Bonjour, mesdames et messieurs. Bienvenue à la conférence Transat. Good morning, ladies and gentlemen. Welcome to the Transat conference call. Nous vous rappelons que la conférence téléphonique d'aujourd'hui est enregistrée. This call is being recorded. Je cède maintenant la parole à monsieur Christophe Hennebelle, vice-président affaires publiques. I would now like to turn the meeting over to Mr. Christophe Hennebelle, Vice President corporate affairs. Monsieur Hennebelle, à vous la parole. Please go ahead.
Thank you, Frank. Hi, everyone, and Welcome to the Transat conference call for the presentation of the financial results of the third quarter ended July 31st, 2022. I'm here with Annick Guérard, 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. As usual, 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.
Monsieur Hennebelle, on ne vous entend pas.
Okay. Where did you lose me? Okay, I'll continue there. Can you hear me now, Frank?
Yes, we can.
Okay. 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 Administrators. Forward-looking statements represent Transat's expectations as at September 8th , 2022, 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 or non-IFRS financial measures. In addition to IFRS financial measures, we are using non-IFRS measures to assess the corporation's operational performance.
It is likely that the non-IFRS financial measures used by the corporation will not be comparable to similar measures 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 investor presentation. With that, let me turn the call over to Annick Guérard for opening remarks.
Good morning, everyone. Our third quarter of 2022 was characterized by the stabilization of our operations, constant efforts to optimize our fleet utilization, and by an encouraging return to profitability in July. I will share with you the highlights of the past quarter. Our revenues at CAD 508 million were 73% of those of the same quarter in 2019. Our customers have clearly decided to travel again, and the surge in traveler number that we have seen since the previous quarter is now well established. Our load factors have increased month after month. On the Atlantic market, for instance, they increased by 10 points every month from 68% in May to 88% in July.
Our capacity will reach 92% of 2019 level in Q4, against 82% in the third quarter. At the moment, we're still taking significant bookings for the rest of the summer. We're also seeing strong booking trends for this upcoming winter, both on South and European destinations, and prices remain above 2019 level. After two years of deprivation, we believe that travel has become, for many, a necessity rather than a discretionary expense. The need to get away and reconnect with the world has become essential. Moreover, savings and consumption levels remain high, which leads us to be confident about future demand. Of course, we remain cautious given the uncertainty surrounding the economy, and this drives us to take a moderate and disciplined approach towards our growth.
Our return to operations after the pandemic was not easy, and like all industry players, we have been impacted by the complicated restart of the entire global aviation ecosystem. Thanks to outstanding commitment by our teams and cautious planning, including careful management of our capacity, we have succeeded in limiting the impact on our passengers, and we were able to operate 96% of our total capacity. That said, every delay, every misplaced luggage, and every long waiting time at our customer care center that affects our client is unacceptable to us. We again sincerely apologize to every customer who lately has flown on our wings and who has not received the flawless service to which they are accustomed. We are continuing to dedicate all our energy every day to reducing the impact of disruptions, and we're moving closer every day to a normal, seamless operational situation.
The beginning of Q3 saw the reopening of several transatlantic routes that we had suspended for two years. This strong recovery in activity over a very short period of time resulted in flight loads below our historical averages for the months of May and June. During those two months, we recalled our employees still on furlough and retrained our crews so that we are now able to operate at full capacity. That effort, of course, apart from contributing to the operational gaps mentioned, also put pressure on our costs. These factors were gradually resolved in July when operations returned to full capacity and our overall load factor reached 87.7%. Increased fuel prices cost us about CAD 103 million this quarter when compared to 2021 levels.
On the other hand, sale prices are up, reflecting the extra demand and the consumer's willingness to pay more for their trip. As we expect fuel prices to remain high, we are continuing to make every effort to mitigate the impact of that cost increase on our bottom line. We're continuing to roll out our strategic plan. In the third quarter, we have made headway on the network and fleet management fronts. First, we have operationalized our first codeshare agreement with WestJet and signed another codeshare agreement with Porter Airlines, our first phase, which will take effect in the fall. We've taken delivery of two additional A321LRs, which brings us to a total of 12, and we will receive another five in 2023 and 2024.
