
410,000
1,566,790
320,732
(7,710)
(749)
312,273
27,313
—
869,280
29,915
—
—
92,025
3,252
(27,313)
58,570
23,547
(29,915)
128,528
454,499
(41,429)
8,220
—
12,680
11,931
—
—
39,421
(9,468)
267
125,871
519,903
30,220
—
71,250
904,758
—
128,528
493,920
41,128
11,739
675,994
340,766
571,639
1,566,790
23,495
23,495
566,945
(1,671)
362,590
(1,671)
40,480
593,463
2,174,215
Annual Report 2020 Transat A.T. Inc. | 81
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Consolidated statements of financial position
(in thousands of Canadian dollars)
ASSETS
Trade and other receivables
Prepaid expenses
Current assets
Deposits
Deferred tax assets
Property, plant and equipment
Other assets
Non-current assets
LIABILITIES
Trade and other payables
Current portion of provision for overhaul of leased
aircraft
Current portion of lease liabilities
Current liabilities
Provision for overhaul of leased aircraft
Provision for return conditions
Lease liabilities
Other liabilities
Deferred tax liabilities
Non-current liabilities
EQUITY
Retained earnings
As at
October 31,
2019
$
Real estate
and other
$
Fleet
$
As at
October 31,
2019
After
adjustments
$
137,449
83,822
1,127,567
41,226
27,209
235,161
34,055
457,360
1,584,927
283
(9,333)
(9,050)
124,911
(270)
603,288
(33,599)
694,330
685,280
212
—
212
—
1,209
52,996
(134)
54,071
54,283
137,944
74,489
1,118,729
166,137
28,148
891,445
322
1,205,761
2,324,490
315,395
(3,304)
(1,026)
311,065
27,151
—
918,625
31,097
—
—
97,498
1,274
(27,151)
88,214
57,759
(31,097)
155,120
514,235
(42,206)
8,172
—
11,600
10,574
—
—
51,880
(7,848)
306
131,519
604,224
44,338
—
99,814
986,958
—
155,120
566,115
47,444
9,752
780,081
314,325
534,783
1,584,927
23,297
23,297
685,280
(629)
336,993
(629)
54,283
557,451
2,324,490
Annual Report 2020 Transat A.T. Inc. | 82
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Consolidated statements of income
Year ended October 31
(in thousands of Canadian dollars, except per share amounts)
Revenues
Operating expenses
Aircraft maintenance
Airport and navigation fees
Aircraft rent
Other airline costs
Other
Depreciation and amortization
Operating income (loss)
Financing costs
Foreign exchange (gain) loss
Income (loss) before income tax expense
Income taxes (recovery)
Deferred
Net income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interests
Earnings (loss) per share
Basic
Diluted
2019
$
2,937,130
279,283
158,618
143,784
262,477
105,304
64,078
2,986,913
(49,783)
1,520
140
(38,766)
(9,250)
(8,222)
(30,544)
(33,191)
2,647
(30,544)
(0.88)
(0.88)
Fleet
$
—
(49,374)
—
(96,981)
6,298
—
108,054
(32,003)
32,003
33,501
(1,252)
(246)
(48)
(48)
(198)
(198)
—
(198)
(0.01)
(0.01)
Real estate
and other
$
2019
After
Presentation
$
adjustments
$
—
—
2,937,130
—
—
—
—
(14,381)
10,189
(4,192)
4,192
2,914
2
1,276
250
250
1,026
1,042
(16)
1,026
0.03
0.03
—
17,215
—
(17,215)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
229,909
175,833
46,803
251,560
90,923
182,321
2,950,718
(13,588)
37,935
(1,110)
(37,736)
(9,048)
(8,020)
(29,716)
(32,347)
2,631
(29,716)
(0.86)
(0.86)
Annual Report 2020 Transat A.T. Inc. | 83
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Consolidated Statements of Cash Flows
Year ended October 31
(in thousands of Canadian
OPERATING ACTIVITIES
Net income (loss) for the year
Operating items not involving an outlay (receipt) of
Depreciation and amortization
Foreign exchange loss (gain)
Deferred taxes
Net change in non-cash working capital balances related to operations
Net change in provision for overhaul of leased aircraft
Net change in provision for return conditions
Net change in other assets and liabilities related to operations
Cash flows related to operating activities
Real estate
and other
$
Fleet
$
2019
After
adjustments
$
2019
$
(30,544)
(198)
1,026
(29,716)
64,078
140
(9,250)
38,868
33,105
1,020
—
(8,918)
64,075
108,054
(1,252)
(48)
106,556
712
(1,020)
26,592
5,885
138,725
10,189
2
250
11,467
189
—
—
1,565
13,221
182,321
(1,110)
(9,048)
156,891
34,006
—
26,592
(1,468)
216,021
INVESTING ACTIVITIES
Additions to property, plant and equipment and other intangible assets
Cash flows related to investing activities
(92,277)
(92,123)
(71,656)
(71,656)
—
—
(163,933)
(163,779)
FINANCING ACTIVITIES
Repayment of lease liabilities
Cash flows related to financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
IFRIC 23, Uncertainty over Income Tax Treatments
—
(1,703)
(67,069)
(67,069)
(13,221)
(13,221)
(80,290)
(81,993)
941
(28,810)
593,654
564,844
—
—
—
—
—
—
—
—
941
(28,810)
593,654
564,844
In June 2017, the IASB issued IFRIC 23, Uncertainty over Income Tax Treatments, which clarifies how to apply the recognition
and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over income tax treatments. IFRIC 23 sets
out the circumstances in which uncertain tax treatments should be treated separately or together, and the assumptions to
be considered in assessing an uncertain tax treatment and determining whether it is probable that a taxation authority will
accept the treatment. Application of IFRIC 23 is effective for the Corporation’s annual reporting period beginning on
November 1, 2019. The adoption of this new IFRIC interpretation has no significant impact on the Corporation’s consolidated
financial statements.
Note 6 Cash and cash equivalents in trust or otherwise reserved
As at October 31, 2020, cash and cash equivalents in trust or otherwise reserved included $242,622 [$292,134 as at
October 31, 2019] in funds received from customers, primarily Canadians, for services not yet rendered or for which the
restriction period had not ended, in accordance with Canadian regulators and the Corporation’s business agreements with
certain credit card processors. Cash and cash equivalents in trust or otherwise reserved also included $66,025, $56,268 of
which was recorded as non-current assets [$60,637 as at October 31, 2019, $51,224 of which was recorded as non-current
assets], which was pledged as collateral security against letters of credit [see note 25].
Annual Report 2020 Transat A.T. Inc. | 84
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 7
Trade and other receivables
Trade receivables
Government receivables
Cash receivable from lessors
Other receivables
2020
$
2019
Restated
[note 5]
$
5,565
26,017
18,970
44,782
95,334
25,669
21,863
71,840
18,572
137,944
As at October 31, 2020, amounts receivable due from government included $16,061 as Canada Emergency Wage Subsidy
[“CEWS”] receivable [note 18]. In addition, other amounts receivable included balances receivable from two credit card
processors totalling $19,177.
Annual Report 2020 Transat A.T. Inc. | 85
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 8
Financial Instruments
Classification of financial instruments
The classification of financial instruments and their carrying amounts and fair values are detailed as follows:
As at October 31, 2020
Financial assets
Cash and cash equivalents
Cash and cash equivalents in trust or
otherwise reserved
Trade and other receivables
Deposits on leased aircraft and engines
Derivative financial instruments
-Other foreign currency derivatives
Financial liabilities
Trade and other payables
Derivative financial instruments
-Fuel purchasing forward contracts and
other fuel-related derivative
financial instruments
-Other foreign currency derivatives
Non-controlling interest
Long-term debt
Carrying amount
Fair value
through other
comprehensive
income Amortized cost
$
$
Total
$
Fair value
$
—
—
—
—
—
—
—
—
426,433
426,433
—
69,317
40,470
—
109,787
308,647
69,317
40,470
964
845,831
308,647
69,317
40,470
964
845,831
189,309
189,309
189,309
—
368
—
—
368
—
—
—
49,980
239,289
9,233
822
37,800
49,980
287,144
9,233
822
37,800
49,871
287,035
Fair value
through net
income
426,433
308,647
—
—
964
736,044
—
9,233
454
37,800
—
47,487
Annual Report 2020 Transat A.T. Inc. | 86
Transat A.T. Inc.
Notes to Consolidated Financial Statements
As at October 31, 2019
Financial assets
Cash and cash equivalents
Cash and cash equivalents in trust or
otherwise reserved
Trade and other receivables
Deposits on leased aircraft and engines
Derivative financial instruments
-Fuel purchasing forward contracts and
other fuel-related derivative
financial instruments
-Other foreign currency derivatives
Financial liabilities
Trade and other payables
Derivative financial instruments
-Fuel purchasing forward contracts and
other fuel-related derivative
financial instruments
-Other foreign currency derivatives
Non-controlling interest
Carrying amount
Fair value
through other
comprehensive
income Amortized cost
Restated
[note 5]
$
$
Total
Restated
[note 5]
$
Fair value
Restated
[note 5]
$
—
—
—
—
—
564,844
564,844
—
116,081
38,415
352,771
116,081
38,415
352,771
116,081
38,415
Fair value
through net
income
Restated
[note 5]
$
564,844
352,771
—
—
407
1,565
919,587
—
2,898
2,898
—
—
154,496
407
4,463
1,076,981
407
4,463
1,076,981
—
—
234,611
234,611
234,611
6,222
2,621
38,284
47,127
—
3,238
—
3,238
—
—
—
234,611
6,222
5,859
38,284
284,976
6,222
5,859
38,284
284,976
Determination of fair value of financial instruments
The fair value of financial instruments is the amount for which the instrument could be exchanged between knowledgeable,
willing parties in an arm’s length transaction. The following methods and assumptions were used to measure fair value:
The fair value of cash and cash equivalents, in trust or otherwise reserved or not, trade and other receivables, and accounts
payable and accrued
liabilities approximates their carrying amount due to the short-term maturity of these
financial instruments.
