Transat AT Inc
TSX:TRZ
Transat AT Inc
TSX:TRZ
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[Foreign Language] Good morning, ladies and gentlemen. Welcome to the Transat conference call. [Foreign Language] I would now like to turn the meeting over to Mr. Christophe Hennebelle, Vice President, Corporate Affairs. Mr. Hennebelle [Foreign Language]. Please go ahead.
Thank you. Hi, everyone, and welcome to the Transat conference call for the presentation of the financial results of the fourth quarter ended October 31, 2021. I'm here with Annick Guerard, President and CEO; and Patrick Bui, CFO. Annick will provide our comments and observations on the current situation and on the operational and commercial plans for the future before Patrick reviews the financial results in more details. We will then answer questions from financial analysts. Questions from journalists will be handled offline. The conference call will be held in English, but questions may be asked in French or English. As usual, our investors presentation has been updated and is posted on our website in the Investors section. Patrick may refer to it as he presents the results. Today's call contains forward-looking statements. There are risks that actual results will differ materially from those contemplated by these forward-looking statements. For additional information on such risks, we invite you to consult our filings with the Canadian Securities Commission. Forward-looking statements represent Transat's expectations as of December 9, 2021, and accordingly, are subject to change after such date. However, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. Finally, we may refer to IFRS and non-IFRS financial measures. In addition to IFRS financial measures, we are using non-IFRS measures to assess the company's operational performance. It is likely that the non-IFRS financial measures used by the corporation will not be comparable to a similar measure reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the corporation are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures. Additional information on non-IFRS financial measures such as their definition and their reconciliation with the more comparable IFRS measures, are available in our annual report and our investors presentation. With that, let me turn the call over to Annick for our opening remarks. Annick?
Good morning, everyone. I'd like to start by acknowledging the presence of [indiscernible] Patrick Bui, who has recently joined us as CFO. I am extremely pleased to have him on Board and confident that it will be a great asset for the development of Transat. I would also like to sincerely thank Jacques Simoneau for filling in before Patrick's arrival. We are concluding the summer with revenues that are still limited, but pointing the right direction. At $63 million, our revenues for the fourth quarter represent about half of what we saw for the whole year. That's also more than double the revenue for the same period last year. Our results for the quarter are better than last year's due to an improvement in load factors and also partially because of one-off elements that weighed negatively on the results last year. They're in line and even slightly better than the objectives we established as part of our restart plan. Most importantly, we have kept the cash burn in check at $50 million per month despite the cost incurred for the restart of operations since July 30. Patrick will comment in more detail on the financial elements. Our operations are now well underway. For winter, we expect to operate a global capacity at around 60% of what it was in 2019, starting at 50% and gradually increasing to 75%. We offer direct flights from 8 Canadian gateways to 22 destinations in the South, 5 in the U.S. and 8 in Europe. Our transborder offer includes 2 new destinations in Florida, Miami and Fort Myers. This comparatively solid winter program will constitute an excellent bridge into the summer season, where we foresee a capacity close to our pre-pandemic levels, reaching about 90% of 2019 level. At the height of the season, we will operate to 45 destinations in Europe to the south within Canada and in the United States. From Montreal, a total of 19 European destinations will be accessible via direct service, including a new route to Amsterdam. From Quebec City a new exclusive route to London is also added to our portfolio, and we will restart our service to Paris. Toronto travelers will be able to fly to 15 key European destination. We will strengthen our position in the United States from Montreal with the addition of Los Angeles, San Francisco and [ year-round ] operation to Miami. Finally, we will offer a selection of our most popular destination in Mexico and the Caribbean out of Montreal, Quebec City and Toronto as well as the domestic flights between 5 Canadian cities, Montreal, Toronto, Quebec, Calgary and Vancouver. As you can hear, this is quite a rich offer from Eastern Canada. We are, of course, monitoring