The cost per kilometer and resulting CO2 per kilometer of operating an Airbus 321LR on transatlantic routes make it the most efficient aircraft on that market. This week, we finalized an order for 4 A321XLRs, three firm orders for 2025 and 2026, with an option for 2027. The XLR will bring us the same advantages as the LR, but with an extended range, improving the number of frequencies on destinations such as Venice, Rome, and Barcelona. It will also allow us to offer European destinations all year long while reducing the risk compared to A330 operation, specifically during the winter season. This quarter, we also received Transport Canada approval for Mixed Fleet Flying, allowing our pilots to seamlessly operate all of our aircraft types and thus optimize operations.
We are the only airline in North America to have this certification, which will notably allow us to increase flexibility of scheduling and training of flight crew, improving overall cost efficiency. We can already measure the impact of our network and fleet redesign as our aircraft utilization this summer is tracking 10% higher than in 2019. It is forecasted to be up by 23% next winter compared to winter of 2019, as we pursue a moderate and cautious pace of growth aimed first and foremost at reinforcing our presence on the strongest market.
On the cash front, we announced in July that we had secured CAD 100 million in additional liquidity through the LEEFF program and reached agreement with our lenders to defer our April 2023 maturities, along with the deadline for meeting certain financial covenants. This gives us the additional resilience to see the restart period through if we encounter more turbulence ahead. As Patrick will detail in a moment, we have a significant amount in cash, of cash in hand, and our customer deposits have returned to a level close to that of 2019. I also want to emphasize that last June we renewed our Travelife certification acquired in 2018. We passed the audit with flying colors. That is a testimony to our dedication to sustainability, which we intend to reinforce further in the years to come.
In addition to our existing offtake agreement with SAF+ Consortium for a major part of the production of electro-sustainable aviation fuel, we are now focusing specifically on creating a clear path to decarbonization. In a nutshell, we are looking at the future with ever-increasing confidence. We are close to having recovered our volumes while our operations have been rebuilt to scale, and we're continuing to fine-tune them to ensure they're smooth running ahead. With the cash reserves we need to make us resilient for the future, and with a fleet now perfectly suited to our needs, we're continuing to roll out our strategic plan and will now zero in a return to profitability. Our priorities in the near future are clear. First, maximize the use of our fleet, increasing utilization quarter after quarter.
Two, be disciplined in our growth by pursuing our development in a sustainable manner in markets where we can maintain a strong presence and have a competitive advantage. Three, optimize revenues from booking of seats and ancillary products. Four, once again, offer exceptional service to our customers. Five, develop the best team in the industry. These priorities, along with strategic efforts being made towards reinforcing our network, will enable us to return to profitability. Despite May and June still being heavily impacted by a costly recovery, we ended the quarter with a positive result in July, our first profitable month in two years. We are confident that the worst is now behind us, and that all the changes we are putting in place will allow us to reach our objectives and bring this company to its full potential. Patrick will now give you more details about our financials.
Thank you, Annick, and good morning, everyone. Our third quarter of 2022 started off with a rather soft month of May. While we were reopening many transatlantic routes and ramping up our operations, the fuel price environment was highly volatile, with some days peaking at close to $7 per gallon. As the quarter progressed, our operations picked up nicely and fuel prices became less volatile, although high, culminating in a profitable month of July. Looking forward, despite the price of WTI decreasing, we see crack spreads for which we are unhedged remaining high. All in all, despite coming off their all-time highs, we expect fuel prices to continue impacting our profitability in the fourth quarter. In the meantime, our booking trends remain solid.
As you can see in the investor presentation posted online, since mid-May, booking levels for the summer season have been consistently above 2019 levels, on average 9% higher. As mentioned by Annick, we see strong momentum for the upcoming winter season. From a financing perspective, our focus in the past few months has been on building the resiliency and flexibility required to navigate through these, yes, improving, but chaotic times. On July 29th, we secured an additional CAD 100 million facility with the Government of Canada with a contingent CAD 50 million facility. As we always do, we will manage our cash very diligently with the objective of minimizing usage of this new facility.
