June 9, 2011 / 11:39 AM / 6 years ago

UPDATE 2-Transat posts surprise loss, sees weaker second half

* Q2 adj loss/shr C$0.02 vs est breakeven

* Revenue up 4 pct

* Says margins pressured by higher fuel prices (Adds details)

June 9 (Reuters) - Transat AT Inc TRZb.TO TRZa.TO posted a surprise quarterly loss as higher fuel prices hurt margins, and the Canadian holiday travel operator said it expects weaker results for the second half of the year.

Margins in the second quarter were hurt by the unrest in North Africa, as the operator of Air Transat airlines suspended sales to Tunisia.

Transat, which competes with WestJet Airlines' WestJet Vacations, Air Canada's ACb.TO Air Canada Vacations and Sunwing Vacations, said there has been a decline in bookings to North African destinations such as Tunisia and Egypt.

However, Europe's biggest tour operator TUI Travel said last month it was on track to meet full-year expectations as increased demand for alternative destinations offset the impact of the unrest in Egypt and Tunisia. [ID:nLDE74909J]

Transat continues to face intense competition on sun destinations.

February-April net income rose to C$8.6 million ($8.8 million), or 23 Canadian cents a share, from C$6.2 million, or 16 Canadian cents a share a year ago.

On an adjusted basis, the company reported an after-tax loss of C$0.7 million, or 2 Canadian cents a share.

Analysts on average had expected the company to break even, according to Thomson Reuters I/B/E/S.

Revenue rose 4 percent to C$1.10 billion, helped by an increase in average selling prices due to higher fuel surcharges.

Though the company's margins rose to C$9.2 million from C$8.2 million last year, higher aircraft fuel prices weighed on it. North American business units recorded a margin of 1.1 percent, compared with 1.5 percent last year.

The company said aircraft fuel costs have risen by about 30 percent and despite additional fuel surcharges selling prices are similar to last year.

The company's class B shares closed at C$10.86 on Wednesday on the Toronto Stock Exchange. ($1 = 0.980 Canadian Dollars) (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Don Sebastian)

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