the situation, especially in connection with the Omicron variant and are ready to adjust our capacity as the situation may require, but we are quite confident that we are now evolving in the right direction. Thanks to the modernization and simplification of our fleet accelerated through the pandemic, we can better adapt to demand while increasing aircraft utilization and reducing our costs. We now have and will have for the future among the simplest and most efficient fleet models in North America, a game changer in our ability to improve our competitiveness. Our operation also allows us to bring our employees back to work. As our fiscal 2022 began, We had about 2,000 active employees in Canada as compared to 750 at the height of the crisis in the spring of 2020 and again at the same time this year. We are constantly recalling staff, and we expect to have around 3,500 by the end of 2022. Our recalls are going well. And despite the labor that rages, we do manage to fill in our positions. We have experienced some difficulties with our call center as the need there proved steeper than what we had expected. This provoked some lengthy wait times for our customers for which we have offered our deepest apologies. We have put in place a wide array of measures from making it easier for our customers to make modifications online, to improving our salary conditions and we are now seeing the situation improving steadily. Our employees are the key to our success, and we are so grateful for programs like CEWS, which have helped keeping them on board during this crisis, while some of them were not at work for us -- with us for the past 20 months. An impressive proportion of them is willing to come back, though, and I want to thank them for their engagement and their resilience. I also want to thank those who have stayed on during the whole period, holding the fort and whose extraordinary dedication and hard work now allow us to look towards the future which much more confident than ever. Another important factor in our post COVID development, and we have pointed out many times already, will be our capacity to forge alliances to strengthen our network with complementary offers from other carriers. This is key to our growth strategy. That's why the announcement of our first codeshare agreement with WestJet important for us, and you can also expect other announcements of the same kind in the upcoming year. In the meanwhile, we have also developed our virtual interline agreement through our connectair by Air Transat service, that conveniently offers interlining options to our customers with minimal system integration and development efforts. This now allows us to offer more than 130 extra destination with Easyjet in Europe, Avianca in South America and [indiscernible] in Spain. Moreover, we are unveiling today the upcoming integration of [indiscernible] addition into our partner portfolio. Our passengers will be able to connect a Transat flight with the network of this regional airline out of Montreal and Quebec as a first step towards a commercial cooperation with them to better serve our regions in Quebec. We play great importance on social, corporate, social and environmental responsibility, which is fully linked to the future of our industry. The climate emergency is at the center of our concerns. Unfortunately, hybrid and electric aircraft will not be available for several years. And the arsenal of tools available to us to reduce GHGs, fleet modernization, fuel efficiency measures and the use of sustainable aviation fuel are key elements. This year, we became the first airline in Canada to have secured a significant volume of electrofuel over a long period of time with the signature of a commercial agreement for 90% of SAF+ consortium sustainable electrofuel to be produced at its first Montreal plant. Projects like this will help lead the aviation industry to a revolution while contributing to the achievement of GHG reduction targets in Quebec and Canada. Before concluding, I would like to acknowledge the contribution of Louis-Marie Beaulieu and Jean-Yves Leblanc to Transat's Board of Directors as both will be leaving us at the end of this month. And I am very pleased to announce that Mr. Daniel Desjardins and Ms. Julie Tremblay have accepted to join the Board and bring their tremendous experience to the table to help Transat develop in this new phase of its history. In a nutshell, we are sharing today results that reflect the [ depth ] of the COVID crisis on worldwide travel and aviation in general and Transat, in particular. But we are extremely confident that we have everything in place to rebuild and redevelop as a company that will be stronger and more profitable than before the crisis, 2022 will be a demanding year, no doubt, and we have a lot on our plate, but it will also be the most exciting one as the first year into our strategic plan and even more ambitious era. Patrick will now give you more details about our financials.
