In a strategic move aimed at enhancing its financial position, Transat has confirmed plans to sell a land parcel in Mexico to a resort company for USD $38 million. This decision aligns with the travel company’s broader strategy to pivot back to its core airline business amidst a recovery phase following over three consecutive years of financial losses.
Financial Recovery Strategy
Transat’s announcement comes on the heels of its Q2 quarterly earnings report released on June 8, which highlighted a reduction in losses due to notable demand for travel and rising prices. As per a report by Open Jaw, the travel recovery is visibly benefiting the company.
Expected Savings and Implications
This strategic sale is projected to yield annual savings of approximately CAD $6 million, a significant advantage according to Desjardins analyst Benoit Poirier. In a note to investors, Poirier remarked, “Transat is starting to approach a turning point.” This sentiment underscores the potential for positive financial progression for the company.
Background on the Property Sale
The land in question, located in Puerto Morelos, was initially acquired in 2018 as part of Transat’s plans to develop a hotel subsidiary, a venture that was ultimately abandoned in 2021. The proceeds from the sale will primarily be allocated to mitigating debt, which stood at CAD $1.92 billion as of April 30, based on reports from CTV News.
The Buyer: Finest Resorts
The buyer, Finest Resorts, is a unit of The Excellence Collection, which operates luxury accommodations including Finest Playa Mujeres in Cancun, Mexico, and Finest Punta Cana in the Dominican Republic. This move is expected to enhance Finest Resorts’ portfolio in a competitive market.
Closing Timeline
The transaction is anticipated to finalize in Transat’s fourth quarter, marking a significant step in the company’s journey towards financial stabilization and operational focus.
By streamlining its assets and concentrating on its core operations, Transat is actively working towards a sustainable and profitable future in the travel and airline industry. The outcome of this sale, combined with positive earnings trends, reflects a promising outlook for both the company and its stakeholders.
