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Transat shops for hotel chain after landing back in the black

Targets its destination areas for purchase

Canadian Press

MONTREAL -- Transat A.T. Inc. has booked a first-quarter profit -- rare in the travel industry -- and revealed at the annual meeting yesterday it is negotiating to buy its first hotel chain.

Executives would only reveal that the hotels are in the sunbelt area of Mexico and the Caribbean, where Transat provides winter vacations for Canadians.

The company has close to $200-million cash on hand for acquisitions, and hotels are about all that's lacking for the integrated company that owns travel agents, tour operators and an airline.

Analysts surveyed by Thomson Financial had on average been forecasting a loss of 14 cents a share, and the results boosted the stock by 8.8 per cent yesterday.

Shares in Transat closed up $1.72 to $21.22 on the Toronto Stock Exchange.

The company said a larger volume of travellers in the latest quarter helped offset higher fuel costs.

A 1.2-per-cent decrease in revenue to $581.6-million was blamed on the dollar's appreciation against the euro, partly offset by a 3.4-per-cent increase in the number of travellers.

Traveller totals rose 1.9 per cent in North America and 18.5 per cent in Europe.

Chief executive officer Jean-Marc Eustache said the damage and fallout from hurricane Wilma in the Cancun area of Mexico hurt demand at the start of the season.

On Monday, Transat announced the acquisition of all 190 Thomas Cook and Marline Travel outlets in Canada, to make Transat the largest travel agency network in the country, with 430 outlets.

Mr. Eustache said this should help boost business in Ontario, the only market in Canada where Transat is not the market leader.

The company says it has a leading 35 per cent of the holiday market in the Maritimes, Quebec, and the West.

In Ontario, Mr. Eustache claims it is tied for first place with Sunquest Vacations, a division of MyTravel Group of Britain, each with 25 per cent.

He said the company has a budget of $300-million available for more acquisitions -- including credit -- and is looking in the United States and Europe.

The airline division, Air Transat, is to add a 15th plane to its fleet next month.

Combined with aircraft flown for Transat by WestJet under agreement, Air Transat offers destination flights from 19 Canadian airports.

Mr. Eustache said the money-losing Look Voyages division in France is on track to reach profitability the second half of this year.

He said the company is also putting the focus on what is called incoming tour operator services -- providing services like bus tours and excursions for tourists.

In response to a shareholder demanding a regular dividend, Mr. Eustache cautioned the rest of the year may not be as strong and Transat has to keep cash to weather any downturns.

"Let's not get too excited about the second quarter," he warned, and added that the third quarter also "looks difficult," because of fierce competition on the transatlantic market during the summer.

Reservations are forecast to fall in North America, but rise in Europe.

Transat A.T.


© The Globe and Mail

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