Furthermore, we have deferred the maturity dates on two facilities by one year, so from April 2023 to April 2024, and the date by which the company must meet certain financial covenants by one year, October 2022 to October 2023. These extensions will provide further runway and flexibility as we focus on our strategic plan. Including the additional voucher facility and amendments announced last March, we are confident we came to the right solutions, and we consider our objective of delivering near-term financial flexibility as complete. We can now turn our attention to optimizing the capital structure and planning for deleveraging. We believe deleveraging will come from a combination of improved profitability/cash generation, improved working capital dynamics, and refinancing with instruments that will reduce our financial burden.
With respect to cash burn, as we mentioned during our prior quarterly call, cash burn increased during the shoulder period, May and June, but stabilized during the month of July. For the quarter, our cash burn was CAD 67 million, but immediately after the cutoff date of July 31st, we received funds from our credit card processors totaling CAD 45 million related to revenues in our third quarter. Earlier this week, we announced a partnership with Nuvei, a Montreal-based payment processor, who will not only expand payment options we can offer to our customers, but also improve the management of our working capital by delivering funds to us in a frictionless, timely and secure manner.
Finally, in the quarter, as you may have seen in our press release, we came to a favorable agreement with the Canada Revenue Agency on the tax treatment with respect to the deductibility of losses on asset-backed commercial paper. This is a dispute that dates back to 2007, 2008. We expect provincial tax authorities to follow suit, and inclusive of interest, this could translate into receiving close to CAD 22 million by the end of the calendar year. Now with respect to our Q3 results, revenues stood at CAD 508 million, up from CAD 13 million in 2021. As a reminder, in Q3 of 2021, we only had two days of operations. Our third quarter revenues were driven by the recovery of our activities with capacity heading towards 2019 levels.
The gradual return of demand, combined with higher fuel prices, contributed to an increase in our average selling price. Adjusted EBITDA was CAD -58 million for the quarter compared with CAD -51 million in 2021. The significant increase in fuel prices greatly dampened the improvement in our performance by CAD 103 million. However, strong pricing partially offset the higher fuel costs. Our costs during the quarter also included costs relating to ramping up our operations for the summer peak, as well as costs associated with flight disruptions. Adjusted net loss was CAD 121 million, compared with CAD 116 million last year. As per our financial statements, net loss was CAD 106 million compared to CAD 138 million last year, a CAD 32 million improvement.
This includes a CAD 50 million gain related to the revaluation of the liability related to warrants compared to a revaluation loss of CAD 9 million in 2021. Our Q3 loss also included a foreign exchange gain of CAD 2 million, mainly from the favorable exchange effect on lease liabilities related to aircraft, compared to a foreign exchange loss of CAD 16 million in 2021. A CAD 7 million loss related to the change in fair value of fuel related and other derivatives, compared to a CAD 2 million gain in 2021. Now with respect to our balance sheet, as at July 31st, the corporation's cash and cash equivalents remain solid at CAD 411 million, with undrawn facilities of CAD 100 million for a total unrestricted liquidity of CAD 511 million.
Cash and trust and otherwise reserved total CAD 213 million, while deposits for future travel stood at CAD 586 million. After reimbursing more than CAD 500 million of travel credits in the past 18 months, we were able to rebuild 96% of our pre-pandemic clients deposits. That's comparing to Q3 2019, reflecting the strong recovery in demand. Drawdowns on our credit facilities totaled CAD 863 million, compared to CAD 859 million last quarter. Virtually no additional drawings in the quarter, save CAD 4 million for administrative purposes. Obviously, our one new CAD 100 million dollar facility remains undrawn. Lease liabilities stood at CAD 1,047 million, which includes 12 A321LRs, two of which were delivered during the quarter.
Off balance sheet agreements, excluding agreements with suppliers, stood at CAD 749 million, which is an undiscounted figure, mainly related to the five Airbus A321LRs yet to be delivered as at July 31st. As Annick mentioned, includes the recently signed agreement for the delivery of four A321XLRs, three under firm orders and one option. In summer, we capped off Q3 on a positive note with a strong showing in July. Despite heightened fuel prices, leading indicators, whether booking levels or client deposits, suggest the business has strong momentum. Thank you.
All right, we are now ready to take questions.
Thank you. If you are an analyst and would like to register a question, please press the one four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Our first question comes from Konark Gupta with Scotiabank. Please proceed.
Thank you, good morning, everyone. Let me just wanted to confirm, I think you guys said that July ended up profitable for you with positive net cash flow. I'm just wondering, what was the magnitude of the operating margin you saw in July on adjusted basis? What kind of margins could you be expecting for the remaining summer?
