Air Canada lowers financial forecast amid declining cross-border travel

An Air Canada aircraft taxis after landing at Tokyo's Haneda airport on Jan. 4, 2025. THE CANADIAN PRESS/Craig Wong

MONTREAL — Air Canada lowered its financial forecast for the year as travellers shy away from trips to the United States, pushing the country’s largest airline to boost flight capacity outside America and rein in costs amid bigger quarterly losses.

“We observed a decline in interest among Canadians for travel to the U.S. The noise around tariffs and trade disputes definitely had an impact,” chief executive Michael Rousseau told analysts on a conference call Friday

“But also we believe some travellers avoided the U.S. simply because it was expensive, with the Canadian dollar trading at levels not seen since 2020.”

• Latest updates on Company News here

The company now expects adjusted earnings of between $3.2 billion and $3.6 billion in 2025 versus the range of $3.4 billion to $3.8 billion laid out earlier this year.

In a backlash against U.S. President Donald Trump’s tariffs and annexation threats, Canadians cancelled trips and booked flights to spots outside America over the past three months.

Transborder bookings at Air Canada have dropped by at least 13 per cent for the next six months, Rousseau said, pushing the airline to cut flight capacity stateside.

In March, the company reduced flights by 10 per cent to Florida, Las Vegas and Arizona -- usually go-to hot spots during spring break season. Competitors WestJet, Flair Airlines and Air Transat made similar moves.

“That said, this remains contained,” Rousseau stressed.

Canadians’ appetite for travel has shifted partly to domestic destinations, while others have sought excursions to Europe as well as Pacific shores -- especially in Japan, Thailand and Australia, network planning chief Mark Galardo said.

The airline has shifted capacity accordingly. One Boeing 737 Max jetliner was snatched from a Canada-U.S. route for deployment on a new one between Montreal and Edinburgh. The company also launched a route to the Philippines from Vancouver.

Nonetheless, Air Canada dialed back plans to grow total flight capacity. In its revised outlook, it forecast capacity growth of one to three per cent versus earlier expectations for three to five per cent.

RBC Dominion Securities analyst James McGarragle said executives also managed to keep a tight lid on spending, pulling off “effective cost control” last quarter.

“Advance ticket sales grew in line with their expectations, implying demand remains stable and that management is being prudent in adjusting lower their guidance,” he said.

On Thursday evening, Air Canada reported a net loss for the three months ended March 31 of $102 million compared with a loss of $81 million in the same period a year earlier.

First-quarter revenues inched down to $5.20 billion from $5.23 billion the year before.

On an adjusted basis, the airline lost 45 cents per diluted share last quarter versus a loss of 27 cents per diluted share a year earlier. The result beat analysts’ expectations of a per-share loss of 54 cents, according to financial markets firm LSEG Data & Analytics.

This report by The Canadian Press was first published May 9, 2025.

Christopher Reynolds, The Canadian Press