Air Canada may reduce flights to certain U.S. destinations later this year if demand from travellers begins to lag, as the airline acknowledged Friday it is coping with uncertainty from the current economic environment, including the threat of tariffs.
The Montreal-based carrier is preparing in case customers decide to fly south of the border less often in 2025, said executive vice-president of revenue and network planning Mark Galardo.
But he cautioned that hasn't yet been the case, with January booking trends aligning with the company's expectations.
"We are anticipating proactively that there could be a slowdown," Galardo told analysts on a conference call, as the airline reported its fourth-quarter earnings.
"In the U.S., we don't see any major slowdown or anything substantial that would change our view of the market. That being said, if we could de-risk this a little bit and be a bit proactive and move capacity into other sectors we see strength in, I think that's the right move right now in this context."
Galardo said leisure destinations such as Florida, Las Vegas and Arizona could be affected if Canadians pull back on travel plans to the U.S.
He said there could be an opportunity to redeploy airplanes to domestic Canadian leisure markets instead.
"It's still premature to discuss the potential impact, if any, of actual or potential regulatory tariffs or possible retaliations," Galardo said.
"We're diligently and continuously monitoring customer behaviour and market dynamics. If these shift in the future, we have ample flexibility to respond by moving capacity around as we've always done."
Despite those preparations, Air Canada maintained its guidance for 2025. In its outlook, the airline said it expects its capacity measured by available seat miles to be up three to five per cent from 2024.
It expects its adjusted cost per available seat mile to range from 14.25 to 14.50 cents.
The carrier reported its adjusted cost per available seat mile for 2024 was 13.80 cents, an increase of 2.3 per cent from 2023.
In its fourth quarter, Air Canada reported a loss of $644 million, compared with a profit of $184 million in the same quarter a year earlier, as its operating revenue increased. The airline said its loss amounted to $1.81 per diluted share for the quarter ended Dec. 31, compared with earnings of 41 cents per diluted share a year ago.
Operating revenue for the quarter totalled $5.4 billion, up from $5.2 billion in the same quarter last year.
On an adjusted basis, Air Canada said it earned 25 cents per diluted share, compared with an adjusted loss of 12 cents per diluted share in the same quarter last year. Analysts on average had expected an adjusted profit of 26 cents per share, according to LSEG Data & Analytics.
"Overall, we view the results and maintained 2025 guide as positive," said RBC analyst James McGarragle in a note.
"However, we believe sentiment will be driven by impacts on travel due to tariff uncertainty."
Chief executive Michael Rousseau said the airline will "continue to navigate uncertainty and external pressures with prudence and decisiveness," noting Air Canada is prepared to "adapt promptly to any changes or challenges that may arise."
Air Canada shares closed 2.6 per cent lower to $17.75 on the Toronto Stock Exchange on Friday.
This report by The Canadian Press was first published Feb. 14, 2025.
Companies in this story: (TSX:AC)
Sammy Hudes, The Canadian Press