Yeah. Not to deviate from the question, but we don't provide monthly figures. We do report them on a quarterly basis. We did this time exceptionally provide color on a month-to-month basis to show the progression during the quarter. We don't provide monthly figures, Konark.
Okay. No worries, Patrick. But if you can provide any color directionally, you know, how should we think about the next four or five months? You have August and September being still strong months of the summer, and then October, November are shorter months. Would you expect the profitability, assuming fuel stays flat, profitability should be higher in August, September, and lower in October, November?
The way we dissect it, if you look at July, you know, we you know considered a you know in our peak season. July is again profitable from an EBITDA perspective, net income and from a cash perspective. You look at Q4, I mean, you wouldn't be surprised to hear that August is also considered a month in our peak season. August in many respects look at July in terms of level of activity. September, October is you know the start of what we you know qualify as our shoulder season. Level activity is a little bit more subdued there.
When you think about cash conversion, these are two months where, you know, we do pay large payables from the summer. But also in terms of cash, all the bookings we take is a disproportionate mix of packages. A lot of the cash does remain in trust. So in terms of, you know, fuel, you know, we think fuel has become less volatile, but when you look at the trend, you know, if the WTI is decreasing, crack spreads have remained quite elevated. We expect that to continue in at least our planning for the fourth quarter, and hope to have nice dynamics in terms of pricing to alleviate some of the pressure on the elevated crack spreads.
Yeah. Thanks for the color there. Then moving on to the future, for the winter outlook. It sounds like from your disclosures that the sun market revenue is tracking ahead of 2019 at this point. What are you expecting or what are you seeing early on in terms of revenue or demand for transatlantic, domestic or Transat markets you have in the winters?
Yes, we saw a similar pace on average for winter compared to 2019. The Sun market is going well with higher pricing, and we are seeing strong demand as well on the European market. In terms of domestic and transborder, this is more of a last-minute market. Right now, we are pacing a similar trend to a little bit behind versus 2019. At the same time, we have more capacity in the market, so we are being careful, especially with the last-minute trend in terms of booking that we've seen over the last year. So far so good. We are confident that we're gonna have a good winter.
However, of course, there are things that we do not control, including what would happen if restrictions would be put at the frontiers, the borders by the Canadian government in case of a surge of COVID. Hopefully, this will not happen, and if it doesn't, we should be okay for next winter.
Okay. Thanks. Again, last one before I turn it over. What is the intention behind getting another CAD 100 million credit facility under LEEFF? I know you haven't drawn anything on that, but it seems just like adding your financial flexibility. Is there anything you plan for using this facility for?
Yeah, it's a good question and a fair question. Again, you know, when you look forward, you know, these are unprecedented times. You know, what lies ahead in the fall, hard to say. It's important that we have all the resiliency that is necessary. As I mentioned in my opening remarks, you know, we do manage cash very carefully. We have some scenarios of the future that may pull on that line of credit, but again, it is additional debt, and we wanna manage cash carefully, and our intent is to minimize as much as possible usage on that facility.
Yeah. With what we see right now in the pent-up demand in the upcoming months, we believe that we will not have to use it, but we wanna be careful and cautious. We never know what's gonna happen with COVID, so we have it by our side in case.
Okay. Thanks for the color. Appreciate it.
Our next question comes from, Benoit Poirier with Desjardins Securities. Please proceed.
Yes. Good morning, Annick, and good morning, Patrick. Just to come back on the cash burn, how should we be thinking in terms of burn rate for the upcoming quarter? Maybe if you could provide more color about the timing to achieve positive cash generation on a quarterly basis, that would be great.
Yeah. The what we could say for Q4, and I might slightly sound like a broken record, Benoit, but you know, August again, you know, peak season. You could look at July. In July, we stabilized the cash burn and arguably marginally positive. If you enter September and October, those are still shoulder months. Nothing special this year or during the pandemic. We've never been cash flow positive during September and October. You can expect some cash burn in September, October. Now we're talking about seasonality and really month to month. When you look at an annual basis, what we've been saying and we're staying on that path is, we expect to be cash flow positive by 2024 at the latest.
