Clarifications

Following an editorial written by Dominique Gobert in Tourmag, Transat wishes to clarify the facts surrounding the compensation paid to its President.

The basic salary of Jean-Marc Eustache, founder, President and CEO of Transat, for 2011, 2012 and 2013 was in fact frozen at $822,000 for these three years, contrary to what Mr. Gobert’s article implies.

The figures disclosed publicly by Transat in its annual proxy are based on the Company’s fiscal year (November 1 to October 31), while salaries are adjusted in line with the calendar year (January 1 to December 31). This is the basis of the erroneous perception that may be drawn from the proxy.

As for the amount mentioned as total compensation, which includes, among others, the value attributed to stock options, it must be understood that this is potential compensation, which will only be realized if certain future conditions are met, including the attainment of profitability objectives. This kind of arrangement is obviously very common in publicly traded companies. Mr. Gobert also seems to attribute statements to Mr. Eustache that we are unable to verify.

In an article published on February 13, 2013, Le Soleil says that Transat’s decision to slightly reduce its capacity to sun destinations was the main factor behind the results of the fourth quarter, ended October 31, 2012, for which the Company recorded a net income of $16.6 million. In the summer, including in August, September and October, Transat’s results depend first and foremost on the conditions prevailing on the transatlantic market. As indicated in our release of December 19, 2012, higher prices and load factors on the Canada-Europe market are the main factor explaining the increase in margin. In addition, it should be noted that we do not endorse the numbers of Le Soleil in terms of market shares.

In its February 12 edition, Le Devoir alludes to a contract between Air Transat and CanJet Airlines. Transat wishes to make clear that CanJet Airlines is under contract from Transat’s main Canadian business unit, Transat Tours Canada (which operates under the Nolitours and Transat Holidays brands), not Air Transat. There is no contract between CanJet Airlines and Air Transat. In addition, the article alludes to the profitability of Air Transat; it should have said Transat.

A story in this morning’s Gazette propagates anonymous comments whose essence is unfounded. Even though the journalist published the company’s denials, Transat regrets the dissemination of totally erroneous information. In light of the above, Transat has issued press releases this morning establishing the facts. Transat announced this morning that it had a very profitable summer.

On November 12, the French online magazine TourMag.com published erroneous information and speculation about Transat, without attempting to check the facts beforehand. Transat is disappointed with the use of conditional tenses and question marks, the obvious outcome of which is to propagate rumours, in an article titled “ Transat France vers un plan social avec la mise en commun des équipes? ” Transat therefore wishes to clarify the facts regarding a plan to merge Transat France business units in one single legal entity, which was presented to the firm’s comité d’entreprise on October 26, 2012.

The said merger of Transat entities in France has numerous advantages, mainly a simplification of financial administration. A reorganization of business units and an amalgamation of some departments could follow. However, contrary to TourMag.com’s speculations, no “plan social” is planned and no meeting of the comité d’entreprise is scheduled on November 15, 2012. Management of Transat France will provide more details about this plan in late November.

Transat France has asked TourMag.com’s newsroom to correct the published story. A clarification has been sent to all professional media in France.

As stipulated in the Charte d’éthique professionnelle des journalistes, journalists should exercise the utmost vigilance before disseminating information, and the failure to check the facts constitutes a serious departure from professional performance.

On October 18, 2012, The Globe and Mail daily newspaper published a story headlined “Beware: Transat faces more turbulence,” which was erroneous.

At Transat’s request, the Globe and Mail published a clarification on-line on October 23, which was updated on October 29.

The following letter was sent to the Globe and Mail’s public editor on November 7, 2012.

Montreal, November 7, 2012.

Ms. Sylvia Stead,
Public Editor,
The Globe and Mail

By email at publiceditor@globeandmail.com

Dear Ms. Stead,

I am writing in reference to an article by David Milstead published in The Globe and Mail on October 18, 2012, headlined Beware: Transat faces more turbulence. The article occupied approximately half of Page B16. A “clarification” was published online on October 23. It was updated on October 29.

The initial story contained a major factual error that Mr. Milstead readily acknowledged when contacted by us. In essence, Mr. Milstead had calculated a ratio of 11.25 when dividing enterprise value (including off-balance-sheet aircraft leases, as he explains) by EBITDA (earnings before interest, taxes, depreciation, and amortization), and concluded that the company’s stock price was less attractive than it seemed. Hence the dark tone of the headline.

