Financial highlights: fourth quarter 2011

¹Non-GAAP financial measures

The terms “margin,” “operating loss”, “adjusted after-tax income (loss)”, “total debt” and “net debt” have no standard definition prescribed by Canadian GAAP and are therefore unlikely to be comparable to similar measures reported by other issuers or those used by financial analysts. They are furnished to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Management believes that these measures or some of these measures are used by the readers of our MD&A to analyze the Corporation's results, its financial performance and its financial position. These terms are presented on a consistent basis from year to year, as management uses them to measure the Corporation’s financial performance.

Margin and operating loss are used by management to assess Transat’s ongoing and recurring operational performance. This term is represented by revenues less operating expenses, according to the unaudited Consolidated Statements of Income.

Adjusted after-tax income (loss) is used by management to assess Transat’s ongoing and recurring operational performance. Adjusted after-tax income (loss) is presented by the income (loss) before change in fair value of derivative financial instruments related to aircraft fuel purchases, non-monetary gain (loss) on investments in ABCP and restructuring charge (gain), net of related taxes.

Total debt is used by management to assess the Corporation’s future cash requirements. It represents the combination of balance sheet debt (long-term debt and debenture) and off-balance sheet arrangements, excluding agreements with service providers.

Net debt is used by management to assess the Corporation’s cash position. It represents the total debt (as discussed above) less cash and cash equivalents not held in trust or otherwise reserved, and investments in asset backed commercial paper [“ABCP”].