We do still have a few bumpy quarters ahead, and this is why we have an elevated cash position as we stand today. This is also why we have an additional flexibility with CAD 100 million. To return on a steady state cash flow positive annual basis, you'd have to look more to 2024 at the latest, Benoit.
Okay. That's great color, Patrick. Could you speak a little bit more about the Nuvei partnership and what it brings to Transat? I'm just wondering whether it opens up the airline to a younger generation and whether it helps on the cybersecurity and fraud detection, given some issues we've seen with some other companies.
Yeah, look, I mean, we maintain a lot of partnerships. We have many credit card processors in our ecosystem. We have many sales channels. We value the current partnerships that we have today. You know, as any company, we're always on the lookout for the most, if I could say, innovative players in the industry. Nuvei struck us as someone who could innovate. What that means is providing new payment solutions to our customers when you think about, Apple Pay, Google Pay, PayPal, that type of payments, that caters to the younger generation, for sure. Nuvei happens to be a local company like us and, you know, certainly, something that, we like and appreciate.
From another perspective as well, you know, during the pandemic, and it's nothing directly related to us, but a lot of credit card processors slowed down remittances to the companies just during the pandemic. We think Nuvei can accelerate and help us in the management of our working capital, deliver the cash on a frictionless, timely manner, and you mentioned as well, in a secure manner. We believe that Nuvei has what it takes to process payments in a secure manner in an environment where, you know, we all understand it's a big focus.
Okay. Okay. Perfect. We've seen new regulation from the CTA, effective September 8th that will require carriers to either refund passenger or rebook them if a flight is canceled or delayed by three hours or more. Just wondering, how does this impact the business moving forward?
Yeah. This will not impact our business moving forward because we already apply all those measures and compensations internally. We've been back to normal operations since last fall of 2021, and we apply all these regulations already.
Okay. Thanks, Annick. Last one for me. We've seen a lot of new low-cost carriers start to appear in Canada, obviously trying to penetrate the market. Just wondering if you could provide some color about what would prevent against losing market share in the longer term and whether you've seen a new dynamic with those obviously new players.
Yeah, of course, we're always watching what these guys are doing. We are monitoring very closely their development within Canada. We're talking Flair, Swoop, Lynx, Jetlines. Their development right now is mainly concentrated in the domestic market, and therefore, the impact on Air Transat is limited in the short term. They do not operate on the international market for now. However, Flair and Swoop must be closely monitored at this point. They began to expand into the U.S. and the South market. We have what it takes while we have, we believe on the routes that they are planning to deploy. We have definitely a competitive advantage in terms of market presence and market shares. We'll see.
We'll see what the future will reserve for us if they will be able to penetrate the Canadian market. The Canadian market is very different from the U.S. and the European in terms of density. There are success factors that are required to be able to succeed as a ULCC and LCC. We take this, of course, seriously, and in the short mid-term, we don't see a strong impact.
Okay. That's great color. Thanks for the time.
Our next question comes from Tim James with TD Securities. Please proceed.
Okay, thank you. Good morning. Forgive me if you covered this. I had to miss a couple minutes of the call here. I guess, first of all, the last minute booking trend that you reported here, does that actually help or hurt your average selling price?
Well, we see less and less. We still see last booking trends on, especially on domestic and transborder. As for Europe and South, we are getting back to similar trends that we had pre-pandemic. In terms of overall performance, we have been accustomed over the last year to be able to deal with those last minute trends, and we have adjusted the way we do revenue management overall. However, we haven't seen a negative effect to that. What it requires, though, is to be much more patient before making any program changes. We need to be patient because we need to anticipate that bookings will come later.
However, we've been able, over the last, especially over the last three months, to yield on almost every flight that we have had. We have adjusted our historical curves of bookings for this summer. However, as we see this moving into the future, we are coming back to similar trends that we had pre-pandemic. We will readjust our curves again.
Does that move back towards normalized booking curves? Does that, does that bias your average selling price lower? I guess maybe the ultimate question is, are you getting higher selling prices, you know, to, on closer in bookings or higher selling prices on, bookings that are further out or in group-
No
advanced?