Thank you, Annick, and good morning, everyone. I'm glad to be sharing our financial results with you. Since the restart of our operations on July 30, we have witnessed encouraging signs of a recovery as our capacity has ramped up through the fourth quarter, and we are seeing much more robust load factors compared to 2020. However, and without surprise, our fourth quarter results were again significantly impacted by COVID-19. While we have secured financing for the LEEFF program last April, and while we resumed operations on July 30, preserving cash has been and remains a top priority. To this end, we have reduced our monthly cash burn to an average of $15 million per month during the fourth quarter, which is a sequential improvement from our cash burn in the third quarter, which was an average of $20 million per month on the back of stronger demand in Q4 as compared to our internal plans. Liquidity remains solid with cash and cash equivalents of $433 million and undrawn facilities of $170 million at the end of Q4 for a total unrestricted liquidity of over $600 million. With respect to our debt, we are currently analyzing all options to optimize our capital structure and to ensure we have a strong footing to execute on our strategic plan. And now for our Q4 results. Revenue stood at $63 million, up from $28 million in 2020. Compared to last year, higher vaccination rates, confidence in traveling is much higher, leading to improved capacity and load factors. Adjusted EBITDA was negative $58 million for the quarter compared to negative $91 million in 2020. Despite cost control measures, this quarter included expenses relating to the resumption of operations, while last quarter included expenses relating to the settlement of fuel hedging contracts put in place before the pandemic for $23 million. Adjusted net loss was $118 million for the quarter compared with $156 million last year. As per our statutory financial statements, net loss was $121 million compared to $238 million last year, a $117 million improvement. Of this improvement, $77 million is explained by a decrease in special items as compared to 2020. This quarter included special items of $20 million, composed of essentially impairment of assets of $13 million, which includes the impairment of an aircraft that will no longer be used until it is returned to the lessor and severance expenses of $7 million. This item of $20 million is mostly offset by $15 million of favorable change in the value of our warrants that were issued at the end of the second quarter relating to the LEEFF program and $7 million in FX gains. Last year, our fourth quarter net loss included in special items totaling $97 million, which mainly consisted in impairment charges totaling $87 million. For the full year 2021, results were significantly impacted by COVID-19. Revenues were $125 million, a decrease of 90% compared to last year. Adjusted EBITDA was negative $214 million for the year compared with a negative $122 million in 2020. We recorded an adjusted net loss of $446 million or $11.83 per share compared with $355 million or $9.41 per share a year ago. And as our -- as per our statutory financial statements, we recorded a net loss of $390 million compared with $497 million in 2020. Now with respect to our balance sheet. The corporation's cash and cash equivalents totaled $433 million as at October 31 compared to $426 million at the end of October 2020. As previously mentioned, the cash burn during the quarter represented an average of $50 million per month. This amount does not consider the proceeds from borrowings nor the reimbursement to customers. For winter 2022, the cash burn is expected to remain within the range of $15 million to $20 million per month as we continue ramping up our activities. And as of October 31, cash in trust or otherwise reserved totaled $140 million, while deposits for future travel stood at $292 million. At the end of November, we had received requests for about $460 million of the amount of credits issued and made refunds for 99% of amounts claimed. The reimbursements made during the summer were partially financed by drawdowns on the $310 million LEEFF facility. The difference comes mostly from reimbursements made with cash held in trust. As of October 31, drawdowns on our credit facilities totaled $650 million compared to $585 million last quarter. During the quarter, an additional amount of $20 million was drawn on our $390 million LEEFF facility and an additional $45 million was drawn on our $310 credit facility relating to customer reimbursements. This facility is now fully drawn. LEEFF liabilities stood at $956 million, which includes 10 A321neoLRs, of which 4 were commissioned during the year. Off-balance-sheet agreements, excluding agreements with certain smaller suppliers, stood at $550 million, mainly related to 7 Airbus A321neoLRs yet to be delivered as at October 31. Finally, as you could read in our press release from this morning, we will not provide an outlook -- a financial outlook for the winter of 2022. That said, as mentioned earlier by Annick, we are planning to ramp up capacity across all of our markets over the course of winter 2022 with an average of 60% of the capacity of 2019, but we will remain vigilant to adapt capacity with demand, whether up or down. At a more granular level for the sun destinations, our main program for the winter capacity in 2022 represents 55% of 2019. On transatlantic routes, where it is the low season, capacity represents 65% of 2019. And finally, on our transborder routes, capacity represents 145% of the capacity of 2019. Thank you, and we will now open it up for questions.
