Long Term Transformation And Growth Plan INVESTORS PRESENTATION SEPTEMBER 2016
Forward-looking Statements THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE CORPORATION. THESE FORWARD-LOOKING STATEMENTS, BY THEIR NATURE, NECESSARILY INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THESE FORWARD-LOOKING STATEMENTS. WE CONSIDER THE ASSUMPTIONS ON WHICH THESE FORWARD-LOOKING STATEMENTS ARE BASED TO BE REASONABLE, BUT CAUTION THE READER THAT THESE ASSUMPTIONS REGARDING FUTURE EVENTS, MANY OF WHICH ARE BEYOND OUR CONTROL, MAY ULTIMATELY PROVE TO BE INCORRECT SINCE THEY ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT AFFECT US. THE CORPORATION DISCLAIMS 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. 2
Section 1: Introduction Page Section 1 Introduction 4 Section 2 Transatlantic Market Overview 12 Section 3 Sun Destinations Market Overview 18 Section 4 Distribution Strategy & Hotels Development 24 Section 5 Financial Profile 28 Appendix 33 3
One Of The Largest Tour Operators In The World FY 2015 $101M EBITDA 2.7M $3.6B Customers Revenues ± 5,500 60+ Employees Destinations 4
One Of The Largest Tour Operators In The World FY 2015 (From continuing operations) $101M EBITDA 2.3M $2.9B Customers Revenues ± 4,500 60+ Employees Destinations 5
True Vertically-integrated Travel Provider Develops holiday travel packages for sun destinations and Europe Outbound Tour Operator Served 1.5M travelers from Canada and 0.6M from Europe in 2015 Largest retail holiday travel distributor in Canada with 485 outlets Distributor Comprehensive online distribution platform Operates flights to 35 sun and 31 European destinations with departures from 19 Canadian airports Airline Served 2.1M passengers in 2015 35% interest in Ocean Hotels (65% held by H10) 3,225 rooms currently under management (1,618 owned & 1,607 managed-only) in Mexico, Hotels Dominican Republic and Cuba 5,000 rooms expected by 2017 Inbound Provides onsite services, such as excursions, sightseeing tours and logistical support services Tour Operator 6
Distinct Summer And Winter Markets PAX Distribution (FY2015) 20% 10% 60% 80% 10% 20% Transatlantic South & Ocean Hotels France (1) $133 $135 $124 (In millions of C$) (In millions of C$) 2013 2014 2015 $12 $17 $18 Historical EBITDA ($12) ($15) ($21) ($3) $123 $116 $106 ($15) ($3) ($17) ($24) ($32) 2013 2014 2015 Continuing operations Discontinued activities Continuing operations Discontinued activities Good and consistent performance in summer Focus on returning to profitability in winter 7 (1) France to other destinations than Canada – Discontinued Activities
2015-2017 Strategic Plan (Key Initiatives) $100M Cost Reduction and Margin Update on $100M Cost Reduction and Margin Improvement Program (C$ M) Improvement Program YTD 2016: 75% achieved Achieved 2015 target $100 $75 Improve Product Offering $45 Introduce new European destinations Optimize sun destinations offering 2015 2016 2017 Achieved Target Transform Distribution Strategy Cost Reductions and Margin Improvements (C$ M) 2015 2016 2017 Cost Reductions Develop Transat Travel brand Narrow-body flexible fleet 18 20 20 Reduction in the number of flight attendants 2 5 6 Improve new distribution website Buy-on-Board (sun destinations) 3 3 3 Optimization of hotel costs (sun destinations) 2 9 12 Optimization of distribution costs 11 13 16 Market Development and Integration Other projects and initiatives 4 8 11 Sub-total (Costs) 40 58 68 Develop and grow Hotels Margin Improvement Ancillary revenues and cargo 5 11 20 Expand in the United States Densification of three A330-300s 2 5 5 Online sales of third-party products (2) 1 7 Enhance incoming tour operator presence Sub-total (Margin) 5 17 32 Total 45 75 100 8