It doesn't. It's all a question of maximizing overall revenues on board, depending on the different classes. We start the pricing low, and we yield up to departure by anticipating the number of bookings that will be made in the different periods. It doesn't change the way we do that. With the, I would say the performance, overall revenue management performance that we have improved over the last two years and the tool that we are putting in place, we are able to cope with any changes that are happening right now, the market, and optimize revenues both on seats and ancillary revenues.
Okay. Thank you. My next question, I'm just wondering if you could talk about any kind of regional trends you're seeing and or maybe just, you know, destination basis. Any destinations that are showing particular strength, any that may be sort of lagging the recovery, and any thoughts you have around that and the future for some of those destinations.
We are seeing very strong demand. We've seen very strong demand and pickup on European destinations, Mediterranean, including Greece, Portugal, of course, France, Italy. These have been very strong like always. You have Paris and London that keep being among the most popular destinations. What we've seen differently, I would say this year is a little bit more demand for South destination. I think that following two years of pandemia, people wanted to go and relax in the South. We saw a surge in the demand for South destination. The other thing that we've seen is because we've opened the U.S. market with San Francisco and L.A. as well during summer.
The demand for those two destinations between Montreal and those two destinations was very good. This is something of course that we would like to continue. Basically, to answer your question, we are seeing the same trends in terms of overall demand than what we were seeing pre-pandemic. There are still some restrictions.
Um, then-
Yeah. Go ahead.
Sorry, no, you were gonna mention some restrictions that are still impeding some destinations maybe, right?
Yeah, there are still some restrictions in place, travel restrictions in place, in about seven to eight destinations, including Canada, which makes it a little bit harder for people, for instance, to travel to Canada. It's complicated. You need to be fully vaccinated. The definition of being fully vaccinated varies from one country to the other. There are tests that are required in certain destinations as well. So that doesn't help in terms of stimulating demand. More and more, and as we saw with the U.K. and France over the summer, the countries are relaxing those measures, and hopefully this will be done in Canada and the U.S. as well shortly.
Okay. Just my last question. Just wondering if you can provide any detail on the timing of the remaining, I think it's 5 A321 deliveries. You mentioned they're in 2023, and I assume you mean calendar 2023 and calendar 2024. Just sort of, you know, could you talk about which half of the year in those years and how many you expect, just to give us a bit of a sense of the more specific timing?
Yes. In terms of the A321LR, we have two that will arrive next winter, so in February 2023, April 2023. One in May 2023. Then there's gonna be two additional, one in December 2023 and January 2024. These are the current dates. However, we need to take into consideration that there's almost always delays that we are negotiating and pushing back, but it's the nature of the industry right now. We can count about maybe two or three months of delays for each of these deliveries. That's for the LRs. We might add some additional LRs for 2024. These are being negotiated right now.
We had planned to bring XLR for 2024, but the XLR will not be ready, will not be out of the manufacturer in 2024 as it was planned. Therefore, we will take two XLRs at the end of 2025 and one LR in mid or for summer 2026, and an option for beginning of 2027.
Thank you very much.
You're welcome.
Our next question comes from Cameron Doerksen with National Bank Financial. Please proceed.
Thanks very much. Good morning. I guess want to come back, I guess, to the I guess the pricing question, particularly around the upcoming winter. Does sound like pricing is looking pretty solid there. I'm wondering if you can maybe give us some idea of, you know, based on the current jet fuel price, how much of that sort of cost headwind are you able to recover from pricing based on what you're seeing so far in the winter bookings?
I mean, rule of thumb, Cameron, roughly speaking, you know, we estimate that we could recuperate anywhere between 30%-40% of the cost increase through higher pricing. That's what we're seeing and that's what we're expecting going forward.
Okay. That's helpful. I guess I want to get a sense of kind of the cost structure for Transat now that things are kind of fully recovered. I'm not looking for any specific numbers per se, but now that you're kind of back to a level of capacity that you were at in 2019, maybe you can sort of talk about what line items in your cost structure have significantly changed versus 2019. Sort of, obviously you've got, you know, a more efficient aircraft fleet, but beyond that, what other, I guess, significant structural costs have you taken out of the company?
Maybe you can talk about it to, in a more specific sort of line item by line item.
