| | |  Travel & Outdoors 
Transat Opens Tour Operator for Mexican Travellers
 Brent Jang - Globe and Mail
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June 12, 2010
| | Air Transat launches Eleva Travel to help its sales in Mexico during the summer. | |
Transat A.T. Inc. is diversifying by opening a Mexico-based tour operator, targeting Mexican leisure travellers who take vacations within their own country and in Las Vegas.
For Transat, whose stock price has fallen more than 50 per cent since the start of the year, the strategic move is designed to give it a lift in Mexico during the summer season, when Canadians turn their sights to Europe and away from sunny climes south.
Eleva Travel, based in Monterrey, Mexico, will sell its products starting in July, primarily through travel agents, Transat chief executive officer Jean-Marc Eustache said Thursday during the firm’s second-quarter conference call with analysts.
Montreal-based Transat has been stung by fierce competition from rivals such as WestJet Airlines Ltd. and Air Canada, resulting in lower prices for vacations and fewer packages sold. Canada’s largest tour operator still managed to post a $6.2-million profit for the three months ended April 30, albeit down from a $42.2-million profit in the same period last year.
The latest results translated into an adjusted share loss of 7 cents, which was better than analysts’ loss estimates of 9 cents for a quarter that traditionally should be healthy. Quarterly revenue slipped 6 per cent to $1.06-billion. Flight disruptions due to volcanic ash from Iceland in April prompted Transat to absorb $4-million in costs arising from cancellations and delays.
“Transat has faced heavy discounts on North American package prices as WestJet targets expansion through its vacations division,” RBC Dominion Securities Inc. analyst Tanya Messinger said in a research note.
But Ms. Messinger said the Eleva initiative could help Transat fill three Mexican hotels, co-owned through its Ocean Hotels joint venture, during the seasonally weaker summer period in the country. Eleva will focus on the Mexican markets of Cancun, Puerto Vallarta, Acapulco, Los Cabos and Ixtapa. Las Vegas will also be marketed as a key tourist destination for Mexicans.
The global tourism industry is still recovering from the recession and the H1N1 influenza outbreak. Last year, the Canadian government’s requirement that Mexicans obtain visas to visit Canada, effective last July, hurt inbound visits from Mexico. For now, Canada won’t be on Eleva’s radar.
“We believe as Eleva builds its operations, it will enable Transat to somewhat offset competitive pressure on Canada-Mexico packages by allowing Transat to better manage its hotel commitments in Mexico, as Mexicans typically focus on domestic destinations and may also potentially lead to better deals with hoteliers if volumes increase,” National Bank Financial Inc. analyst David Newman said in a research note. |
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