The problem was that Mr. Milstead’s calculation was flawed. It should have included aircraft rents in the denominator. As he says in his clarification: “How much difference does it make? A lot.” And he then explains that the ratio of enterprise value to EBITDAR (the “R” standing for “Rents”) comes out at 3.0, not his original 11.25.

In his original clarification of October 23, Mr. Milstead, as we said, readily recognized the problem, and even spoke of “multiple malpractice on my part,” quite a strong statement for an error obviously made in good faith, and we thank him for his openness. That said, in that clarification, Mr. Milstead continued to present his calculation as legitimate when he qualified the proper ratio (the one including aircraft rents) as an “alternative” valuation to “his” approach. He erroneously backed this position with comments from financial analyst Ben Vendittelli. We suggested that Mr. Vendittelli call Mr. Milstead, which he did. Mr. Vendittelli confirmed that aircraft rents simply cannot be ignored. Mr. Milstead’s original approach is indeed not viable, and the ratio of reference, including aircraft rents, is not an “alternative”. Mr. Vendittelli’s comments were then “unpublished” from the clarification, but the idea of an “alternative” ratio remained in the headline. We contacted Mr. Milstead again on November 1 to ask for the headline to be corrected.

As of November 7, as we address this letter to you, the headline stands incorrect and unchanged, the nature of the update of October 29 remains absent and content was unpublished, all of this being in breach with journalism standards. The Canadian Association of Journalists says: “When we make a mistake, whether in fact or in context, and regardless of the platform, we correct it promptly and in a transparent manner, acknowledging the nature of the error. We publish or broadcast all corrections, clarifications or apologies in a consistent way. We generally do not “unpublish” or remove digital content...”

We would respectfully like to make the following comments.

The Globe and Mail’s Report on Business is a very credible news medium that has a solid and well-deserved following among investors. The original article of October 18, essentially conveying that Transat stock may present risks that are not reflected in its price, or are not well understood by the market, may have had, or may still have, consequences. Did some investors sell? Did others refrain from buying? How many retail brokers or investors marked a little dark cloud above our company? We will never know. But we know for a fact that one of our competitors was quick to tweet a link to Mr. Milstead’s original article to who knows how many people, all of whom will never be advised of the clarification(s) and may have re-tweeted the link. The mention in the paper of a clarification, tiny and inconsequential as it was, and the subsequent versions of the online-only, incomplete clarification, do not even come close to rectifying the problem caused by the original article, prominently displayed with photo and headline.

Our paramount point, in the circumstances, is to deplore the disappearance of fact-checking as standard procedure in journalism.

In this case, we contend that the error, obviously made in good faith, was nevertheless significant, that the original headline was damaging, with possible financial consequences, and we believe there should have been a call made to us in advance of publication to check the facts. Like many large corporations, we have a full-time media officer available, exactly for cases like this. A call from The Globe and Mail would have been returned quickly. Readers would have been better served, and our reputation would have emerged intact.

Please note that this letter will be posted on our website for the benefit of our shareholders.

Best regards,

Michel Lemay
Vice-President, Communications and Corporate Affairs
Transat A.T. Inc.

We wish to issue a clarification regarding information about Transat published in an article in the business section of La Presse on September 14, 2012.

The article suggested that Transat would be reducing capacity for winter 2012 by 10% on its transatlantic routes and by 17% on Sun destination routes. In fact, as the press release issued by Transat on September 13, 2012, clearly states, these numbers apply only to the fourth quarter; i.e., the months of August, September and October 2012.

The article should have stated that Transat is reducing capacity on Sun routes by 7% this winter, as mentioned during the conference call that accompanied the release of the company’s third-quarter results.

At our request, La Presse corrected the error in its September 15, 2012, edition. We thank the newspaper for doing so.

During the quarterly conference call on December 16, 2011, Transat spoke about a number of initiatives that it is taking to boost profitability. The company explained, for example, that it will be renewing efforts to differentiate its “sun” product, in hopes of being able to sell packages for a few dollars more. The explanations provided were misunderstood by some journalists, as evidenced in expressions such as “Transat turns its back on low prices” (“Transat tourne le dos aux bas prix”) and “Transat eyeing luxury products” (“Transat veut se tourner vers les produits luxueux”).

Over the years, the wintertime getaway to a sunny southern beach has become a must lifestyle option for millions of Canadians. The market is huge, demand is firm and highly resistant to economic downturns, and the competition is extremely fierce, in part because of the near-absence of entry barriers. As a result, a sizable majority of these products sell practically at cost, and profit margins are slim.