The fair value of forward purchase contracts and other derivative financial instruments related to fuel or currencies is
measured using a generally accepted valuation method, i.e., by discounting the difference between the value of the contract
at expiration determined according to contract price or rate and the value of the contract at expiration determined according
to contract price or rate that the financial institution would have used had it renegotiated the same contract under the same
conditions at the current date. The Corporation also factors in the financial institution’s credit risk when determining the
value of financial assets and its own credit risk when determining the value of financial liabilities.
The fair value of deposits on leased aircraft and engines approximates their carrying amount given that they are subject to
terms and conditions similar to those available to the Corporation for instruments with comparable terms.
Annual Report 2020 Transat A.T. Inc. | 87
Transat A.T. Inc.
Notes to Consolidated Financial Statements
The fair value of the non-controlling interest in respect of which a shareholder holds an option entitling him to require the
Corporation to buy back his shares corresponds to its redemption price. The redemption price is based on a formula that
factors in financial indicators.
The fair value of long-term debt is measured using a generally accepted valuation method, i. e., by discounting long-term
debt-related cash outflows based on the prevailing market interest rate for similar debt, taking into account guarantees,
current credit market conditions and the Corporation’s credit risk.
The following table details the fair value hierarchy of financial instruments by level:
As at October 31, 2020
Financial assets
Derivative financial instruments
-Foreign exchange forward contracts and other
foreign currency derivatives
Financial liabilities
Derivative financial instruments
-Fuel purchasing forward contracts and other fuel-related
derivative financial instruments
-Foreign exchange forward contracts and other
foreign currency derivatives
Non-controlling interest
As at October 31, 2019
Financial assets
Derivative financial instruments
-Fuel purchasing forward contracts and other fuel-related
derivative financial instruments
-Foreign exchange forward contracts and other
foreign currency derivatives
Financial liabilities
Derivative financial instruments
-Fuel purchasing forward contracts and other fuel-related
derivative financial instruments
-Foreign exchange forward contracts and other
foreign currency derivatives
Non-controlling interest
Quoted prices
in active
markets
(Level 1)
$
Other
observable
inputs
(Level 2)
$
Unobservable
inputs
(Level 3)
$
—
—
—
—
—
—
964
964
9,233
822
—
10,055
—
—
—
—
37,800
37,800
Total
$
964
964
9,233
822
37,800
47,855
Quoted prices
in active
markets
(Level 1)
Other
observable
inputs
(Level 2)
$
$
Unobservable
inputs
(Level 3)
Restated
[note 5]
$
Total
Restated
[note 5]
$
—
—
—
—
—
—
—
407
4,463
4,870
6,222
5,859
—
12,081
—
—
—
—
—
38,284
38,284
407
4,463
4,870
6,222
5,859
38,284
50,365
Annual Report 2020 Transat A.T. Inc. | 88
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Non-controlling interest
The minority shareholder of the subsidiary Trafictours Canada Inc. could require that the Corporation purchase its
Trafictours Canada Inc. shares at a price equal to a pre-determined formula, subject to adjustment according to the
circumstances, payable in cash. The fair value of this option is taken into account in the carrying amount of the
non-controlling interest.
The change in the non-controlling interest is as follows:
Balance, beginning of year
Net income
Other comprehensive income
Dividends
Change in fair value of non-controlling interest
2020
$
38,284
(220)
663
(849)
(78)
37,800
2019
Restated
[note 5]
$
48,700
2,631
1
(2,892)
(10,156)
38,284
Management of risks arising from financial instruments
In the normal course of business, the Corporation is exposed to credit and counterparty risk, liquidity risk and market risk
arising from changes in certain foreign exchange rates, changes in fuel prices and changes in interest rates. The Corporation
manages these risk exposures on an ongoing basis. In order to limit the effects of changes in foreign exchange rates, fuel
prices and interest rates on its revenues, expenses and cash flows, the Corporation can avail itself of various derivative
financial instruments. The Corporation’s management is responsible for determining the acceptable level of risk and only
uses derivative financial instruments to manage existing or anticipated risks, commitments or obligations based on its
past experience.
Credit and counterparty risk
Credit risk is primarily attributable to the potential inability of customers, service providers, aircraft and engine lessors and
financial institutions, including the other counterparties to cash equivalents and derivative financial instruments, to
discharge their obligations.
Trade accounts receivable included under Trade and other receivables in the consolidated statement of financial position
totalled $5,565 as at October 31, 2020 [$25,669 as at October 31, 2019]. Trade accounts receivable consist of balances
receivable from a large number of customers, including travel agencies. Trade accounts receivable generally result from the
sale of vacation packages to individuals through travel agencies and the sale of seats to tour operators dispersed over a wide
geographic area. No other customer represented more than 10% of total accounts receivable as at October 31, 2020
and 2019. As at October 31, 2020, approximately 18% [approximately 7% as at October 31, 2019] of accounts receivable were
over 90 days past due, whereas approximately 77% [approximately 90% as at October 31, 2019] were current, that is, under
30 days. Historically, the Corporation has not incurred any significant losses in respect of its trade receivables. Therefore,
the allowance for doubtful accounts at the end of each period and the change recorded for each period is insignificant.
Other receivables included balances receivable from two credit card processors totalling $19,177. The credit risk for these
receivables is negligible.
Pursuant to certain agreements entered into with its service providers consisting primarily of hotel operators, the
Corporation pays deposits to capitalize on special benefits, including pricing, exclusive access and room allotments. These
deposits totalled $9,267 as at October 31, 2020 [$20,576 as at October 31, 2019]. These deposits are offset by purchases of
person-nights at these hotels. Risk arises from the fact that these hotels might not be able to honour their obligations to
provide the agreed number of person-nights. The Corporation strives to minimize its exposure by limiting deposits to
recognized and reputable hotel operators in its active markets. These deposits are spread across a large number of hotels
and suppliers and, historically, the Corporation has not been required to write off a considerable amount for its deposits
with suppliers.
Annual Report 2020 Transat A.T. Inc. | 89
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Under the terms of its aircraft and engine leases, the Corporation pays deposits when aircraft and engines are commissioned,
particularly as collateral for remaining lease payments. These deposits totalled $40,470 as at October 31, 2020 [$38,415 as at
October 31, 2019] and are returned as leases expire. The Corporation is also required to pay cash security deposits to lessors
over the lease term to guarantee the serviceable condition of aircraft. Cash security deposits with lessors are generally
returned to the Corporation upon receipt of documented proof that the related maintenance has been performed by the
Corporation. As at October 31, 2020, the cash security deposits with lessors that have been claimed totalled $18,970
[$71,840 as at October 31, 2019] and are included in Trade and other receivables. Historically, the Corporation has not written
off any significant amount of deposits and claims for cash security deposits with aircraft and engine lessors. The credit risk
for these receivables is negligible.
For financial institutions including the various counterparties, the maximum credit risk as at October 31, 2020 relates to cash
and cash equivalents, including cash and cash equivalents in trust or otherwise reserved, and derivative financial instruments
accounted for in assets. These assets are held or traded with a limited number of financial institutions and other
counterparties. The Corporation is exposed to the risk that the financial institutions and other counterparties with which it
holds securities or enters into agreements could be unable to honour their obligations. The Corporation minimizes risk by
entering into agreements only with large financial institutions and other large counterparties with appropriate credit ratings.
The Corporation’s policy is to invest solely in products that are rated R1-Mid or better (by Dominion Bond Rating Service
[“DBRS”]), A1 (by Standard & Poor’s) or P1 (by Moody’s) and rated by at least two rating firms. Exposure to these risks is closely
monitored and maintained within the limits set out in the Corporation’s various policies. The Corporation revises these
policies on a regular basis.
The Corporation does not believe it is exposed to a significant concentration of credit risk as at October 31, 2020.
Liquidity risk
The Corporation is exposed to the risk of being unable to honour its financial commitments by the deadlines set out under
the terms of such commitments and at a reasonable price [see note 2]. The Corporation has a Treasury Department in charge,
among other things, of ensuring sound management of available cash resources, financing and compliance with deadlines
within the Corporation’s scope of consolidation. With senior management’s oversight, the Treasury Department manages
the Corporation’s cash resources based on financial forecasts and anticipated cash flows. The Corporation has implemented
an investment policy designed to safeguard its capital and instrument liquidity and generate a reasonable return. The policy
sets out the types of allowed investment instruments, their concentration, acceptable credit rating and maximum maturity.
The maturities of the Corporation’s financial liabilities as at October 31, 2020 are summarized in the following table, excluding
lease liabilities, which are disclosed in note 14:
Maturing in
under 1 year
$
Maturing in
1 to 2 years
$
Maturing in
2 to 5 years
$
189,309
37,800
11,048
—
238,157
—
—
—
50,000
50,000
—
—
—
—
—
Contractual
cash flows
Total
$
189,309
37,800
11,048
50,000
288,157
Carrying
amount
Total
$
189,309
37,800
10,055
49,980
287,144
Accounts payable and accrued liabilities
Non-controlling interest
Derivative financial instruments
Long-term debt
Total
Market risk
FOREIGN EXCHANGE RISK
The Corporation is exposed to foreign exchange risk, primarily as a result of its many arrangements with foreign-based
suppliers, lease liabilities, fuel purchases, long-term debt and revenues in foreign currencies, and fluctuations in exchange
rates mainly with respect to the U.S. dollar, the euro and the pound sterling against the Canadian dollar and the euro, as the
case may be. Approximately 64% [74% in 2019] of the Corporation’s costs are incurred in a currency other than the
measurement currency of the reporting unit incurring the costs, whereas approximately 13% [19% in 2019] of revenues are
earned in a currency other than the measurement currency of the reporting unit making the sale. To safeguard the value of
commitments and anticipated transactions, the Corporation has a foreign currency risk management policy that authorizes
the use of forward exchange forward contracts and other types of derivative financial instruments for the purchase and/or
Annual Report 2020 Transat A.T. Inc. | 90
Transat A.T. Inc.
