Good morning, ladies and gentlemen. Welcome to the Transat conference call. This call is being recorded. I would now like to turn the meeting over to Ms. Andréan Gagné, Senior Director of Communication and Public Affairs.
Madame Gagné, please go ahead.
Thank you, Frank. Hello, everyone, and welcome to the Transat conference call for the presentation of the financial results of the fourth quarter ended October 31st, 2022. I'm here this morning with Annick Guérard, President and CEO, and Patrick Bui, Chief Financial Officer. Anick will provide comments and observations on the current situation and on the operational and commercial plans for the future. Patrick will have to review the financial results in more detail. We will 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 those forward-looking statements. For additional information on such risks, we invite you to consult our filings with the Canadian Securities Commission and on SEDAR and are incorporated through this statement. Forward-looking statements represent Transat's expectations as of December 15, 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 and non-IFRS financial measures. In addition to IFRS financial measures, we're 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 substitute to 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 reports and our investor presentation. With that, let me turn the call over to Annick for opening remarks.
Merci, Andréan. Good morning, everyone. My remarks today are about the fourth quarter of 2022, the year overall, and trends to watch in 2023. The fourth quarter was the strongest of the fiscal year. We are clearly on the road to recovery. Our results are improving and our confidence is growing. With each quarter, we have seen more robust sales, increased activity and improvement in our financial situation. This momentum is continuing. These last few months have shown something powerful. People have a strong desire to travel. Spending on travel is a priority to consumers. Their need to go abroad is a main factor driving Transat's recovery. Through careful planning, disciplined execution and targeted investment, we are capitalizing on this favorable consumer demand.
For the quarter that ended on October 31st, 2022, revenues reached CAD 573.1 million compared to CAD 62.8 million for the same quarter in 2021. Our operational performance improved over the months, and load factors saw a sharp rise and return to more normal levels. For summer 2022, capacity was 86% of 2019 levels, while the average load factor was at 82%. Turning our attention to the 2023 winter season, the trend is clear and booking patterns are encouraging. Over the last month, we have seen a strong pace in bookings comparable to the one in 2019, and even higher during certain weeks.
The average load factor for the season has reached 56% this week, which is highly comparable to 2019 levels. As indicated by our yield, consumers are ready to pay more to travel, approximately 15% more than they did in winter 2019. All this activity has allowed Transat to close the year with good, positive momentum. Our adjusted operating loss for the fourth quarter has narrowed significantly to CAD 11.5 million compared to CAD 58.4 million in 2021. The situation is expected to trend positively in 2023, even though some uncertainty persists. Transat's financial situation, although far from ideal, has stabilized. We continue to being disciplined in the management of our costs and focused on the optimization of our working capital. During the last quarter, we continued implementing our strategic plan.
Our fleet renewal efforts speak to our confidence moving forward. At the end of November, we placed an order for two more A321LRs. This is in addition to the order for 4 A321XLRs announced at the end of the previous quarter. To date, we have 23 of these next-generation aircraft in our fleet or on order. As we have explained on several occasions, this modernized fleet continues to provide us with increased flight operational efficiency, especially in the context of higher fuel costs. As we continue to renew our fleet, we are also improving our network. In October, we introduced a new codeshare agreement with Porter Airlines. This agreement follows others signed in recent months with WestJet and 10 other partner accessible through connectair by Air Transat, our virtual interlining offer. Codeshare increases the total number of destinations available via Air Transat to more than 300.
With these partnerships and additional ones to come, we target three objectives: increase the number of destinations proposed by Transat, increase the number of flights proposed for a same destination, benefit from the partner's sales force. Ultimately, this will have a positive effect on our main objectives to grow our revenues and increase our capacity, including during low season, in order to reduce seasonality. Looking ahead. The trend heading into 2023 is positive. People want to travel, creating strong demand, which in turn is driving prices higher, ultimately contributing to increased revenues. That cascade effect would help us deal with rising costs and to cope with the economic slowdown. While the months to come will have their share of economic uncertainties, current trends suggest that the demand for travel should remain resilient.
