Transat's profit slips, warns of summer fuel pain
TORONTO (Reuters) - Transat AT said on Thursday second-quarter profit dropped 32 percent due primarily to another write-down related to its ABCP holdings, and warned it expects "significantly" lower margins for the summer because of fuel prices.
The holiday travel firm and parent company of Air Transat earned C$40.7 million, or C$1.21 a share in the period ended April 30, down from a profit of C$53.8 million, or C$1.57 a share in the same period a year earlier.
Before the impact of the C$17.9-million ABCP write-down and hedge accounting standards, Transat said it earned C$1.24 per share.
Revenue was up 18 percent at C$1.08 billion in the period, as the volume of travelers rose 34 percent.
On average, analysts polled by Reuters Estimates expected the Montreal-based firm to earn C$1.10 per share on revenue of C$977.1 million.
Transat blamed the write down related to its asset-backed commercial paper (ABCP) holdings for the profit drop. Last quarter, the company was also stung by a writedown in ABCP, the credit market that came to a halt in 2007 when the global credit crunch hit Canada.
Last week, Transat joined other companies claiming they were improperly sold the non-bank ABCP, saying they would fight a restructuring plan that limits their ability to sue market participants.
Looking ahead, the company said prices and booking are up for the summer, although it expects "rising and unpredictable" aircraft fuel costs to hit margins in the next two quarters.
(Reporting by Jonathan Spicer; Editing by Scott Anderson)
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