The challenge for tour operators has long been to market a holiday experience that consumers perceive as different and that offers added value, especially in this most popular of market segments. It is important to realize that, while an all-inclusive week in the sun can be had for as little as $700 per person (and even less), the true “deluxe” version of this type of product can cost $5,000 per person. Indeed, there are well-known major brands that specialize in high-end travel, a segment that might be defined as anything that sells for $3,500 and up per person per week. The mid-range segment, meanwhile, can be thought of as being in the range of $2,000 to $3,500.

Transat has always vied with its competitors for the biggest market segment in terms of passenger numbers; i.e., trips selling for roughly $1,000 to $1,500 per person per week—or less (far less, even!). That facet of the company’s strategy is not about to change.

What was explained on December 16 is that the company intends to ramp up efforts to differentiate its product—for example, through exclusive agreements with certain hotel chains or an enhanced in-flight experience—with a view to building greater customer loyalty, in a market where tour operators are currently competing mostly on price, with products that often are relatively devoid of distinguishing attractions. Over the medium term, as the senior executives explained, the tour operator’s margin, which is practically non-existent at the moment, could be nudged upward by $10 or $20 per package. In other words, the potential price variation is about 1%. This should therefore under no circumstances be construed as a shift toward luxury products, or a change in market segment, or even a willingness to substantially raise prices.

Précision sur un article de La Presse du 23 août 2011

Le quotidien La Presse a publié le 23 août 2011 des informations erronées au sujet de Rêvatours, une filiale de Transat spécialisée dans le circuit, qui devient Transat Découvertes à compter du 1er octobre prochain.

Contrairement à ce qui a été publié dans un article de La Presse Affaires, Rêvatours n’est pas présente en France. Depuis maintenant 25 ans, Rêvatours propose au marché québécois des circuits touristiques de qualité aux quatre coins du monde. Tel que mentionné dans le communiqué de presse émis hier par Transat, Rêvatours devient Transat Découvertes à compter du 1er octobre prochain et étend son offre au marché ontarien sous la marque Transat Discoveries.

Le changement de nom de la filiale ne touche aucune filiale en France.

À notre demande, La Presse a corrigé son erreur dans son édition du 24 août 2011. Nous l’en remercions.

Précision sur un article du Devoir du 12 avril 2011

Le quotidien Le Devoir évoque ce matin que nous avons retiré d'un de nos sites Web un « cours accéléré de parler québécois » destiné à nos clients de l'Hexagone. Nous reconnaissons volontiers que ces petites capsules audio étaient inappropriées. L'erreur de parcours a été corrigée rapidement, et nous présentons nos excuses. Histoire d'attribuer à César ce qui lui revient, nous signalons cependant les erreurs du Devoir :  Air Transat, une des 18 filiales de Transat, n'a strictement rien à voir dans la mise au point ou la diffusion de ces capsules, contrairement à ce que Le Devoir affirme en manchette. Celles-ci ont été développées à la demande de Transat France (qui n'est pas une agence de voyages, comme le dit Le Devoir, mais un des plus importants voyagistes en France). Rappelons que le site Web de Transat (http://www.transat.com) met de l'avant toute l'information permettant de comprendre la structure de notre organisation, y compris dans la section destinée aux journalistes.

Mise au point – dépêche de l’Agence QMI – 23 septembre 2010

Une dépêche de l'agence QMI au sujet de l'engagement de Transat dans la lutte à l'exploitation sexuelle des enfants, reprise le 23 septembre 2010, contient de nombreuses erreurs et inexactitudes. Tout d'abord, comme l'indique clairement notre communiqué de presse du 22 septembre, c'est Transat, voyagiste international, qui a signé une entente avec l'organisme spécialisé Au-delà des frontières, et non sa filiale Air Transat. En outre, il est erroné de parler ici de lutte « aux pédophiles », puisque la très grande majorité des gens qui abusent d'enfants ne sont pas des pédophiles. Nous sommes ici au cœur de la question : nombre d'abuseurs commettent un acte criminel impulsif, et c'est ce qu'il faut combattre en informant les gens sur le caractère inacceptable et criminel de ces comportements. Ramener les choses à la pédophilie suggère une grave erreur de perspective. Par ailleurs, le journaliste affirme, erronément et sans que nous puissions retracer sa source, que nous allons installer des « affiches évoquant l'illégalité de la pédophilie » dans des hôtels. Le journaliste n'a pas communiqué avec Transat.

Kathie Stewart’s March 22 story about a passenger on an Air Transat flight out of Montreal bringing relief supplies to Haiti (“Organizations help nurse flying with aid to Haiti; woman loads up on vital supplies for family”) portrays the Canadian airline industry in an unfortunate and unfair light.