Notes to Consolidated Financial Statements
sale of foreign currencies based on anticipated foreign exchange rate trends, expiring in generally less than 18 months. Due
to the COVID-19 pandemic and the resulting lack of visibility on its future needs, the Corporation has not contracted any new
foreign exchange derivatives since March 2020. The Corporation will reassess the situation from time to time.
Expressed in Canadian dollar terms, the net financial assets and net financial liabilities of the Corporation and its subsidiaries
denominated in currencies other than the measurement currency of the financial statements as at October 31, based on
their financial statement measurement currency, are summarized in the following tables:
Net assets (liabilities)
2020
Financial statement
measurement currency of the
group’s companies
U.S. dollar
Pound sterling
Canadian dollar
Other currencies
Total
U.S. dollar
$
Euro
$
Pound
sterling
$
Canadian
dollar
$
Other
currencies
$
Total
$
—
5
(792,367)
(652)
(793,014)
—
134
(752)
2
(616)
—
—
(1,834)
—
(1,834)
14
40,559
—
—
40,573
(533)
—
(345)
875
(3)
(519)
40,698
(795,298)
225
(754,894)
For the year ended October 31, 2020, a 1% rise or fall in the Canadian dollar against the other currencies, assuming that all
other variables had remained the same, would have resulted in an $8,006 increase or decrease in the Corporation’s net loss
for the year, whereas other comprehensive loss would have decreased or increased by $929. For sensitivity analysis purposes,
the impact of the U.S. dollar individually on the Corporation’s net loss for the year would have resulted in an increase or
decrease of $8,273. Also for sensitivity analysis purposes, the impact of any other single currency on the Corporation’s
income would not be material.
As at October 31, 2020, due to a significant COVID-19 pandemic-related decrease in our capacity, 100% of estimated
requirements for winter 2021 were covered by foreign exchange derivatives [63% of estimated requirements for fiscal 2020
were covered as at October 31, 2019]. Due to the COVID-19 pandemic and the resulting lack of visibility on its future needs,
the Corporation has not contracted any foreign exchange derivatives for summer 2021.
RISK OF FLUCTUATIONS IN FUEL PRICES
The Corporation is particularly exposed to fluctuations in fuel prices. Due to competitive pressures in the industry, there can
be no assurance that the Corporation would be able to pass along any increase in fuel prices to its customers by increasing
prices, or that any eventual price increase would fully offset higher fuel costs, which could in turn adversely impact its
business, financial position or operating results. To mitigate fuel price fluctuations, the Corporation has implemented a fuel
price risk management policy that authorizes foreign exchange forward contracts, and other types of derivative financial
instruments, expiring in generally less than 18 months. Due to the COVID-19 pandemic and the resulting lack of visibility on
its future needs, the Corporation has not contracted any new fuel-related derivatives since March 2020. The Corporation
will reassess the situation from time to time.
For the year ended October 31, 2020, a 10% increase or decrease in fuel prices, assuming that all other variables had
remained the same, would have resulted in a $1,009 decrease or increase in the Corporation’s net loss.
As at October 31, 2020, due to a significant decrease in our capacity related to the COVID-19 pandemic, 100% of estimated
requirements for winter 2021 were covered by fuel-related derivatives [41% of estimated requirements for fiscal 2020 were
covered as at October 31, 2019]. Due to the COVID-19 pandemic and the resulting lack of visibility on its future needs, the
Corporation has not contracted any fuel-related derivatives for summer 2021.
Annual Report 2020 Transat A.T. Inc. | 91
Transat A.T. Inc.
Notes to Consolidated Financial Statements
INTEREST RATE RISK
The Corporation is exposed to interest rate fluctuations, primarily due to its variable-rate credit facility. The Corporation
manages its interest rate exposure and could potentially enter into swap agreements consisting in exchanging variable rates
for fixed rates.
Furthermore, interest rate fluctuations could have an effect on the Corporation’s interest income derived from its cash and
cash equivalents.
For the year ended October 31, 2020, a 25 basis point increase or decrease in interest rates, assuming that all other variables
had remained the same, would have resulted in a $1,106 increase or decrease in the Corporation’s net loss.
CAPITAL RISK MANAGEMENT
The Corporation’s capital management objectives are first to ensure the longevity of the Corporation so as to support its
continued operations, provide its shareholders with a return, generate benefits for its other stakeholders and maintain the
most optimal capitalization possible with a view to keeping capital costs to a minimum.
The Corporation manages its capitalization in accordance with changes in economic conditions. In order to maintain or adjust
its capitalization, the Corporation may elect to declare dividends to shareholders, return capital to its shareholders and
repurchase its shares in the marketplace or issue new shares.
The Corporation monitors its capitalization using the adjusted debt/equity ratio. This ratio is calculated by dividing total net
debt by equity. Total net debt is equal to the aggregate of long-term debt and lease obligations, less cash and cash equivalents
[not held in trust or otherwise reserved]. Although commonly used, this measure does not reflect the fair value of leases as
it does not take into account current rates for similar obligations with similar terms and risks.
Due to the COVID-19 pandemic and the resulting effect on capital structure, the Corporation is suspending its strategy of
maintaining its adjusted debt/equity ratio below 1 until operations return to normal. The calculation of the adjusted
debt/equity ratio is summarized as follows:
Net debt
Long-term debt
Lease liabilities
Cash and cash equivalents
Equity
Adjusted debt/equity ratio
2020
$
2019
Restated
[note 5]
$
49,980
853,906
(426,433)
477,453
66,307
720.1%
—
665,929
(564,844)
101,085
557,451
18.1%
The Corporation’s credit facilities are subject to certain covenants including a debt/equity ratio and a fixed-charge coverage
ratio. These ratios are monitored by management and submitted to the Corporation’s Board of Directors on a quarterly basis.
As at October 31, 2020, due to the COVID-19 pandemic, the Corporation benefited from a temporary suspension of these
ratios by its lenders up to January 30, 2021. Except for the credit facility covenants, the Corporation is not subject to any
third-party capital requirements.
Annual Report 2020 Transat A.T. Inc. | 92
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 9 Deposits
Deposits for maintenance to lessors
Deposits on leased aircraft and engines
Deposits with suppliers
Less current portion
Note 10 Property, plant and equipment
2020
$
103,638
40,470
9,267
153,375
16,471
136,904
2019
Restated
[note 5]
$
124,911
38,415
20,576
183,902
17,765
166,137
Aircraft
equipment
$
Fleet
$
Office
furniture
and
equipment
$
Land, building
and leasehold
improvements
$
Right-of-
use
Fleet
$
Right-of-
use
Real estate
and other
$
Total
$
328,737
6,839
(47,628)
(121,053)
(4,122)
—
162,773
250,001
18,372
(45,060)
(121,053)
—
102,260
125,102
25,852
(14,600)
—
(171)
—
136,183
74,717
11,152
(14,597)
—
—
71,272
60,037
5,089
(369)
(6,038)
—
(70)
58,649
40,388
5,642
(209)
(6,038)
61
39,844
115,558
1,294
—
(1,885)
(32,826)
825
82,966
1,344,885
269,227
(109,891)
(138)
(46,524)
—
1,457,559
130,017
24,648
(1,049)
(4,822)
—
177
148,971
2,104,336
332,949
(173,537)
(133,936)
(83,643)
932
2,047,101
29,167
2,392
—
(1,885)
(83)
29,591
741,597
145,810
(80,773)
(138)
—
806,496
77,021
9,262
(130)
(4,822)
(75)
81,256
1,212,891
192,630
(140,769)
(133,936)
(97)
1,130,719
60,513
64,911
18,805
53,375
651,063
67,715
916,382
Cost
Balance as at October 31, 2019
Additions
Disposals
Write-offs
Depreciation
Exchange difference
Balance as at October 31, 2020
Accumulated depreciation
Balance as at October 31, 2019
Depreciation
Disposals
Write-offs
Exchange difference
Balance as at October 31, 2020
Net book value as at
October 31, 2020
Annual Report 2020 Transat A.T. Inc. | 93
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Aircraft
equipment
Fleet
Office
furniture
and
equipment
Building and
leasehold
improvements
$
$
$
Right-of-
use
Fleet
Restated
[note 5]
$
Right-of-
use
Real estate
and other
Restated
[note 5]
$
Total
Restated
[note 5]
$
339,093
24,807
(35,163)
—
328,737
251,348
33,816
(35,163)
—
250,001
118,679
27,730
(21,307)
—
125,102
88,238
7,786
(21,307)
—
74,717
53,102
10,634
(3,601)
(98)
60,037
38,335
5,711
(3,601)
(57)
40,388
96,123
19,926
(352)
(139)
115,558
1,152,517
229,595
(37,227)
—
1,344,885
105,460
24,760
(136)
(67)
130,017
1,864,974
337,452
(97,786)
(304)
2,104,336
27,598
1,930
(352)
(9)
29,167
670,770
108,054
(37,227)
—
741,597
67,181
9,950
(136)
26
77,021
1,143,470
167,247
(97,786)
(40)
1,212,891
78,736
50,385
19,649
86,391
603,288
52,996
891,445
Cost
Balance as at November 1, 2018
Additions
Write-offs
Exchange difference
Balance as at October 31, 2019
Accumulated depreciation
Balance as at November 1, 2018
Depreciation
Write-offs
Exchange difference
Balance as at October 31, 2019
Net book value as at
October 31, 2019
Fleet-related property, plant and equipment
During the year ended October 31, 2020, the Corporation early returned four leased aircraft to the lessors: three Boeing 737-
800s and one Airbus A330. These returns resulted in disposals of property, plant and equipment and accumulated
amortization balances of $118,886 and $91,341, respectively.
Moreover, due to the significant COVID-19 pandemic-related capacity reductions, ten leased aircraft, i.e., five Airbus A330s,
three Airbus A321ceos and two Boeing 737-800s, will no longer be used until they are returned to the lessors. An impairment
charge corresponding to the full carrying amount of the right-of-use assets, maintenance components and leasehold
improvements for these aircraft was recorded under Special items in the consolidated statement of loss; these impairment
charges totalled $50,817. The Corporation is negotiating with the lessors of some of its aircraft in order to return them
early [note 19].