For 2023, our capacity will be equivalent to 90% of 2019 level. That activity level is consistent with the pace of recovery IATA foresees. However, in Eastern Canada markets, where we are concentrating our activities, we will actually deploy a capacity close to 7% more than in 2019. Our network redesign will allow us to increase our fleet utilization by 16% compared to 2019. With what we see today in terms of booking and pricing trends, we are targeting an adjusted operating income margin between 4%-6% for 2023. Patrick will explain these expectations shortly. To sum up, demand during the fourth quarter was stronger than Q3 and continues to build. We are returning to pre-pandemic activity levels.
Since the start of October, our weekly sales have regularly outperformed 2019 levels. Selling prices are higher and so are our revenues. Our financial situation continues to improve, and we are taking strategic actions to return to sustainable profitability rapidly. During fiscal 2022, we made progress on all major pillars of our strategic plan. Fleet renewal, network optimization, and the introduction of airline partnerships were our top priorities. We attained a significant milestone with the launch of our first codeshare agreement. Everything is now in place with our systems to increase the number of partnerships and support our strategy. From a financial perspective, we renegotiated our loan agreements with the government and preserved our cash flow. Accelerated recovery and increased activity have allowed us to intensify our recruiting effort. Throughout the year, we hired or re-hired 1,800 employees.
Our labor relations continue to be excellent. Last month, we reached a new five-year collective agreement with our maintenance team. In the second quarter, we ratified a new contract with our pilots. We also created a new vice presidency corporate responsibilities to strengthen our commitment to environmental, societal, and government issues. The mandate of this team is to better support the priority objectives of our strategic plan in this area, which includes promoting diversity and inclusion in the workplace and decarbonizing our operation. A cross-functional committee was established to develop our climate action plan, including the identification of medium-term targets for carbon emission reduction and sustainable aviation fuel supply. Significant investments were made in our brand visibility this fall. We launched our first major branded advertising campaign in three years. This campaign has contributed to our strong booking trends this next winter.
Customers are on board, and we have improved their overall booking experience by increasing and maximizing our website self-service capabilities. We are putting all the pieces in place for a return to profitability and value creation. As we close another fiscal year with confidence, I wish to thank all our employees, my colleagues on the executive team, and the members of the board. We are heading into 2023 with enthusiasm. I now turn things over to Patrick for more details on our financials.
Merci, Annick, and good morning, everyone. The fourth quarter ended October 31st represents an important step forward in our financial performance. We are ending a challenging year by narrowing the gap in adjusted EBITDA loss and opening 2023 with encouraging signs. While an adjusted EBITDA loss of CAD 11.5 million is an indication we are still ways from our financial potential, it does point to a positive momentum as we have been at an adjusted EBITDA loss of CAD 60 million in the past nine quarters on average. This positive momentum provides us with a better view of the future and confidence in setting financial targets and guidance for the full year of 2023. Our fourth quarter of 2022 opened on a strong summer peak in August and continued with improved financial performance during our shoulder season in September and October.
Progress was made despite sustained high fuel prices in U.S. dollar. On average, during the quarter, jet fuel was at $3.72 U.S. Per gallon and the U.S. dollar at 1.33. Looking forward, while our plant capacity is still lower than 2019, bookings are currently tracking at the pre-pandemic pace of 2019. For the winter season, from beginning of November to end of April, load factors have reached 56%, consistent with the pattern observed in 2019. On the pricing front, expressed in airline unit revenues or yield, prices are 15% higher than 2019 on average, led by strong momentum in both our South and Transatlantic programs. The combination of demand and increasing prices will help offset the increase in operational costs due to inflationary pressures.
Excluding fuel and hotel expenses, our unit costs are projected to increase globally by roughly 10% compared to 2019, or approximately 2.3% per year. Fuel prices have also been on the rise, although have recently receded, and we are continuing our hedging strategy on both oil and FX for 2023 to contain any sharp increase. As always, we remain vigilant on the economic situation and potential impact on demand. At the current time, we do not see a negative impact on our booking trend. The ongoing pent-up demand seems to provide for an atypical resilience, but we remain highly vigilant. We closed 2022 with a strong cash position, a CAD 100 million undrawn facility, no maturities until 2024, and improving working capital dynamics, all of which are necessary to pave the way to a full recovery.