[Operator Instructions] [Foreign Language] And our first question comes from Benoit Poirier, Desjardins Capital Markets.
Congrats, Patrick, for your new role at Transat. Could you maybe share some of your first impression on Transat, the travel industry? And where would you like to position the company from a financial standpoint?
Benoit, good to hear from you, and thanks for the words. Look, I mean, I think the travel industry has gone through a very difficult past few months and years. But everything points in the right direction. If you look more closely at our numbers, the last quarter was just an indication of that. With our revenues that are double of last year and we're clearly on a strong footing. And so no pun intended, sky is the limit. But from a financial standpoint, obviously, there's work to be done as we alluded in the past on the financing side, and we think there's an opportunity to provide a strong footing for the company and align with the development and the growth of our business.
Okay. That's great. Any timing for such an announcement with respect to refinancing initiatives.
Yes, that's a great question. I mean, as we mentioned in the past, we're looking at all options. We're looking at no stones unturned. We're looking at all types of instruments and markets. We think there's an opportunity. There's a window of opportunity now. We just want to make sure that we do a thorough homework before we proceed with a financing. Obviously, there's some clear objectives in that financing. We wanted to be financially accretive to the company on one side. And secondly, we want to reduce risk as well. And for sure, we want that financing to be working hand-in-hand with the business plan that we've announced in the past. And we have a very clear 5-year plan, a very clear strategic path, and we want to make sure the financing is aligned with that.
Okay. And you provide great color in terms of the expectation for cash burn, the capacity for this winter, next summer. Just wondering, given that there has been change in the strategy. Now you have a much more optimized fleet and also the codesharing agreement that you just signed. Any thoughts about where the Transat margin profile could evolve once you recover to the pre-crisis level?
Yes. It's -- I mean, I appreciate the question, Benoit. I think it's a little early to tell. Obviously, when we look under the hood on our strategic plan, we are strongly -- we're confident that we will return to pre pandemic margins and beyond. But I think it's a little bit too early to say, Benoit.
Okay. And the last 1 -- yes, go ahead. Sorry.
Maybe I can comment on that because that's important for us. We are consolidating our operation. As you know, as we announced in Eastern Canada, where we are extremely well positioned with solid market shares, and we will be there for next summer. Transat has had the largest market share on almost 75% of its transatlantic routes market that has always been profitable for us with 95% of market share out of Quebec and near 50% out of Ontario. So with that and rebuilding that network, I think it's very important to understand that we have a solid base. Now we are putting in place everything that is required to increase our efficiency. So there's a clear path to improve overall operational and financial performance. Our fleet simplification, of course, as we've talked in the past, is going from 4 to 2 types of aircraft, entirely compatible with the most efficient aircraft on the Atlantic market, the Airbus A321 LR. We have significantly reduced our number of aircraft to increase our agility in the market. And we now have, as I was saying in the opening remarks, one of the simplest and most effective, efficient fleet model in North America and our cost structure is becoming among the most competitive ones as well. And by consolidating our operation in Eastern Canada, where we are extremely well positioned with solid market share, I think that we're going to be very well positioned for the future. And the new space has allowed us to redesign the network to significantly reduce seasonality and increase fleet utilization. Two main factors that have clearly prevented us for being performance in the recent years. So we already have a plan to exceed our historical aircraft utilization by next summer. So it looks very promising for the -- for future profitability.
Okay. And last one for me. With respect to the new variant, I understand you'll be agile, but have you seen any change in the booking so far?