Land, building and leasehold improvements
Due to the COVID-19 pandemic occurring worldwide, the global tourism industry has faced a collapse in demand. The
Corporation cannot currently forecast all the impacts of COVID-19 on its hotel development strategy, particularly the use of
its land and the start of eventual construction work. However, the land in Mexico does not meet the required criteria to be
presented as an asset held for sale. Given the uncertainty surrounding future use of the land, an assessment of the
recoverable amount of the land in Mexico compared with its carrying amount has been made. The recoverable amount of the
land was determined based on fair value less costs to sell. Fair value less costs to sell was estimated using level 3 input data,
according to a valuation prepared by an independent, external valuator as at October 12, 2020. The determined recoverable
amount of the land in Mexico is less than its carrying amount. Accordingly, as at October 31, 2020, the Corporation recognized
an impairment charge of $32,826 related to its land in Mexico, under Special items, in order to bring the carrying value of
the land to its recoverable amount of $50,675 as at October 31, 2020 [note 19].
Annual Report 2020 Transat A.T. Inc. | 94
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 11
Intangible assets
Cost
Balance as at October 31, 2019
Additions
Write-offs and impairment
Exchange difference
Balance as at October 31, 2020
Accumulated amortization and impairment
Balance as at October 31, 2019
Amortization
Write-offs and impairment
Exchange difference
Balance as at October 31, 2020
Net book value as at October 31, 2020
Cost
Balance as at October 31, 2018
Additions
Exchange difference
Balance as at October 31, 2019
Accumulated amortization and impairment
Balance as at October 31, 2018
Amortization
Exchange difference
Balance as at October 31, 2019
Net book value as at October 31, 2019
Software Trademarks
$
$
Customer
lists
$
162,800
2,456
(6,737)
24
158,543
130,710
11,410
(6,737)
8
135,391
23,152
20,381
—
—
37
20,418
15,809
—
2,384
—
18,193
2,225
Total
$
195,970
2,468
(6,944)
61
191,555
159,118
11,480
(4,560)
8
166,046
12,789
12
(207)
—
12,594
12,599
70
(207)
—
12,462
132
25,509
Software Trademarks
$
$
Customer
lists
$
153,709
9,088
3
162,800
115,695
15,010
5
130,710
32,090
20,334
—
47
20,381
15,809
—
—
15,809
4,572
12,574
92
123
12,789
12,424
52
123
12,599
190
Total
$
186,617
9,180
173
195,970
143,928
15,062
128
159,118
36,852
Annual Report 2020 Transat A.T. Inc. | 95
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Impairment testing in 2020
The Corporation performed its annual impairment test to determine whether the carrying amount of trademarks was higher
than their recoverable amount.
The recoverable amount is determined based on value in use, using the royalty capitalization method. The Corporation
prepares cash flow forecasts based on pre-established royalty rates, which represent what a third party would pay to use
the trademark. The cash flow forecasts, which correspond to after-tax royalties, are then discounted.
The Corporation concluded that the recoverable value of the Canadian Affair trademark, determined on a value-in-use basis,
was lower than its carrying amount as a result of a decrease in revenues and expected profitability for this trademark due to
the COVID-19 pandemic. As a result, the Corporation recognized a $1,884 impairment charge.
The Corporation concluded that the recoverable value of its wholly owned agency trademark Marlin Travel, determined based
on value in use, was lower than its carrying amount as a result of a decrease in revenues and expected profitability for this
trademark due to the COVID-19 pandemic. As a result, the Corporation recognized a $500 impairment charge.
Note 12
Investment
The Corporation holds a 50% interest in Desarrollo Transimar, a Mexican company operating a hotel, the Marival Armony.
This interest in a joint venture is accounted for using the equity method.
The change in the investment in Desarrollo Transimar is detailed as follows:
Balance, beginning of year
Capital contribution
Share of net loss
Impairment [note 19]
Translation adjustment
2020
$
16,533
2,042
(1,172)
(3,100)
206
14,509
2019
$
16,084
1,690
(1,250)
—
9
16,533
The investment was translated at the USD/CAD rate of 1.3336 as at October 31, 2020 [1.3142 as at October 31, 2019].
As at October 31, 2020, the Corporation determined that the declines in Desarrollo Transimar’s revenues and demand due
to the COVID-19 pandemic were objective evidence of impairment of its investment in a joint venture. Accordingly, the
Corporation performed an impairment test on its investment to compare its recoverable amount with its carrying amount.
The recoverable amount of the investment was determined based on the fair value less costs to sell. Fair value less costs to
sell was established based on a valuation prepared by an external and independent appraiser as at October 31, 2020, using a
discounted cash flow model based on Level 3 inputs. The cash flows used are management’s most plausible projections given
current and expected market conditions. The recoverable amount of the investment determined is less than its carrying
amount. Accordingly, as at October 31, 2020, the Corporation recognized a $3,100 impairment charge related to its
investment under Special items in order for the carrying amount of the investment to be equal to its recoverable amount as
at October 31, 2020.
As at October 31, 2020, the pre-tax discount rate used for the investment’s impairment test was 7.1%.
Annual Report 2020 Transat A.T. Inc. | 96
Transat A.T. Inc.
Notes to Consolidated Financial Statements
The following table shows the condensed financial information regarding Desarrollo Transimar as at October 31, 2020
and 2019:
Statement of financial position:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Impairment [note 19]
Carrying amount of investment
Statement of comprehensive income:
Revenues
Net loss and comprehensive loss
Share of net income (loss)
Note 13 Trade and other payables
Trade payables
Accrued expenses
Salaries and employee benefits payable
Government remittances
Non-controlling interest [note 8]
2020
$
2019
$
7,830
97,323
5,654
64,282
35,217
(3,100)
14,509
8,863
93,479
7,214
62,063
33,065
—
16,533
11,054
(2,344)
(1,172)
6,370
(2,500)
(1,250)
2020
$
2019
Restated
[note 5]
$
90,750
15,743
82,816
5,134
37,800
232,243
124,208
21,939
88,464
38,170
38,284
311,065
Annual Report 2020 Transat A.T. Inc. | 97
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 14 Long-term debt and lease liabilities
On October 9, 2020, the Corporation amended its $50,000 revolving credit facility agreement for operating purposes. The
amended agreement, which expires in 2022, may be extended for a year at each anniversary date subject to lender approval
and the balance becomes immediately payable in the event of a change in control. Under the terms of the agreement, funds
may be drawn down by way of bankers’ acceptances or bank loans, denominated in Canadian dollars, U.S. dollars, euros or
pounds sterling. The agreement is secured by a first movable hypothec on the universality of assets, present and future, of
the Corporation’s Canadian, Mexican and European subsidiaries, subject to certain exceptions. The credit facility bears
interest at the bankers’ acceptance rate, the financial institution’s prime rate or LIBOR, plus a premium. The terms of the
agreement require the Corporation to comply with certain financial ratios and conditions. As at October 31, 2020, the
Corporation benefited from a temporary suspension of the application of certain financial ratios and conditions by its lenders
until January 30, 2021 and $50,000 was drawn down under this credit facility.
On October 9, 2020, the Corporation entered into a $250,000 subordinated short-term credit agreement for operating
purposes. Under the agreement, which expires on March 31, 2021, or becomes immediately due in the event of a change of
control, drawdowns may be made until February 28, 2021 in the form of bankers’ acceptances or bank loans, in Canadian
dollars, subject to certain conditions, including certain cash and cash equivalent requirements before and after a drawdown
under the credit facility. The agreement is secured by a second movable hypothec on the universality of assets, present and
future, of the Corporation’s Canadian, Mexican and European subsidiaries, subject to certain exceptions. The credit facility
bears interest at the bankers’ acceptance rate, the financial institution’s prime rate, plus a premium. As at October 31, 2020,
the Corporation benefited from a temporary suspension of the application of certain financial ratios and conditions by its
lenders until January 30, 2021 and the credit facility was undrawn.
The Corporation also has a $75,000 annually renewable revolving credit facility in respect of which the Corporation must
pledge cash totalling 100% of the amount of the issued letters of credit as collateral security. As at October 31, 2020,
$60,266 had been drawn down under the facility [$55,848 as at October 31, 2019], $56,268 of which was to secure obligations
under senior executive defined benefit pension agreements; this irrevocable letter of credit is held by a third-party trustee.
In the event of a change of control, the irrevocable letter of credit issued to secure obligations under senior executive
defined benefit pension agreements will be drawn down.