That said, we remain acutely aware of our indebtedness levels. We continue to plan for the deleveraging phase, which will come from a combination of improved profitability, cash generation, improved working capital dynamics, and refinancing. Now with respect to our Q4 results, revenue stood at $573 million, up from $63 million in 2021, driven by the resumption of operations, with capacity heading towards 2019 levels with 91% of 2019 capacity across all markets. The return of demand combined with higher fuel prices contributed to the increase in our average selling price. Adjusted EBITDA was -$11.5 million for the quarter, compared with -$58 million in 2021, which represents a significant narrowing of the adjusted EBITDA loss despite significant headwinds.
During the quarter, there was a significant increase in fuel prices, 61% surge or CAD 73 million, and a 6% weakening in the Canadian dollar against the U.S. dollar. adjusted net loss was CAD 76 million compared with CAD 118 million last year, and per our financial statements, a net loss of CAD 126 million compared to CAD 121 million last year, a CAD 5 million deterioration. With respect to our balance sheet, as at October 31st, the corporation's cash and cash equivalents amounted to CAD 323 million, with undrawn facilities of CAD 100 million for a total unrestricted liquidity of CAD 423 million. Cash and trusts or otherwise reserved totaled CAD 376 million, while deposits for future travel stood at CAD 603 million.
We were up 7% from pre-pandemic levels as at October 31st, 2019, reflecting the recovery in demand and higher average selling prices. Our net cash burn was CAD 70 million for the quarter. The cash burn was negatively affected by the timing of the conversion of our receivables into cash. Since the end of the quarter, the corporation agreed with its credit card processor partners to a one-time lump sum release of CAD 75 million from our accounts receivable as at October 31st, 2022. Separately, last quarter, we announced the selection of Nuvei as a new credit card processor in our payment system, and we are happy to report that this partnership is now operational. With respect to our indebtedness, there were no further drawings on our credit facilities during the quarter and remained at CAD 863 million.
Lease liabilities stood at CAD 1.088 billion, which includes 12 A321LRs, 2 of which were delivered during the previous quarter. Off-balance sheet agreements, excluding agreements with suppliers, stood at CAD 978 million. This is an N discounted figure, mainly related to the 5 A321LRs and 3 A321XLRs yet to be delivered as at October 31st. For the full year of 2023, we expect capacity to represent approximately 90% of 2019 capacity. Our overall capacity deployment is consistent with demand projections provided by IATA in the regions we serve. With respect to margins, we are setting the adjusted EBITDA target at 4%-6% for the full year, representing an important milestone in our recovery.
In providing such guidance, we use a combination of assumptions, including moderate growth in Canada's GDP and the risk of a short recession, exchange rate at CAD 1.34 for $1, and jet fuel price per gallon of CAD 4.50. Should any of these assumptions vary significantly, we may adjust our guidance. Thank you. We are now ready to take questions.
Thank you. Merci. Si vous êtes analyste et vous désirez vous enregistrer pour poser une question, veuillez appuyer sur le 1 suivi du 4 sur votre téléphone. Vous entendrez alors une triple tonalité indiquant que votre question a bien été enregistrée. If you are an analyst and would like to register a question, please press the 1 4 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. Un moment, s'il vous plait. One moment, please, for the first question. Our first question comes from Cameron Doerksen with National Bank Financial. Please proceed.
Thanks very much. Good morning. maybe just a couple of questions on the outlook. I guess maybe first, just want to reconcile, I guess, the sort of the capacity guidance that you've put out, 90% of 2019 levels for the full year. If I look at what you've indicated for the winter, it's capacity down only 3% relative to 2019. I'm wondering if you can maybe describe what that implies for the, for the summer season, because it would seem that maybe summer capacity plans would be something less than 90% of 2019 levels.
Yes. We are forecasting indeed -3% for the winter. As for the summer, we are forecasting -14%. In total, that gives us -10% for now for the whole all year.
If I look at what you just flew in Q4, it was, I believe at 91% of 2019 levels. Would that sort of imply that you're going to be flying, I guess, less or the plan flying less in Q4 next year versus what you just did?