Overall, we are seeing a definite recovery in demand, the level of booking observed over the last month has been encouraging. Without any surprise, though, demand has slowed down over the last week with the recent uncertainty created by Omicron and especially with the measures that have been imposed again at the Canadian borders, including the quarantine. But we believe that the impact will not last long with what we are hearing around limited consequences of Omicron already. So we just looked at the numbers this morning. The bookings were picking up -- have been picking up during the last 2 days as a result of the encouraging new of Omicron.
The next question comes from Tim James TD Securities.
Congratulations, Patrick, on the appointment. I'm just wondering if you could talk a bit about the approximate timing of the remaining 321 LRs that are coming into the fleet. I believe you've indicated that it's by -- to fiscal '20 -- I think it's fiscal '23 or calendar '23, maybe you could clarify that. And then just talk maybe about any indications of timing within that period.
Yes. So just to give you an overview of our fleet. So in terms of A321neoLR, we have 10 right now in the fleet, and we will have 2 additional ones next spring, so spring of 2022 for a total fleet of 31 aircraft, including 12 A330s and 7 A321ceos. We are expecting the remaining of the A321 LRs, so 5 because we had a total -- an order total of 17 in spring of 2023 and 2 in spring or summer of 2 and spring 2023 and the remaining 21s in spring in 2024. That being said, we will plan additional aircraft for the next 5 years. These needs, of course, for aircraft will be aligned with our projections of future demand, and we will communicate new leasing in due time.
Okay. My second question, I'm wondering, Annick, if you can talk about this WestJet codeshare agreement, I think, looks very exciting for Transat. Can you sort of talk from a the perspective of travelers and where that benefit that opportunity of the partnership will kind of show up and expand the, I guess, the travel options for Transat customers?
Yes. So we have different partnerships. We signed the current partnership with WestJet and working on other as well. So the benefit, of course, for our customers, they will have access to an extended network of routes and destinations. The whole goal of partnership overall is to increase the level of passengers through new streams of passengers on our existing network. And for customers, the partnership we have with WestJet, which is a codeshare allows 1 single booking and check-in from flights operated by the 2 different airlines. There's also protection in case of flight delay and cancellations. So it's a great partnership. It's the first that we have, first of many to come and we are very pleased by that. In terms of routes, we said we would announce them because we are finalizing the details of the different routes. We are finalizing the agreement. But in terms of scope, it will involve some routes that, of course, domestic routes that ends a couple of transborder routes that WestJet operates that will connect on to our departures and that will feed mostly our European network.
Okay. That's great. And then just my final question, maybe for Patrick. There was a comment about the fourth quarter. I think -- correct me if I'm wrong, but the cash burn being better than you expected. I'm just wondering if you could talk about specifically what that was? Was it really a function of the pickup in bookings and therefore, cash deposits coming in for future travel? Or what was the reason behind the better-than-expected cash performance?
Yes, Tim, it's -- I mean, it's frankly a level of activity in bookings that were beyond our internal plans. It was mostly that.
The next question comes from Konark Gupta of Scotiabank.
And echo my congrats to Patrick. So welcome to the earnings call. Maybe the first one to ask, I think I'm just kind of following up on Tim's question on the bookings. Is there -- like this is a seasonality, obviously, in bookings, where you see maybe the first quarter being pretty strong from a working capital standpoint and then it winds down. Given the kind of situation right now, the new variant plus the travel optimism due to vaccinations, et cetera. How do you see the bookings shaking out with respect to seasonality? Do you still expect similar seasonality as normal? Or would it be different this time?