The following table details the maturities and weighted average interest rates related to long-term debt and lease liabilities
as at October 31, 2020 and 2019. The current portion of lease liabilities includes deferred rent payments related to aircraft
leases and real estate leases of $44,808 and $2,819, respectively:
Long-term debt
Lease liabilities
Fleet
Real estate and other
Lease liabilities
Total long-term debt and lease liabilities
Current portion of lease liabilities
Long-term debt and lease liabilities
Weighted
Average
Interest
Rate
Final
Maturity
2020
2022
%
4.97
$
49,980
2020-2031
2020-2037
5.73
5.57
5.71
5.67
772,925
80,981
853,906
903,886
(147,980)
755,906
2019
Restated
[note 5]
$
—
602,449
63,480
665,929
665,929
(99,814)
566,115
Annual Report 2020 Transat A.T. Inc. | 98
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Interest expense for the years ended October 31, 2020 and 2019 is detailed as follows:
Interest on lease liabilities
Accretion on provision for return conditions
Interest on long-term debt
Other interest
Financing costs
Rent expense for the years ended October 31, 2020 and 2019 is detailed as follows:
Variable lease payments
Short-term leases
Aircraft rent
Variable lease payments
Short-term leases
Low value leases
2020
$
40,781
2,454
1,361
3,453
48,049
2020
$
4,810
18,548
23,358
1,002
3,618
556
28,534
2019
Restated
[note 5]
$
33,035
3,380
—
1,520
37,935
2019
Restated
[note 5]
$
8,987
37,816
46,803
6,839
3,758
204
57,604
Cash flows related to lease liabilities
The following table details cash flows related to repayment of lease liabilities for the year ended October 31, 2020:
2020
Non-cash
changes
$
Cash flows
$
Total Cash flows
$
$
2019
Non-cash
changes
$
Opening balance
Repayments
New lease liabilities (new contracts and amendments)
Interests on deferred payments
Offset of rent payments and lease terminations
Exchange difference
Closing balance
(82,505)
—
—
—
—
(82,505)
—
275,118
17,708
(25,022)
2,678
270,482
665,929
(82,505)
275,118
17,708
(25,022)
2,678
853,906
(80,290)
—
—
—
—
(80,290)
—
180,125
—
—
924
181,049
Total
$
565,170
(80,290)
180,125
—
—
924
665,929
Annual Report 2020 Transat A.T. Inc. | 99
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Maturities of lease liabilities
Repayment of principal and interest on lease liabilities as at October 31, 2020 is detailed as follows. Lease liabilities
denominated in U.S. dollars are translated at the USD/CAD closing rate of 1.3336 as at October 31, 2020:
Year ended October 31
Fleet
Real estate and other
Lease liabilities
2021
$
2022
$
2023
$
2024
$
2025
$
2026 and
up
$
Total
$
176,185 126,752 119,313 99,285 92,073 351,691 965,299
7,369 64,860 113,571
14,804 9,695
8,763 8,080
190,989
136,447
128,076
107,365
99,442 416,551 1,078,870
Note 10 provides the information required for right-of-use assets and depreciation. Note 25 details the information required
with respect to leases of aircraft that will be delivered in the coming fiscal years.
Note 15 Provision for return conditions
The provision for return conditions relates to contractual obligations to return leased aircraft and engines at the end of the
leases under pre-determined maintenance conditions. The change in the provision for return conditions for the years ended
October 31, 2020 and 2019 is detailed as follows:
Opening balance
Additional provisions
Change in estimate
Unused amounts reversed
Accretion
Closing balance
Current provisions
Non-current provisions
Closing balance
2020
$
155,120
35,791
1,638
(51,405)
2,454
143,598
14,963
128,635
143,598
2019
Restated
[note 5]
$
128,528
16,127
7,085
—
3,380
155,120
—
155,120
155,120
As at October 31, 2020, additional provisions included $6,395 related to impairment of leased aircraft [note 20]. In addition,
the unused amounts recovered included $16,705 related to reversals of provisions for return conditions for aircraft whose
leases had been terminated.
Note 16 Other liabilities
Employee benefits [note 23]
Other liabilities
2020
$
49,862
353
50,215
2019
Restated
[note 5]
$
46,986
458
47,444
Annual Report 2020 Transat A.T. Inc. | 100
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 17 Equity
Authorized share capital
CLASS A VARIABLE VOTING SHARES
An unlimited number of participating Class A Variable Voting Shares [“Class A Shares”], which may be owned or controlled
only by non-Canadians as defined by the Canada Transportation Act [“CTA”], carry one vote per share at any meeting of
shareholders subject to an automatic reduction of the voting rights attached thereto in the event that [i] any non-Canadian,
individually or with persons of the same group, holds more than 25% of the votes cast, [ii] any non-Canadian authorized to
provide an air service in any jurisdiction (in aggregate) holds more than 25% of the votes cast, or [iii] the votes that would be
cast by holders of Class A Shares would be more than 49%. If any of the above-mentioned applicable limitations are
exceeded, the votes that should be attributed to holders of Class A Shares will be attributed as follows:
first, if applicable, there will be a reduction in the voting rights of any non-Canadian individual (including a
non-Canadian authorized to provide an air service) whose votes total more than 25% of the votes cast, so
that such non-Canadian holder may never hold more than 25% (or such other percentage as may be
prescribed by an act or regulation of Canada and approved or adopted by the directors of the Corporation)
of the total votes cast at a meeting;
next, if applicable, and once the pro rata distribution as described above is made, a further pro rata reduction
will be made in the voting rights of all holders of Class A non-Canadian Shares authorized to provide an air
service, so that such non-Canadian holders may never hold votes totalling more than 25% (or such other
percentage as may be prescribed by law or regulation of Canada and approved or adopted by the directors
of the Corporation) of the total votes cast, all classes combined, at a meeting;
last, if applicable, and once the two pro rata allocations described above have been made, a proportional
reduction will be made in the voting rights of all holders of Class A Shares, so that all non-Canadian holders
of Class A Shares may never hold votes totalling more than 49% (or such other percentage as may be
prescribed by law or regulation of Canada and approved or adopted by the directors of the Corporation) of
the total votes cast, all classes combined, at a meeting.
Each issued and outstanding Class A Share shall be automatically converted into one Class B Voting Share without any further
action on the part of the Corporation or of the holder if [i] the Class A Share is or becomes owned or controlled by a Canadian
as defined by the CTA; or [ii] the provisions contained in the CTA relating to foreign ownership restrictions are repealed and
not replaced with other similar provisions.
CLASS B VOTING SHARES
An unlimited number of Class B Voting Shares [“Class B Shares”], participating, which may be owned and controlled only by
Canadians as defined by the CTA and shall confer the right to one vote per Class B Share at all meetings of shareholders of
the Corporation. Each issued and outstanding Class B Share shall be converted into one Class A Share automatically without
any further action on the part of the Corporation or the holder if the Class B Share is or becomes owned or controlled by a
non-Canadian as defined by the CTA.
PREFERRED SHARES
An unlimited number of preferred shares, non-voting, issuable in series, each series bearing the number of shares,
designation, rights, privileges, restrictions and conditions as determined by the Board of Directors.
Annual Report 2020 Transat A.T. Inc. | 101
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Issued and outstanding share capital
The changes affecting Class A Shares and Class B Shares were as follows:
Balance as at October 31, 2018
Issued from treasury
Exercise of options
Balance as at October 31, 2019
Balance as at October 31, 2020
Number of shares
$
37,545,335
169,862
31,893
37,747,090
37,747,090
219,684
940
388
221,012
221,012
As at October 31, 2020, the number of Class A Shares and Class B Shares was 3,785,312 and 33,961,778, respectively
[4,243,821 and 33,503,269, respectively, as at October 31, 2019].
Subscription rights plan
The shareholders’ subscription rights plan [the “rights plan”] entitles holders of Class A Shares and Class B Shares to acquire,
under certain conditions, additional shares at a price equal to 50% of their market value at the time the rights are exercised.
The rights plan is designed to give the Board of Directors time to consider alternatives, thus allowing shareholders to receive
full and fair value for their shares. The time limit for a permitted bid under the rights plan is 105 days. The rights plan
terminated on the day after the 2020 annual general meeting on March 12, 2020.
Stock option plan
Under the stock option plan, the Corporation may grant up to a maximum of 829,196 additional Class A Shares or Class B
Shares to eligible persons at a share price equal to the weighted average price of the shares during the five trading days prior
to the option grant date. The option exercise period and the performance criteria are determined on each grant. The options
granted between January 14, 2009 and October 31, 2015 are exercisable in three tranches of 33.33% as of mid-December of
each year following the grant, provided the performance criteria determined on each grant are met. For options granted
starting November 1, 2015, vesting will no longer depend on meeting performance criteria. The options granted before
October 31, 2013 are exercisable over a ten-year period, whereas those granted after that date are exercisable over a seven-
year period, respectively. Provided the performance criteria set on grant date are met, the exercise of any non-vested
tranche of options during the first three years following the grant date due to the performance criteria not being met may
be extended three years. Under the plan, in the event of a change of control, all outstanding stock options vest.
Annual Report 2020 Transat A.T. Inc. | 102
Transat A.T. Inc.
Notes to Consolidated Financial Statements
The following tables summarize all outstanding options:
Beginning of year
Exercised
Cancelled
Expired
End of year
Options exercisable, end of year
Range of exercise price
$
6.01 to 7.48
8.73 to 11.22
12.25 to 12.49
19.24
2020
2019
Number of
options
1,748,570
—
(2,000)
(8,000)
1,738,570
1,557,042
Weighted
average
price
$
10.15
—
19.24
11.82
10.13
10.03
Number of
options
1,786,588
(31,893)
(4,125)
(2,000)
1,748,570
1,471,592
Weighted
average
price
$
10.13
8.41
15.76
10.52
10.15
10.05
Outstanding options
Options exercisable
Number of options
outstanding as at
October 31, 2020
Weighted
average
remaining
life
572,758
618,269
449,493
98,050
1,738,570
1.6
2.0
0.2
0.2
1.3
Weighted
average
price
$
6.87
10.07
12.37
19.24
10.13
Number of options
exercisable as at
October 31, 2020
572,758
513,260
372,974
98,050
1,557,042
Weighted
average
price
$
6.87
10.13
12.35
19.24
10.03
COMPENSATION EXPENSE RELATED TO STOCK OPTION PLAN
During the years ended October 31, 2020 and 2019, the Corporation granted no stock options to its key executives and
employees. The average fair value of each option granted is estimated on the date of grant using the Black-Scholes option
pricing model.
During the year ended October 31, 2020, the Corporation recorded no compensation expense [$427 in 2019] for its stock
option plan.
Performance share unit plan
Performance share units [“PSUs”] are awarded in connection with the performance share unit plan for senior executives.
Under this plan, each eligible senior executive receives a portion of his or her compensation in the form of PSUs. PSUs consist
of a number equal to a percentage of the participant’s basic salary, divided by the fair market value of Class B Shares as at
the award date. Once vested, PSUs give the participant the right to receive an equal number of shares or a cash payment, at
the Corporation’s discretion. Starting in 2017, PSUs awarded vest 100% in mid-January three years following the award,
provided the performance criteria determined on the award are met. PSUs awarded prior to 2017 vest in three tranches
of 16.67% in mid-January of each year for three years following the award, provided the performance criteria determined on
each award are met. The remaining 50% of PSUs awarded vest in mid-January three years following their award, provided
the plan member is still an employee of the Corporation. Under the plan, in the event of a change of control, all outstanding
PSUs vest.