No, we will not. We're just deploying capacity differently. We are putting more capacity on Europe. We are increasing our capacity as well in the shoulder season. We want to make sure that we don't deploy too much capacity based on what we foresee for the demand and that's about it.
Okay. Okay, that's helpful. Second question, just on, I guess, the winter, obviously things are looking pretty positive from a booking perspective and from a pricing perspective. I just want to maybe understand maybe the seasonality here between Q1 and Q2, because historically with Transat, we would have seen a negative EBITDA in Q1 and then more positive in Q2. What is your expectation for this winter? Are we going to see a significant difference in, I guess, the margin profile Q1 versus Q2?
Yeah, I'll take that one. I mean, as you noted, Q1 is not our best quarter. We are still projecting in Q1 an EBITDA loss, not a significant loss, but a loss in Q1. Then you should see it pick up in terms of positive margins in Q2.
That's very helpful. That's great. I'll pass the line. Thanks very much.
Our next question comes from Jasroop Bains with TD Securities. Please proceed.
Hey, guys. Just filling in for Tim James here today. Just got a few questions, actually. Firstly, could you please provide an update regarding the traffic being generated by the WestJet Atlantic codeshare and then the new Porter codeshare agreement as well?
First of all, it's very early because we've just introduced those alliances. We see great potential. At this point, it's a little bit early to share numbers. These are agreements that are focused on increasing the connecting traffic on European routes, which we already see. We will be able, during the upcoming year after a few quarters, to be able to share those data.
Okay. No worries. I guess just our second question, more so related to the 15% higher yield. How much of the 15% higher yields currently for the upcoming winter are due to mix, so i.e., more higher end packages, and how much of that is actually due to price increases for a given trip?
Oh, yeah. Yeah. What's the split between increase in pricing of packages versus flights?
Flights?
Yeah. The 15% refers to flights, the 15%.
For flights? Okay.
Yeah.
Perfect. I appreciate the call guys.
Our next question comes from Kevin Chiang with CIBC World Markets. Please proceed.
Morning, everyone. Thank you for taking our questions. This is Jessica Filler for Kevin here. I guess just a quick one from me. Given and I appreciate, you know, the margin guidance of 4%-6%. I guess given the puts and takes and all the, you know, the strategic, all those strategies you're pursuing, what would you say would be a normalized margin?
You know, you're right. 4%-6% is 2023. I'll just build up to our full potential. If you look at our historical margins, so looking back, you know, roughly the past 10 years, you adjusted for, you know, IFRS 16 and discontinued operations, the business has delivered, let's say on average, 7% margins. I think 2019 was %6.6. We expect to be above that or around that in next year in 2024. We think the full potential of this business is definitely double digit in terms of margin.
What exactly we'll come back in due course, but our strategic plan assumes and should deliver way better margins than we were able to produce in the past. Again, think of it as double-digit margins at full potential.
Okay, perfect. Thank you so much. That's all for me. Thank you.
Our next question comes from Michael Kypreos with Desjardins Securities. Please proceed.
Thank you, and good morning. Maybe just on returning to pre-pandemic levels, how should we expect the cash burn to evolve next year? What kind of margin would you need to produce on an operating margin level to produce positive free cash flow over time? Thank you.
Yeah. In terms of cash flow, we're consistent what we've said in the past that we would be cash flow positive by 2024. 2023 is still a transition year. When we provided guidance of 4%-6%, and you do your analysis, you can see it's below what we've been able to produce in the past. Now, obviously, if we can be cash flow positive, that is definitely our objective. One thing to bear in mind is in 2023 to keep an eye on is working capital dynamics. We mentioned this morning that we freed CAD 75 million post end of quarter.
We think during the year, a portion of cash or cash generation will come back in the form of normalized working capital. For the full year, 2023, you know, our objective again is to be as close as breakeven as possible. Again, we maintain the line that it should be by the latest 2024 in terms of cash flow generation.
Perfect. It's very helpful. Thank you. Appreciate it.
There are no further questions at this time.
Very well. Thank you, everyone. Let me remind you that our first quarter results will be released on March 9, 2023. Thank you, and have a nice day.
Thank you.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.