Referring to the fact that passengers are limited to 50 kg of luggage and must pay $12 per kg over and above that limit, the reporter states that “ Air Transat has not adjusted excess baggage policies to accommodate travellers bringing supplies to Haiti […] Air Transat allows a maximum of 50 kilograms of personal luggage. Passengers are allowed 32 kilograms of excess baggage, but must pay $12 for each excess kilogram.”

In fact, as was explained to the reporter, Air Transat’s normal luggage allocation is 20 kg. In the case of flights to Haiti, the limit has been set at 50 kg to accommodate our customers travelling there to visiting family and friends. In other words, our policy has been “permanently adjusted” to Haiti’s reality, and allowing more than 50 kg as the base allocation is impractical, as the physical limitations of the aircraft could be quickly reached.

Most important, we would like to point out that Air Transat is regularly solicited by customers who want to bring supplies to our sun destinations for humanitarian reasons, as was the case here. In 95% of cases we agree to accommodate them, allowing an average of up to 20 free additional kg of luggage per passenger. However, our check-in agents are not entitled to grant such special authorizations themselves. Any passenger wishing to benefit from this humanitarian program must make a request in advance, generally by e-mail. Air Transat carries as much as two tonnes of goods to populations in need each year, including for Not Just Tourists (NJT), a regular beneficiary of this program that is quoted in Ms. Stewart’s story.

The reporter quotes someone who we gather is a Canadian Tire customer picked at random, who says: “I think a while back, airlines would have gone out of their way to help their customers, but times have changed.” Given the information provided to the reporter, or available to her by other means, we find this way of concluding the article extremely unfortunate, especially based on an uninformed source with no apparent expertise or authority in the matter.

Following the January 12 earthquake, Air Transat organized four humanitarian flights to Haiti carrying more than 125 tonnes of supplies and hundreds of volunteers, and provided its logistical and financial support to a number of NGOs working on the ground. This included a huge effort by our employees, including flight crews and staffers onboard who took care of Haitian orphans we brought back to Canada. Our employees donated time, clothing and food, as well as money. This information is available in the attached news release (this and others are available to the public on our website). Other airlines, most notably Air Canada, made similar efforts. We resumed our regular flights to Haiti on March 10, and we remain supportive of humanitarian organizations on the ground, providing them with free tickets and free cargo space. This is why we feel Ms. Stewart’s piece, and especially its ending, does a disservice to all the airlines involved in this massive and historic humanitarian effort.

Information erronée et incomplète dans Le Devoir et La Presse

Les quotidiens Le Devoir et La Presse ont publié le 12 mars des informations erronées et incomplètes au sujet du recours par Transat à des transporteurs autres qu’Air Transat.

Lors d’un point de presse donné le 11 mars, Transat a expliqué que le recours à des transporteurs externes n’est pas nouveau et que la proportion de la capacité qui est ainsi fournie par d’autres transporteurs n’a pas substantiellement changé depuis plusieurs années.

Il a été notamment précisé qu’un grand nombre de liaisons offertes par Transat ne peuvent tout simplement pas être assumées par Air Transat pour des raisons réglementaires. En tant que transporteur canadien, celle-ci n’est pas autorisée à voler de la France, où Transat compte 600 000 clients, vers l’Amérique du Sud, l’Asie, l’Afrique, la Scandinavie, le Royaume-Uni, les États-Unis, etc. En conséquence, le recours à d’autres transporteurs est inévitable.

Par ailleurs, en 2003, Transat s’est engagée dans une stratégie de desserte de marchés régionaux qui exigeait le recours à des petits porteurs, ce qui s’est traduit par le recours à un transporteur externe.

Globalement, environ 50 % des clients de Transat voyagent sur Air Transat. Au départ du Canada, cette proportion est d’environ 75 %, et n’a pas changé substantiellement au fil des années.

Le Devoir n’a pas assisté au point de presse donné le 11 mars par Transat, où la question a été soulevée et s’est méritée une réponse complète, et le journaliste Alexandre Shields n’a pas jugé bon de contacter Transat pour vérifier les informations qui lui ont été transmises de source syndicale.

La Presse a assisté au point de presse du 11 mars, mais la journaliste Hélène Baril publie néanmoins une information erronée lorsqu’elle affirme que la sous-traitance est en croissance chez Transat. Mme Baril ignore entièrement les explications données par Transat à ce sujet, en réponse à une question qu’elle a elle-même posée.

Des demandes de correction seront soumises aujourd’hui aux deux quotidiens.