You just mentioned it in terms of fuel consumption per aircraft, per kilometers. Of course, we benefit from that since we have a younger and more efficient fleet. The mixed flying as well allow us to reduce the number of pilots that are required and the time that is required to be able to perform training. We have reduced significantly our overall fixed cost structures in terms of employees to be able to serve the same level of capacity in the market. Overall, we are able. If you look at the upcoming winter, we will be able to offer a capacity of reaching 98%, sorry, of the 2019 winter level with 17 aircraft less.
In terms of fleet resolution and when we talk about cadence, this is definitely something that is shown as being a big improvement for us. The other thing is that when we talk about the fleet, we used to have a fleet that was much more older, and now in terms of maintenance costs, with a younger fleet, of course, we're decreasing, and we see this in our results every month. We are able to reduce the maintenance costs, technical costs that are associated with the fleet. We have less, well, maybe not this summer, but we should have less irregular operations due to a better fleet reliability. Now this was out of our control during this summer, but moving forward in the upcoming months, fleet reliability will be up, and this of course will decrease our overall cost.
Okay. No, that's helpful. You mentioned the ability to fly, I guess, nearly the 2019 capacity level with fewer aircraft. What about total employment level, I guess? I mean, if we compare the go forward employment level versus 2019, how many fewer employees can you run the business with?
We were saying, 10% less.
Okay.
With same capacity.
Right.
That's an average right now. We are finalizing our number. It might be a little more than that, but that's an average right now in our estimates, we're at 10% less.
Okay. No, that's very helpful. That was all for me. Thanks very much.
Our next question comes from Kevin Chiang with CIBC World Markets. Please proceed.
Thanks for taking my questions. Just two quick ones for me. Maybe this goes to Patrick. Unrestricted liquidity at CAD 511 million. Just wondering what you think your available liquidity though is. It's. You know, I assume you wouldn't wanna burn through or you don't look at that full CAD 411 million as fully available to you. You probably want some sort of minimum level or a buffer. Is there a way to think of how much of that 511 is fully available to Transat?
Yeah, I mean, that's a very difficult question for any company. What is the minimum you could go. When you look at our cash, right? The unrestricted liquidity, I mean, that. You know, we have a lot of cash also that, you know, we put it in the restricted area. A lot of our cash is, if I could say, pointed out and earmarked as restricted. When you look at our cash balance, a lot of what's left there is unrestricted in many measures. You know, obviously we have. You know, you look at our balance sheet as of Q3, there's a lot of cash that's in receivables as well as we point out.
A lot of that cash will be converted as well in our unrestricted cash portion. Now, how low? If your question is how low could we go in the cash balance? I mean, that's a very difficult question to ask. But we feel a substantial portion of that is unrestricted. Again, number one, because we've already restricted a bunch of cash on our balance sheet. Number two, we have a lot of receivables on our cash as well.
No, that's helpful, and I appreciate answering an obviously difficult question there. Maybe if I could take Cam's question and just look at it more. If I just kind of narrow into a, you know, a key KPI, which is your margins. If I just look at your EBITDA margins, you know, pre-2019 and use that as a proxy for your IFRS 16 adjusted EBITDA margins. You know, you're tracking like in that, you know, 5%-7% range. I suspect you need that to be much higher, to kind of aggressively de-lever and convert more cash off these earnings. Is there a way to think about where you think margins can go to based on some of the, you know, some of the initiatives you've laid out there?
You know, the fleet, the labor efficiency, you know, some of the supplier renegotiations. Is there a way to think of, you know, what that margin profile could be, you know, when things do stabilize from a network perspective and from maybe a fuel cost perspective?
Yeah. Look, it's a fair question. Obviously, if we need to de-lever, our margins need to go to be above what we've seen in recent years and to an additional extent, be above what Transat has seen in the past. That is the purpose of our strategic plan, that we're refocusing on the airline, reviewing our cost structure, the way we operate as a business, so on and so forth. We don't guide at this point what is the full EBITDA potential we think of this business. You could assume with our strategic plan that once it is executed, that margin, apples to apples basis, will be above what Transat has ever experienced in terms of EBITDA margin.
Okay. That's helpful. Thank you, and I'm glad to hear the network disruptions are easing and you had a good July there.
Thank you. I cannot.
There are no further questions at this time.
Let me thank everyone and remind you that our fourth quarter results will be released on the fifteenth of December, 2022. Thanks, and have a nice day.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.