Just to -- maybe to add some color on what I said previously. What we are seeing right now, first of all, just before the announcement of the new variant, we were seeing solid bookings throughout the winter season as well as a little bit of the -- during the -- for the next summer season. That being said, we need to take into consideration, and we have mentioned it before that the booking pattern has significantly changed over the last 18 months, well, especially in the last 6 months and the bookings are much more last minute. So it's a little bit more difficult for us to be able to predict. But so far, what we've been able to put in the market as capacity has proved that we were pretty much correct in terms of demand forecast. That being said, the impact of Omicron that we've seen over the last week, more importantly last week, less importantly over the last 2 days is specifically in the short term. So it affects the bookings for December and January. And we, of course, received a lot of calls from customers who do not understand what are the most new travel restriction because it's very complicated to be able to understand the restriction from a consumer point of view. So everybody is asking questions, should I wait? So people -- we've seen a lot of people -- not a lot, but a couple of people who have been delaying their travel. So they call us, they have plan to go out on vacation in January, calling back to, say, let's postpone for 2 months. So putting back their travel in March or April. So we are seeing some postponing. However, we are not seeing any movement at this point around March, April, not for the summer either, so that's now remaining steady. So we haven't reacted in terms of decreasing the prices, changing the network because we know that this is going to be temporary. And at one point, I think we have much more visibility than we used to have a year back, and we need to be strong on the nerve side and not to react too much and wait to see the -- to see as we are seeing right now, encouraging news on the limited threat of new variants. And of course, Omicron will not be the last. There will be others. So we are getting, I would say, kind of a routine -- on a routine on how to manage those ups and downs in the market.
That's great color. And then perhaps a follow-up on the codeshare agreement with WestJet. I think it is still being reviewed by the regulators. So if you can provide any color on -- are there any areas of the codesharing agreement where the regulators are showing any concerns at all? And can you remind us where is this codeshare going to be applied for mostly? Is it all transatlantic? Is it going to be transborder as well?
We haven't received any negative reaction from the authority so far. So it's going definitely in the right direction. We don't see any roadblocks on that side. And as I said, we are not able at this point to confirm all the details on which routes will be involved. But of course, it will be a combination of WestJet's strong presence in Western Canada and our strong presence in Eastern Canada on the transatlantic market.
Okay. That's great. And then Patrick, perhaps you might have an answer for this one on the hotel division side. So do you guys have -- are you looking to divest the hotel division. Any updates there? What could be the timing? And what could be the magnitude of proceeds?
Yes. Thanks for the question, Konark. We've announced in the past quarters that we were exiting the hotel division. So you won't be surprised that we are looking at options for the land in Puerto Morelos. But again, too early to say. But we're advancing in the right direction, and we're considering our options there.
Great. And the last one for me. You talked about the capital structure, Patrick, earlier on this call in terms of your strategic plan and the alignment there. What is the best metric to look at to when you think about optimizing the capital structure? Is it the absolute level of net debt you want to look at? Is it some of the metric? And does that also entail exiting the government LEEFF program like Air Canada just did recently?
Yes. I mean there's a lot of -- all of the above. I mean, there's a lot of metrics. I mean obviously, on an absolute level, we do look at leverage metrics and benchmark ourselves compared to other airlines, whether total leverage, including liabilities over your profitability or an EBITDA or something like that. So we do look at all of that. But like I mentioned earlier, mean ultimately, we wanted to be, call it, financially accretive to the company. And so specifically, what we mean by that is reduce the financial burden on the company. One thing to note on the LEEFF program. There are also warrants included in that financing. So that also is part of the equation of making it financially accretive, if I could say. And then the other thing that we're looking at is making sure that we derisk -- further derisk the capital structure of the business as well. So what that may mean is in terms of maturities and so on and so forth. Does that answer you question?
Yes, I appreciate the time.
The next question comes from Kevin Chiang of CIBC Markets.
Annick, you mentioned that you're seeing, I guess, bookings pick up again the past few days as headlines on Omicron suggests maybe it's less severe. What -- any change in the destination, maybe people are looking to book into or I suspect there might be some hesitancy for some of the more international destinations given the restrictions versus maybe domestic and transborder where travelers might face fewer restrictions. But I was wondering if you're seeing anything on your end to that effect?
