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Transat to reduce its activities in order to adjust to decreased demand following terrorist attacks in the United States
Transat A.T. Inc., an integrated company specializing in the organization, marketing, and distribution of holiday travel, announces a series of measures today, including layoffs, in order to adjust its activities to deal with the decreased demand for travel that has impacted the entire industry in the wake of the terrorist attacks in the United States.
'Although it is too early to say that the impact will be lasting, it is very real for the time being and we have a responsibility to act, even if it means taking the painful decision of laying off some of our employees,' said Jean-Marc Eustache, President and Chief Executive Officer of Transat.
'Our objective is to temporarily reduce our activities on the Canadian market and remain prepared to increase them when the situation returns to normal.''This is going to have consequences - which I and our entire management team greatly regret - on a significant number of very loyal and competent people. It is by far the largest cutback that we will have experienced in 15 years of growth. I sincerely hope it will be a temporary one, and that we will be back in a rehiring position in a few months,' Mr. Eustache added.
Consequently, Transat is starting today to implement a plan for reducing both its activities and operating costs. The plan includes the following measures:
- A reduction of about 30% in Air Transat's activities for the winter season, with no impact on the range of destinations the airline serves, but resulting in the layoffs of approximately 800 Air Transat employees.
- A reduction of up to 25% (approximately 500 people) of the workforce across all Transat's other Canadian divisions and subsidiaries, particularly tour operators. Details will be worked out over the coming days.
- For Transat and all its Canadian subsidiaries and divisions, a freeze in salaries for all non-unionized employees and salary reductions of 5% to 20% for managers and all executives for the fiscal year beginning November 1, 2001. Terms will be discussed in the coming days.
In addition, discussions will be held with union officials in the same spirit. Management judged it essential to react swiftly to the events, given the material impact on demand, in order to put Transat in a better position when the market recovers.
'We are now entering the low season, which lasts until mid-December, and we believe it will take several weeks to get a better assessment of the medium-term impact on demand,' Mr. Eustache said.
Vacationers and other Transat customers will not be affected by the measures. The number of flights for a given destination will decrease but the quality of service and the product range will remain the same.
Transat also believes it has certain advantages that will help it face the crisis in the travel industry:
- Because it is a fully integrated organization with a significant market presence, it has a preferred access to customers through its distribution networks.
- Air Transat has a mixed fleet in terms of size and age, which allows it to temporarily reduce the utilization of aircraft with relatively low fixed costs.
- Approximately 40% of the Company's sales are in Europe, where the decrease in demand is definitely lower at this time than in North America.
- Transat has a sound balance sheet, including approximately $100 million in cash. The pre-tax direct costs associated with the implementation of the aforementioned measures will be approximately $5 million. Their main impact is expected to be a major reduction in operating costs, which will minimize the impact of the crisis on earnings.
'This is not the first storm that Transat will weather,' Mr. Eustache concluded. 'We ask for the understanding of all our employees. Over the last 15 years, we have succeeded, by working together, in making Transat a worldwide leader of the leisure travel industry, and we firmly intend to remain one.'
About Transat A.T. Inc.
Transat A.T. Inc., with its head office in Montreal, is an integrated company specializing in the organization, marketing, and distribution of holiday travel. The core of its business consists of tour operators in Canada and France. Transat is also involved in air transportation, hotel management, and value-added services offered at travel destinations, as well as in distribution through both travel agency networks and e-commerce initiatives. Transat A.T. Inc. is a public corporation listed on the Toronto Stock Exchange (TSE:TRZ). In 2000 Transat recorded revenues of $1.9 billion.
Financial analysts and media are invited to participate in a one-hour conference call with Company management today starting at 3 p.m. Members of the media are kindly asked to refrain from asking questions for the first 30 minutes of the call, which will be devoted to taking questions from analysts. In the following half-hour, we will answer questions from the media.
Please dial 1-877-783-7566 and ask for the Transat call to participate.
Replay will be available two hours later by dialing 1-888-716-7820, Access Code 917713(pound key) and will be available until September 26.