"Transat's cost structure is in great shape. Direct costs are down due to lower costs of hotel rooms and third-party airline seats are lower," -- David Pupo, Macquarie Research.

Canadian leisure travel company Transat posted a first-quarter net loss, hurt by lower selling prices, and said it expects to post a loss in the second quarter, wiping out about a third of the stock's market value.

The company said lower selling prices will also hurt its second-quarter results. In addition, it will not fully benefit from the strength of the Canadian dollar, due to its foreign exchange hedging positions.

Transat, however, said "for the summer 2010, it is too early to make a statement on pricing trends, but reservations are superior to the previous year."

"It is still our belief that improving demand, a more rational competitive environment, and the positive impact from cost savings and a stronger Canadian dollar will lead to better results in third and fourth quarter versus last year," Versant Partners analyst Cameron Doerksen said.

In 2010, the company said it targets to expand its market position on both sides of the Atlantic, helped by a broader offering of products and destination-based services by stepping up multi-channel distribution and controlling costs.

"Transat's cost structure is in great shape. Direct costs are down due to lower costs of hotel rooms and third-party airline seats are lower with the new five-year contract with Canjet," Macquarie Research analyst David Pupo said.

For the first quarter ended January 31, the company posted a net loss of CAD$13.9 million, compared with a loss of CAD$29.4 million in the year-ago quarter.

"Our operating costs decreased significantly, partially offsetting the unfavourable impact of lower prices on our margins, in a highly competitive commercial environment," chief executive Jean-Marc Eustache said in a statement.

Revenue fell 10 percent to CAD$792.6 million, partly hurt by the company's decision to reduce its capacity based upon the decreasing number of travellers in America.

Transat said its revenues from the American business units fell 11.2 percent to CAD$656.8 million in the quarter, while its revenues from the European business units decreased by 1.5 percent to CAD$135.8 million.