During the years ended October 31, 2020 and 2019, the Corporation granted no PSUs to its key executives and employees. As
at October 31, 2020, the number of PSUs awarded amounted to 435,662. During the year ended October 31, 2020, the
Corporation recognized a compensation expense reversal of $3,807 [compensation expense of $2,945 in 2019] for its
performance share unit plan, which was recorded in full as a cash-settled transaction.
Annual Report 2020 Transat A.T. Inc. | 103
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Share purchase plan
A share purchase plan is available to eligible employees of the Corporation and its subsidiaries. Under the plan, as at
October 31, 2020, the Corporation was authorized to issue up to 355,790 shares. The plan allows each eligible employee to
purchase shares up to an overall limit of 10% of his or her annual salary in effect at the time of plan enrolment. The purchase
price of the shares under the plan is equal to the weighted average price of the shares during the five trading days prior to
the issue of the shares, less 10%.
During the year, the Corporation issued no shares [169,862 Class B Shares in 2019, for a total of $940 in 2019] under the
share purchase plan.
Stock ownership incentive and capital accumulation plan
Subject to participation in the share purchase plan offered to all eligible employees of the Corporation, the Corporation
awards annually to each eligible officer a number of shares, the aggregate purchase price of which is equal to an amount of
30% or 60% of the maximum percentage of salary contributed, which may not exceed 5%. Shares so awarded by the
Corporation will vest to the eligible employee, subject to the retention during the first six months of the vesting period of all
the shares purchased under the Corporation’s share purchase plan.
The shares awarded under this plan are bought in the market by the Corporation and deposited in the participants’ accounts
as and when they purchase shares under the share purchase plan.
During the year ended October 31, 2020, the Corporation recognized no compensation expense [compensation expense of
of $84 in 2019] for its stock ownership incentive and capital accumulation plan.
Permanent stock ownership incentive plan
Subject to participation in the share purchase plan offered to all eligible employees of the Corporation, the Corporation
awards annually to each eligible senior executive a number of shares, the aggregate purchase price of which is equal to the
maximum percentage of salary contributed, which may not exceed 10%. Shares so awarded by the Corporation will vest
gradually to the eligible senior executive, subject to the senior executive’s retaining, during the vesting period, all the shares
purchased under the Corporation’s share purchase plan. The shares awarded under this plan are bought in the market by
the Corporation and deposited in the participants’ account as and when they purchase shares under the share purchase plan.
During the year ended October 31, 2020, the Corporation recognized no compensation expense [compensation expense
of $243 in 2019] for its permanent stock ownership incentive plan.
Deferred share unit plan
Deferred share units [“DSUs”] are awarded in connection with the independent director deferred share unit plan. Under this
plan, each independent director receives a portion of his or her compensation in the form of DSUs. The value of a DSU is
determined based on the average closing share price for the five trading days prior to the award of the DSUs. The DSUs are
repurchased by the Corporation when a director ceases to be a plan participant. For the purpose of repurchasing DSUs, the
value of a DSU is determined based on the average closing share price for the five trading days prior to the repurchase of
the DSUs.
As at October 31, 2020, the number of DSUs awarded amounted to 306,775 [306,775 as at October 31, 2019]. During the year
ended October 31, 2020, the Corporation recorded a compensation expense reversal of $3,289 [compensation expense
of $2,946 in 2019] for its deferred share unit plan.
Annual Report 2020 Transat A.T. Inc. | 104
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Restricted share unit plan
Restricted share units [“RSUs”] are awarded annually to eligible employees under the new restricted share unit plan. Under
this plan, each eligible employee receives a portion of his or her compensation in the form of RSUs. The value of an RSU is
determined based on the weighted average closing share price for the five trading days prior to the award of the RSUs. The
rights related to RSUs are acquired over a period of three years. When acquired, the RSUs are immediately repurchased by
the Corporation, subject to certain conditions and certain provisions relating to the Corporation’s financial performance.
For the purpose of repurchasing RSUs, the value of an RSU is determined based on the weighted average closing share price
for the five trading days prior to the repurchase of the RSUs. Under the plan, in the event of a change of control, all
outstanding RSUs vest.
As at October 31, 2020, the number of RSUs awarded amounted to 149,097 [393,601 as at October 31, 2019]. During the year
ended October 31, 2020, the Corporation recorded a compensation expense reversal of $928 [compensation expense
of $5,615 in 2019] for its restricted share unit plan.
Earnings per share
Basic and diluted earnings per share were calculated as follows:
[In thousands, except per share amounts]
NUMERATOR
Net income (loss) attributable to shareholders
DENOMINATOR
Adjusted weighted average number of outstanding shares
Effect of dilutive securities
Stock options
Adjusted weighted average number of outstanding shares used in
computing diluted earnings per share
Earnings (loss) per share
Basic
Diluted
2020
$
2019
Restated
[note 5]
$
(496,545)
(32,347)
37,747
37,673
—
—
37,747
37,673
(13.15)
(13.15)
(0.86)
(0.86)
Given the net losses recognized for the years ended October 31, 2020 and 2019, all 1,738,570 and 1,748,570 outstanding stock
options, respectively, were excluded from the calculation of diluted loss per share due to their anti-dilutive effect.
Annual Report 2020 Transat A.T. Inc. | 105
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 18 Additional disclosure on revenue and expenses
Breakdown of revenue from contracts with customers
Revenue from contracts with customers is broken down as follows:
Customers
Transatlantic
Americas
Other
Total revenues
Contract balances
Contract balances with customers are detailed as follows:
Trade accounts receivable [note 7]
Other receivables [note 7]
Contract costs, included in Prepaid expenses
Customer deposits and deferred revenues
Salaries and employee benefits
Salaries and other employee benefits
Long-term employee benefits [note 23]
Share-based payment expense
2020
$
2019
$
164,804
1,102,080
35,185
1,302,069
1,173,884
1,705,753
57,493
2,937,130
2020
$
5,565
22,677
14,256
608,890
2019
$
25,669
—
52,761
561,404
2020
$
236,241
3,009
—
239,250
2019
$
407,836
2,927
1,612
412,375
As of March 15, 2020, the Corporation made use of the CEWS for its Canadian workforce, which enabled it to finance part of
the salaries of its staff still at work and to offer employees temporarily laid off to receive a part of their salary equivalent to
the amount of the grant received, with no work required. The Corporation determined it fulfilled the employer eligibility
criteria and claimed the CEWS for the period from March 15 to October 31, 2020. For the year ended October 31, 2020, the
Corporation recognized a total deduction of $113,596 from Salaries and other employee benefits expense related to CEWS,
including $38,782 for active employees.
Depreciation and amortization
Property, plant and equipment
Intangible assets subject to amortization
Other assets
2020
$
192,630
11,480
2
204,112
2019
Restated
[note 5]
$
167,247
15,062
12
182,321
Annual Report 2020 Transat A.T. Inc. | 106
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 19 Special items
Special items related to the transaction with Air Canada
Professional fees
Compensation (reversal of compensation) expense
Other special items
Impairment of the fleet (including right-of-use asset) [note 10]
Impairment of the land in Mexico [note 10]
Impairment of the invesment in a joint venture [note 12]
Impairment of trademarks [note 11]
Provision for return conditions of impaired leased aircraft [note 15]
Severance
2020
$
2019
$
7,753
(4,491)
3,262
10,302
13,573
23,875
50,817
32,826
3,100
2,384
6,395
891
96,413
99,675
-
-
-
-
-
-
-
23,875
Special items generally include restructuring charges and other significant unusual items as well as impairment losses. Due
to the COVID-19 pandemic occurring worldwide, the global tourism industry has faced a collapse in demand. As a result, the
Corporation had to scale back its capacity significantly and recognize impairment charges accordingly. These impairment
charges are included under Special items.
For the year ended October 31, 2020, professional fees of $7,753 and compensation expense reversals of $4,491 were
recorded in connection with the transaction with Air Canada. For the year ended October 31, 2019, professional fees of
$10,302 and compensation expenses of $13,573 were recorded in connection with the transaction with Air Canada. The
compensation expenses are mainly related to the stock-based compensation plans which include a change of control clause
and to adjustments related to stock-based compensation plan provisions. Compensation expenses recorded as special items
result from Air Canada’s offer, which makes it likely that the change of control criteria included in some of the Corporation’s
stock-based compensation plans will be met, and also changes the vesting period.
During the year ended October 31, 2020, the Corporation recorded severance benefits of $891 for employees permanently
laid off during the year ended October 31, 2020.
Note 20 Loss (gain) on asset disposals
Lease termination
Engine disposals
Other
2020
$
2019
$
-
19,319
(8,094)
-
46 (9)
11,271 (9)
Due to the significant reduction in capacity related to the COVID-19 pandemic, during the year ended October 31, 2020, the
Corporation early returned four leased aircraft to the lessors: three Boeing 737-800s and one Airbus A330, and also
terminated the leases of certain travel agencies. These lease terminations resulted in the recognition of a $19,319 loss. In
addition, during the year ended October 31, 2020, the Corporation disposed of Airbus A310 engines with a nil carrying value
for an amount of $8,094, which corresponds to the amount recorded as a gain on disposal of assets.