Well, most of our network, of course, is international. We are seeing -- in terms of booking trends, what has been strong is all the VFR markets. So between Canada and Paris, for instance, or Montreal- Paris or Toronto- London, Toronto-Montreal, Portugal as well has been very strong for this winter. So we are seeing -- the demand remains very strong. As of the South destinations packages, this is where we've seen a little bit more negative impact over the last week. So destinations like Cancun, Dominican Republic and Cuba as a whole, not more one than the other. I think it's the South overall. But however, as I said, it's picking up. It's been picking up over the last 2 days. So that's very encouraging. Just before the announcement, just before the media or the news around Omicron, the bookings for South destination was going pretty well. We have opened a lot of destination for this summer. We have about 22 -- and for this winter, I'm sorry. If we have about 22 in South destination and they have picked up in terms of velocity. They have done very well. So we want to wait and see a little bit. I think that it's encouraging to see that the bookings have picked up over the last 2 days. And we remain very confident that the demand will still be there. The vaccination continues to progress. Children's being progressed, children under 12 as well being vaccinated. That's going to help for -- to support family who are looking to travel.
That's great color. If I could just ask maybe a further out question. If I think back to pre-pandemic and you pursued this hotel strategy, which you're obviously dissolving given the pandemic. I think the argument was that was where you could anchor a competitive advantage that being -- not having that hotel asset disadvantaged your network and your product offering versus some of the larger established carriers you go up against. When you look out whatever it is 3, 4, 5 years, we're kind of through the worst of the pandemic and travel returns. What do you think your competitive advantages are going to be if it's not this hotel, given you've abandoned this hotel strategy. Just at a high level, I can imagine reduced seasonality getting some A321 LRs is always going to take. So I suspect there's more to the strategy than that. I'd be interested in knowing where you think you carve out a competitive niche versus some of your competitors?
Yes. So maybe just to go back on what we've decided in 2021. So we launched the new Transat or the Transit 2.0, which refocuses the business around airline activities. We really aim at becoming the best sustainable leisure airline in the world. And I think we were not very far from that. But of course, it will depend on the recovery that we are going through right now. So this involves several structural changes that have started to take place, of course, a change in the company's governance, the closing of the hotel division. We cannot be -- we decided to move away from the vertical integration business model as we realize that we cannot be everything to everybody. We cannot be first or second or best in all the different fields. And it involved as well as path to improve the overall operational, financial performance as well, of course, ambitious targets towards decarbonization. In terms of competitive advantage, we are -- as I said earlier, we are consolidating our operation in Eastern Canada, where we are extremely solid, well positioned with our market shares. So that's really important for us. We -- I don't want to say -- it's not an dominate, but we ranked first on market share more than 75% on all the routes we operate to the Atlantic market to Europe. And on the South, we have the largest market share 50% -- 57% of our routes, that's 77% in Quebec and 42% The problem that we have is that we have great market share, but we didn't have the right cost structure. And I could say as well that the revenue management was lacking behind. So as I said, a new brand -- the new fleet has allowed us to redesign the whole network, reduce our costs. We are very well positioned to take advantage of the recovery of the leisure and traffic in DFR market. This is our target customer. And in the long run, we will be less impacted than the average market by the loss of business traffic revenues, which I think represent 20% of the legacy carriers' customers and account for 80% of their revenue. We have among the highest brand equity and service reputation. We have the best leisure airline in the world. We rank -- we have -- we were among the best leisure companies in the world actually. We have the best leisure airline company. And we have been ranked with 4 stars by the Skytrax award. The only other Canadian airline having this ranking is Porter. So when we look at all the assets we have, the market shares, the best fleet in North America, we will be highly competitive we believe that when we look at the market, the Canadian market, the transborder market and the European market, we will have the leanest structure overall to be able to compete in the market. And in parallel, we are working, of course, to improve our revenue management. So we are implementing our new RM system, one of the best in the airline industry. So this will able -- allow us to increase RM efficiency, especially in the existing context of the development of our airline partnerships. So overall, as we get out of this crisis and we compare ourselves for our competitors, we think that we're going to be much more competitive than what we used to be pre COVID and that's it.
