Terrible news for Transat (TSE:TRZ) investors today, as the airline stock found itself in an open freefall, down over 8% in Thursday afternoon’s trading. What prompted a dive that hard? It’s a little dose of one of the most usual suspects around: poor earnings.
Transat posted a loss of $61 million this quarter. That’s a disaster objectively, and looking at it comparatively does it no favors. That $61 million loss managed to outweigh the $56.7 million loss it posted a year prior. Perhaps worst of all, it managed to post that catastrophic loss at a time when its revenue was up 18%.
There was a clear and rising demand for air travel, but even in circumstances like this, Transat generated deepening losses. One of the biggest problems, reports noted, was the constant looming threat of a flight attendant strike, which ate away at potential bookings.
Strike Threat Largely out of the Picture
While the strike threat certainly put a damper on Transat’s returns, that particular stumbling block may be out of the picture going forward. Just two weeks ago, Transat and its cabin crew union ratified a new agreement, which took the threat of a strike largely out of the picture. The Canadian Union of Public Employees let the agreement go through following the recommendation of government mediators.
The new agreement calls for a 30% pay hike until 2027, as well as some improvements in vacation days and personal leave time. Indeed, some believe that the agreement will prompt similar concessions throughout the Canadian airline industry as competitors try to keep their workforces happy.
What Is the Price Target for Air Transat?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on TRZ stock based on two Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 24.52% rally in its share price over the past year, the average TRZ price target of C$4.31 per share implies 9.11% upside potential.