Multiple Value Drivers Implied Value Per Share 2014-2016 average EBITDA of $70M excluding contribution from Ocean Hotels, French and Greek Tour Integrated Tour Operators ~$3.75-5.75$ (1) Operator Strategic plan creates opportunity to reduce costs by an additional $25M in 2017 (including Airline) Potential for improvement of trading multiple to level more in-line with comparables Contributed $7M in after-tax distributions in 2015 Expanding from 3,225 to 5,000 rooms (owned and managed) by 2017 ~$2.50 Ocean Hotels Current book value of ~ $100M Current unrestricted cash of $503M with projected 2016 calendar low of $250M We consider that we need $150M to operate the company (excess cash of $100M) ~$2.75 Excess Cash Opportunity to redeploy excess cash in hotels and enter a new source market Firm offer from TUI AG to purchase Transat France and TourGreece for an enterprise value of € 54.5M (equivalent to C$ 80M ), subject to working capital adjustments at closing ~$2.00 France and Greece The contemplated transaction is subject to final approval from anti-trust authorities. Closing is expected to take place around year-end ~$11.00-13.00 52Wk Range Share Price (2) $6.00-$8.50 (1) Based on a multiple of 2.0-3.0x LTM EBITDA of C$ 70M (2014, 2015 and LTM 2016 result) 9 (2) Based on 52-week range price at the close of 26-Aug-16
Investment Highlights 1 Truly vertically-integrated travel producer with flexible cost structure Very strong position in sun destinations and transatlantic markets with exceptional 2 brand recognition Since 2012, Transat did a turnaround to become more agile including a unique flexible 3 Significant unrecognized asset value at current trading level aircraft fleet 2016 is an unusual year due to 4 Long-term strategic and transformation plan driving profitability expansion various external factors that had a direct impact on bottom line Strong balance sheet providing financial capacity to execute on strategic 5 opportunities 10
Section 2: Transatlantic Market Overview Page Section 1 Introduction 4 Section 2 Transatlantic Market Overview 12 Section 3 Sun Destinations Market Overview 18 Section 4 Distribution Strategy & Hotels Development 24 Section 5 Financial Profile 28 Appendix 33 11
Transatlantic Capacity And Market Share (1) +16% 2,000,000 Summer 2015 (Actual) Transatlantic Market Share Summer 2016 (Forecast) TOTAL SEATS 1,750,000 Summer 2016 SUMMER 2015 1,500,000 3,960,000 8 4 1,250,000 7 43 6 +6% % 1,000,000 12 TOTAL SEATS 750,000 +2% SUMMER 2016 +19% 500,000 20 4,515,000 +7% -4% +344% 250,000 Air Canada Transat +14% Air France - KLM British Airways 0 Other Lufthansa WestJet Other 12 (1) Capacity between Canada and European countries as : France, United Kingdom, Italy, Spain, Portugal, Greece, Netherlands, Germany, Belgium, Ireland, Switzerland, Austria, Czech Republic, Hungary and Croatia
Transatlantic Market Share by Destinations GLOBAL MARKET OVERVIEW Market share United Kingdom Europe: largest tourism market in the world (more than 50% of travellers inbound & outbound) 12 4.5M seats in summer 2016 between Canada and Europe 18 % 51 TRANSAT STRATEGY AND MARKET POSITION Market share Lowest-cost producer 19 France Wide portfolio of direct destinations 4 Strong airline brand and enhanced customer experience Air Canada Transat 30 32 Solid distribution networks on both sides of the Atlantic % British Airways WestJet 40% of European passengers = sales in foreign currency Attractive offering of packages including accommodations, 34 transfers, cruises, tours, rental cars and excursions Air Canada Transat Air France - KLM Corsair 13
Third Quarter Financial Performance 3 rd quarter results ended July 31 Q3 HIGHLIGHTS (vs. 2015) (f (from om continuing continuing oper operations tions) (in thousands of C$) Various factors have impacted our 2016 vs. 2015 2016 2015 bottom line : $ % • Global capacity increased REVENUES 663,591 704,844 (41,253) (5.9%) Terrorism attack • Brexit (Pound Sterling Devaluation) • Adjusted EBITDAR (incl. hotels JV) (1) 47,910 69,500 (21,590) (31.1%) Possibility of flight attendant strike (avoided) • • Engine damage (at the end of Q3) Adjusted EBITDA (incl. hotels JV) (1) 15,964 44,798 (28,834) (64.4%) Transatlantic market As % of revenues 2.4% 6.4% (4.0%) (62.5%) Capacity up by 5.0% • Load factor down by 4.7% • Adjusted net income (loss) (1) 2,523 26,886 (24,363) (90.6%) Price down by 5.7% • As % of revenues 0.4% 3.8% (3.4%) (89.5%) • Net impact (FX & Fuel) on costs of 4.6% Other markets Per share $0.07 $0.70 ($0.63) (90.0%) Sun destinations: Results deterioration • Net income (loss) attributable to shareholders 9,439 13,067 (3,628) (27.8%) compared to previous year due to challenging market conditions (1) Refer to Non-IFRS Financial Measures in the Appendix Discontinued activities • France : Better results than previous year 14
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