No, that's great color. That's very helpful. Best of luck as you execute on that. And congratulations, Patrick, on the appointment of CFO.
Thank you.
Our final question comes from Cameron Doerksen of National Bank Financial.
I guess maybe first question for me is really more of a clarification. Annick, you mentioned I guess, in your prepared remarks, looking ahead to the summer, I think you said that you to fly to 90% of the destinations. So I just wanted to clarify that was the case, 90% of the pre-pandemic destinations. I just want to make sure that wasn't 90% of pre-pandemic capacity.
Now that was 90% of pre-pandemic capacity. And that's for the overall season because when we look more, that's a little bit lower when we look at peak season during July and August. But overall, as we plan to increase aircraft utilization, we are increasing capacity in low periods or smaller season and spring and next fall, the following fall. So overall, it's reaching 90% capacity versus of the 2019 level.
Okay. So yes, my next sort of follow-up question was going to be you've got a much smaller fleet, but I guess the answer to how you're going to get to 90% is the you'll be operating those aircraft in, I guess, more in the seasons and the off peak season that gets you to that 90% of 2019?
Yes. We are achieving this program, of course, with aircraft with 8 aircraft And that's why we are able to increase our aircraft utilization for next summer compared to summer of 2019 by 10%. That's just the first step as we're planning even more for the upcoming years. This is the beauty of the A321neo long range. I don't think that a lot of operators can say the same, being able to deploy such an efficient aircraft on both our mission, self-destination and European destination, it's a perfectly well adapted aircraft to our mission.
Okay. No, that makes a lot of sense. I guess maybe a question on the winter. I mean you talked about the bookings a lot. But I'm wondering if you can discuss what pricing looks like? And I guess, maybe compare it to maybe the 2019 winter season, how are things looking from a pricing perspective on those sun destination routes?
The pricing depends on the routes, of course, where there is more capacity deployed, the pricing is more aggressive when there's less and we -- for instance, when we look at the Dominican Republic, where we are very strong and have strong market share, we are able to generate pricing that are similar to 2019 levels, where we see more competition, such as Mexico, for instance, the price war is a little bit higher. However, since we have less capacity in the market, we are able to count on load factors. So it's really a balance of load factor, of course, and price per passenger. But overall, we think -- we believe that we're going to be able to achieve decent results.
Okay. No, that's helpful. And maybe last question for me, I guess, maybe more around the strategy of how you're going to deploy aircraft on to new routes in the future. I was sort of intrigued by the new routes you've announced for next summer to the U.S., L.A. and San Francisco. I mean, to me, those would be kind of nontraditional markets for Transat, especially in the summertime. So I just -- maybe you can talk a little bit about why those routes? We look to the sort of the future route additions, I mean, what kind of markets are you looking for? What kind of characteristics are you looking for as far as new route additions, especially on some of the U.S. transborder stuff?
What we're looking at in terms of transborder are really 2 parts: first, to increase our market share on a market that is very dynamic, which is Florida. So that's the East part. Besides that, on the East part of the U.S., we don't plan to deploy our own capacity. We plan to develop the eastern part of the U.S., but it will be done through alliances. As for the western part of the which is very important for us because there's clear opportunities in terms of offer and demand that is not being served. So we've conducted all analysis. And there is definitely a space for us to occupy between -- especially between Montreal and destinations such as San Francisco, Los Angeles, Phoenix, Seattle. So this is a market that we are looking at right now. There's not that much competition right now. And we believe with the A321neo long range that we're going to be able to deploy a lot of frequency on these markets and be able to capture revenues and be profitable in those markets. So we're starting next summer with gently with 2 destinations. But eventually, in the year's we will grow, especially on our own, with our own network to the Western part of the U.S.
And that was our final question. I'll turn the call back over to our speakers for any closing remarks.
So thanks, everyone. Let me just remind you that our first quarter results will be released on March 10, 2022. And with that, let me wish you nice day and a wonderful holiday season.
This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a good day. [Foreign Language]