Annual Report 2020 Transat A.T. Inc. | 107
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 21
Income Taxes
The major components of the income tax expense for the years ended October 31 are:
Consolidated statements of income
Current
Current income taxes
Adjustment to taxes payable for prior years
Deferred
Relating to temporary differences
Adjustment to deferred taxes for prior years
Income tax expense (recovery)
2020
$
(1,905)
(2,471)
(4,376)
10,009
2,159
12,168
7,792
2019
Restated
[note 5]
$
1,243
(215)
1,028
(8,934)
(114)
(9,048)
(8,020)
The reconciliation of income taxes, computed at the Canadian statutory rates, to income tax expense was as follows for the
years ended October 31:
Income taxes at the statutory rate
Increase (decrease) resulting from:
Effect of differences in Canadian and foreign tax rates
Non-taxable items
Unrecognized losses for the current year
Derecognition of a future income tax asset
Adjustments for prior years
Effect of tax rate changes
Other
2020
2019
Restated
[note 5]
%
26.5
$
(128,774)
%
26.6
$
(10,056)
0.4
(0.5)
(24.9)
(3.0)
0.1
(0.0)
(0.1)
(1.6)
(1,737)
2,471
120,925
14,559
(312)
43
617
7,792
7.2
(8.2)
1.1
(6.2)
0.9
(0.1)
(0.1)
21.2
(2,718)
3,087
(421)
2,353
(329)
36
28
(8,020)
The applicable statutory income tax rate was 26.5% for the year ended October 31, 2020 [26.6% for the year ended
October 31, 2019]. The 0.1% rate decrease is due to the reduction in the applicable Québec tax rate which was lowered
from 11.6% to 11.5%. The Corporation’s applicable statutory income tax rate is the applicable combined Canadian (federal
and Québec) tax rate.
Annual Report 2020 Transat A.T. Inc. | 108
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Deferred taxes reflect the net tax impact of temporary differences between the value of assets and liabilities for accounting
and tax purposes. The main components and changes in temporary differences in deferred tax assets and liabilities for fiscal
2020 and 2019 were as follows:
Non-capital losses
Excess of tax value over net carrying value of:
Property, plant and equipment and software
Intangible assets, excluding software
Lease liabilities
Derivative financial instruments
Other financial assets and other assets
Provisions
Employee benefits
Other financial liabilities and other liabilities
Balance,
beginning of
year
3,072
(187,091)
702
176,218
1,896
271
13,088
12,451
(2,211)
Deferred tax
18,396
(12,168)
2020
Recognized in
other
comprehensive
income
$
—
Recognized in
net income
$
2,207
Recognized in
equity
$
—
Exchange
differences
$
—
Balance, end
of year
$
5,279
(22,338)
(702)
32,468
1,116
(5,620)
(12,896)
(8,614)
2,211
—
—
—
(3,080)
—
—
(3,837)
—
(6,917)
—
—
—
—
—
—
—
—
—
2019
15
—
—
—
—
—
—
—
15
(209,414)
—
208,686
(68)
(5,349)
192
—
—
(674)
Non-capital losses
Excess of tax value over net carrying value of:
Property, plant and equipment and software
Intangible assets, excluding software
Lease liabilities
Derivative financial instruments
Other financial assets and other assets
Provisions
Employee benefits
Other financial liabilities and other liabilities
Balance,
beginning of
year
Recognized in
net income
Recognized in
other
comprehensive
income
Restated
Restated
Restated
[note 5]
$
243
[note 5]
$
2,829
[note 5]
$
—
(149,562)
854
149,558
(4,498)
597
2,134
10,703
(5,663)
(36,906)
(131)
26,660
2,375
(326)
10,572
523
3,452
—
—
—
4,019
—
—
1,225
—
Recognized in
equity
Exchange
differences
Balance, end
of year
Restated
[note 5]
$
3,072
(187,091)
702
176,218
1,896
271
13,088
12,451
(2,211)
$
—
(11)
(21)
—
—
—
—
—
—
$
—
(612)
—
—
—
—
382
—
—
Deferred tax
4,366
9,048
5,244
(230)
(32)
18,396
Annual Report 2020 Transat A.T. Inc. | 109
Transat A.T. Inc.
Notes to Consolidated Financial Statements
The net deferred tax assets are detailed below:
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Non-capital losses recorded in various jurisdictions expire as follows:
Year of expiry
2021 - 2025
2026 - 2030
2031 - 2035
2036 - 2040
With no expiry
2020
$
—
(674)
(674)
2019
Restated
[note 5]
$
28,148
(9,752)
18,396
Unrecognized
$
6,980
13,368
777
267,945
3,383
Recognized
$
—
—
—
18,493
1,676
292,453
20,169
As at October 31, 2020, non-capital losses carried forward and other unrecognized temporary differences were as follows:
Non-capital losses
Capital losses
Excess of tax value over net carrying value of:
Property, plant and equipment and software
Intangible assets, excluding software
Derivative financial instruments
Other financial assets and other assets
Provisions
Lease liabilities
Employee benefits
Deferred donations
Canada
Quebec
$
265,832
2,478
Federal
$
247,492
2,478
4,449
3,902
65,678
8,791
522
58,733
49,862
569
24,941
3,902
65,678
8,791
—
58,733
49,862
1,040
460,816
462,917
Mexico
$
18,709
—
36,695
—
130
—
—
529
—
—
56,063
Other
$
8,951
—
Total
$
293,492
2,478
50
—
55
—
—
—
—
—
41,194
3,902
65,863
8,791
522
59,262
49,862
569
9,056
525,935
The Corporation recognized a deferred tax liability of $4,900 on retained earnings of one of its foreign subsidiaries. The
Corporation recognized no other deferred tax liability on retained earnings of its foreign subsidiaries and its joint venture as
these earnings are considered to be indefinitely reinvested. However, if these earnings are distributed in the form of
dividends or otherwise, the Corporation may be subject to corporate income tax or withholding tax in Canada and/or abroad.
As of October 31, 2020, there are no taxable temporary differences for which a deferred income tax liability was recorded.
Annual Report 2020 Transat A.T. Inc. | 110
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 22 Related party transactions and balances
The consolidated financial statements include those of the Corporation and those of its subsidiaries. The main subsidiaries
and joint venture of the Corporation are listed below:
Air Transat A.T. inc.
Transat Tours Canada inc.
Transat Distribution Canada inc.
11061987 Florida Inc.
Transat Holidays USA Inc.
The Airline Seat Company Ltd.
Air Consultants France S.A.S.
Caribbean Transportation Inc.
CTI Logistics Inc.
Sun Excursions Caribbean Inc.
Propiedades Profesionales Dominicanas Carhel S.R.L.
Servicios y Transportes Punta Cana S.R.L.
TTDR Travel Company S.A.S.
Turissimo Carribe Excusiones Dominican Republic C por A
Turissimo Jamaica Ltd.
Laminama S.A. de C.V.
Promociones Residencial Morelos S.A. de C.V.
Promotora Turística Regional S.A. de C.V.
Trafictours de Mexico S.A. de C.V.
Desarrollo Transimar S.A. de C.V.
Compensation of key senior executives
Country of
incorporation
Canada
Canada
Canada
United States
United States
United Kingdom
France
Barbados
Barbados
Barbados
Dominican Republic
Dominican Republic
Dominican Republic
Dominican Republic
Jamaica
Mexico
Mexico
Mexico
Mexico
Mexico
Interest (%)
2019
100.0
100.0
100.0
100.0
100.0
100.0
100.0
70.0
70.0
70.0
70.0
70.0
70.0
70.0
70.0
100.0
100.0
100.0
70.0
50.0
2020
100.0
100.0
100.0
100.0
100.0
100.0
100.0
70.0
70.0
70.0
70.0
70.0
70.0
70.0
70.0
100.0
100.0
100.0
70.0
50.0
The annual compensation and related compensation costs of directors and key senior executives, namely the President and
Chief Executive Officer and the Senior Vice Presidents of the Corporation were as follows:
Salaries and other employee benefits
Long-term employee benefits
Share-based payment expense
2020
$
7,264
1,567
—
2019
$
6,958
1,280
2,412
Annual Report 2020 Transat A.T. Inc. | 111
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 23 Employee future benefits
The Corporation offers defined benefit pension arrangements to certain senior executives and defined contribution plans to
certain employees.
Defined benefit arrangements and post-employment benefits
The defined benefit pension plans offered to certain senior executives provide for payment of benefits based on the number
of years of eligible service provided and the average eligible earnings for the five years in which the participant’s eligible
earnings were the highest. These arrangements are not funded; however, to secure its obligations related to defined benefit
pension arrangements, the Corporation has issued a $56,268 letter of credit to the trustee [see note 6]. The Corporation
uses an actuarial estimate to measure its obligations as at October 31 each year.
The following table provides a reconciliation of changes in the defined benefit obligation as at October 31, 2020 and 2019:
Present value of obligations, beginning of year
Current service cost
Financial costs
Benefits paid
Experience losses (gains)
Actuarial loss (gain) on obligation
Present value of obligations, end of year
2020
$
46,986
1,567
1,442
(960)
(656)
1,483
49,862
2019
$
40,388
1,280
1,647
(960)
(648)
5,279
46,986
The following table provides the components of retirement benefit expense for the years ended October 31:
Current service cost
Interest cost
Total cost of retirement benefits
2020
$
1,567
1,442
3,009
2019
$
1,280
1,647
2,927
The following table indicates projected payments under defined benefit pension plan arrangements as at October 31, 2020:
Under one year
One to five years
Between five and 10 years
Between 10 and 15 years
Between 15 and 20 years
$
959
11,930
15,690
13,752
11,212
53,543
The weighted average duration of the defined benefit obligation related to pension arrangements was 12.6 years as at
October 31, 2020.
Annual Report 2020 Transat A.T. Inc. | 112
Transat A.T. Inc.
Notes to Consolidated Financial Statements
The significant actuarial assumptions used to determine the Corporation’s retirement benefit obligation and expense were
as follows:
Retirement benefit obligation
Discount rate
Rate of increase in eligible earnings
Retirement benefit expense
Discount rate
Rate of increase in eligible earnings
2020
%
2019
%
2.75
2.75
3.00
2.75
3.00
2.75
4.00
2.75
A 0.25 percentage point increase in the actuarial assumptions below would have the following impacts, all other actuarial
assumptions remaining the same:
Increase (decrease)
Discount rate
Rate of increase in eligible earnings
Retirement benefit
expense for
the year ended
October 31, 2020
$
(6)
15
Retirement benefit
obligations as at
October 31, 2020
$
(1,483)
75
The funded status of the benefits and the amounts recorded in the statement of financial position under other liabilities
were as follows:
Plan assets at fair value
Accrued benefit obligation
Retirement benefit deficit
2020
$
—
49,862
49,862
2019
$
—
46,986
46,986
Changes in the cumulative amount of net actuarial losses recognized in other comprehensive income (loss) and presented as
a separate component of retained earnings were as follows:
Gains (losses)
October 31, 2018
Actuarial losses
Income taxes
October 31, 2019
Actuarial losses
Income taxes
October 31, 2020
$
(7,184)
(4,631)
1,225
(10,590)
(827)
(3,837)
(15,254)
Defined contribution pension plans
The Corporation offers defined contribution pension plans to certain employees with contributions based on a percentage
of salary.
Contributions to defined contribution pension plans, which correspond to the cost recognized, amounted to $10,656 for the
year ended October 31, 2020 [$14,310 for the year ended October 31, 2019].
Annual Report 2020 Transat A.T. Inc. | 113
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 24 Commitments and contingencies
Leases and other commitments
As at October 31, 2020, the Corporation was party to agreements to lease 11 Airbus A321neos for delivery up to 2023. The
Corporation also had leases with a term of less than 12 months and/or for low value assets, as well as purchase obligations
under various contracts with suppliers, in particular related to hotel rooms and information technology service contracts
entered into in the normal course of business. The following table presents the minimum payments due under leases for
aircraft to be delivered over the next few years and leases with a term of less than 12 months and/or for low value assets, as
well as the purchase obligations:
Year ended October 31
Leases
Purchase obligations
Litigation
2021
$
2022
$
2023
$
2024
$
2025
$
2026 and
up
$
Total
$
20,344 48,738 70,718 70,618 70,618 566,836 847,872
9,690 7,347 4,224 2,648 4,750 - 28,659
30,034 56,085 74,942
73,266
75,368
566,836
876,531
In the normal course of business, the Corporation is exposed to various claims and legal proceedings. These disputes often
involve numerous uncertainties and the outcome of the individual cases is unpredictable. According to management, these
claims and proceedings are adequately provided for or covered by insurance policies and their settlement should not have a
significant negative impact on the Corporation’s financial position, subject to the paragraph hereunder. The Corporation has
directors’ and officers’ liability insurance and professional liability insurance, and the amount of coverage under said
insurance policies is usually sufficient to pay the amounts the Corporation may be required to disburse in connection with
these lawsuits specifically involving directors and officers, not the Corporation. In addition, the Corporation holds
professional liability and general civil liability insurance for all lawsuits related to any non-bodily or bodily injuries sustained.
In all these lawsuits, the Corporation has and will continue to vigorously defend its position.
During the year ended October 31, 2020, the Corporation was the subject of certain class actions in connection with the
reimbursement of customer deposits for flights cancelled in connection with the COVID-19 pandemic. Some of these class
actions could entail significant disbursements and costs which will remain uncertain until one or more events occur or not.
To date, the outcome of these class actions is impossible to predict with certainty and the financial effect that could result
from it cannot be reliably estimated. Most of the amounts that may have to be paid in connection with class actions are
included in Customer deposits and deferred revenue. If the Corporation had to pay an amount related to class actions, the
unfavourable effect of the settlement would be recognized in the consolidated statement of income and could have a very
unfavourable effect on cash.
Other
From time to time, the Corporation is subject to audits by tax authorities that give rise to questions regarding the tax
treatment of certain transactions. Certain of these matters could entail significant costs that will remain uncertain until one
or more events occur or fail to occur. Although the outcome of such matters is not predictable with assurance, the tax claims
and risks for which there is a probable unfavourable outcome are recognized by the Corporation using the best possible
estimates of the amount of the loss. The tax deductibility of losses reported by the Corporation in previous fiscal years with
regard to investments in ABCP was challenged by tax authorities. No provisions are made in connection with this issue, which
could result in expenses of approximately $16,200, as the Corporation intends to vigorously defend itself with respect thereto
and firmly believes it has sufficient facts and arguments to obtain a favourable final outcome. However, the Corporation
already paid $15,100 to the tax authorities in respect of this matter during the fiscal year ended October 31, 2015 and objected
to the notices of assessment received. This amount is recognized as income taxes receivable as at October 31, 2020 and 2019.
Annual Report 2020 Transat A.T. Inc. | 114
Transat A.T. Inc.
Notes to Consolidated Financial Statements
Note 25 Guarantees
In the normal course of business, the Corporation has entered into agreements containing clauses meeting the definition of
a guarantee. These agreements provide compensation and guarantees to counterparties in transactions such as operating
leases, irrevocable letters of credit and collateral security contracts.
These agreements may require the Corporation to compensate the counterparties for costs and losses incurred as a result
of various events, including breaches of representations and warranties, loss of or damages to property, claims that may
arise while providing services and environmental liabilities.
Notes 7, 9, 14, 23 and 24 to the consolidated financial statements provide information about some of these agreements. The
following constitutes additional disclosure.
Leases
The Corporation’s subsidiaries have general indemnity clauses in many of their airport and other real estate leases whereby
they, as lessee, indemnify the lessor against liabilities related to the use of the leased property. The nature of the agreements
varies based on the contracts and therefore prevents the Corporation from estimating the total potential amount its
subsidiaries would have to pay to lessors. Historically, the Corporation’s subsidiaries have not made any significant payments
under such agreements and have liability insurance coverage in such circumstances.
Collateral security contracts
The Corporation has entered into collateral security contracts with certain suppliers. Under these contracts, the Corporation
guarantees the payment of certain services rendered that it undertook to pay. These contracts typically cover a one-year
period and are renewable.
The Corporation has entered into collateral security contracts whereby it guarantees a prescribed amount to its customers,
at the request of regulatory agencies, for the performance of the obligations included in mandates by its customers during
the term of the licences granted to the Corporation for its travel agent and wholesaler operations in the Province of Québec.
These agreements typically cover a one-year period and are renewable annually. As at October 31, 2020, the total amount of
these guarantees unsecured by deposits was $468. Historically, the Corporation has not made any significant payments under
such agreements. As at October 31, 2020, no amounts had been accrued with respect to the above-mentioned agreements.
Irrevocable credit facility unsecured by deposits
The Corporation has a guarantee facility that is renewable in 2021. Under this agreement, the Corporation may issue collateral
security contracts with a maximum three-year term and for a total amount of $35,000. As at October 31, 2020, $22,758 had
been drawn down under the facility [$24,350 in 2019].
Note 26 Segmented disclosure
The Corporation has determined that it conducts its activities in a single industry segment, namely holiday travel. With
respect to geographic areas, the Corporation’s operations are mainly in the Americas. Revenues and non-current assets
outside the Americas are not material. Therefore, the consolidated statements of income and consolidated statements of
financial position include all the required information.
Annual Report 2020 Transat A.T. Inc. | 115
Leader
in sustainability
The proof? Transat is the first major international
tour operator to be Travelife Certified for all its activities.
Board
of Directors
1
2
4
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
Louis-Marie
Beaulieu
Chairman of
the Board,
President and Chief
Executive Officer,
Groupe Desgagnés Inc.
Lina
De Cesare
Corporate Director
Jean-Yves
Leblanc
Corporate Director
1 2 3
Raymond
Bachand
Lead Director
Strategic Advisor,
Norton Rose
Fulbright Canada
S.E.N.C.R.L., s.r.l./LLP
1 3
Lucie
Chabot
3
Corporate Director
W. Brian
Edwards
1 2 4
Corporate Director
Ian
Rae
Founder, President
and Chief Executive
Officer, CloudOps
Jacques
Simoneau
President and Chief
Executive Officer
and Director,
Gestion Univalor, LP
1 3 4
Susan
Kudzman
2 4
Corporate Director
Louise
St-Pierre
Corporate Director
Philippe
Sureau
Corporate Director
Committees
1 Executive
Committee
2 Human Resources
and Compensation Committee
3 Audit
Committee
4 Risk Management and Corporate
Governance Committee
resp.transat.com
Information
transat.com
For additional
information, write to
the Vice-President, Finance
and Administration,
and Chief Financial Officer.
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Stock Exchange
Toronto Stock
Exchange (TSX)
TRZ
Transfer Agent
and Registrar
AST Trust Company (Canada)
2001 Robert-Bourassa Blvd.
Suite 1600
Montreal, Quebec
H3A 2A6
Toll-free: 1.800.387.0825
inquiries@astfinancial.com
astfinancial.com/ca-en
Auditors
Ernst & Young LLP
Montréal (Québec)
Annual and Special Meeting
of Shareholders
Thursday, April 22, 2021
This annual report is
printed on Rolland Enviro
Print paper.
Use a ton of
Rolland Enviro Print
rather than a virgin
paper and save
the equivalent of:
100%
17
trees
62,078
litres of water
2,500 kg
of greenhouse
gas emissions
761 kg
of solid waste
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Annual Report
2020
Transat A.T. inc.
Senior
Management
Jean-Marc
Eustache
Chairman
of the Board,
President and Chief
Executive Officer,
Transat A.T. Inc.
Jean-François
Lemay
President,
Air Transat A.T. Inc.
Daniel
Godbout
Senior
Vice-President
and Advisor to
the President,
Transat A.T. Inc.
Bruno
Leclaire
Chief Information
and Digital Officer,
Transat A.T. Inc.
Annick
Guérard
Chief Operating
Officer,
Transat A.T. Inc.
Jordi
Solé
President,
Hotel Division,
Transat A.T. Inc.
Bernard
Bussières
Vice-President,
General Counsel and
Corporate Secretary,
Transat A.T. Inc.
Christophe
Hennebelle
Vice-President,
Human Resources
and Corporate
Affairs,
Transat A.T. Inc.
Denis
Pétrin
Vice-President,
Finance and
Administration,
and Chief Financial
Officer,
Transat A.T. Inc.
resp.transat.com
transat.com
Head Office
Transat A.T. inc.
Place du Parc
300 Léo-Pariseau St.
Suite 600
Montreal, Quebec
H2X 4C2
Telephone: 1.514.987.1660
Fax: 1.514.987.8035
transat.com
info@transat.com