Air Canada’s US Revenue Sinks But Carrier Keeps Profit Outlook

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(Bloomberg) — Air Canada held its profit guidance steady despite a sharp decline in travel to US destinations, betting it can make up for it on other international and domestic routes.

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The Montreal-based carrier reiterated its guidance of C$3.2 billion ($2.3 billion) to C$3.6 billion in adjusted earnings before interest, taxes, depreciation and amortization for the year. But it posted disappointing second-quarter results, and the shares tumbled the most in more than two years. 

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The company reported a 11% decline in passenger revenue from Canada-US flights in the second quarter compared with the same period last year. Those transborder flights accounted for 19% of passenger revenue, down from 22% a year ago.

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The airline continues to reduce US-Canada flights, redeploying planes to sun destinations and international markets, executives said during a call with analysts. 

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“We think we’re going to restore some of that capacity gradually,” said Chief Commercial Officer Mark Galardo, but “we continue to think the situation that we’re in will continue all the way through the end of the year.”

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Canadians have been cutting back on US travel and buying fewer American goods in reaction to President Donald Trump’s trade war and his threats against the country’s sovereignty. In its quarterly survey of consumers last week, the Bank of Canada found more than one-third intended to increase their spending on travel within Canada.

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Changing consumer demand also caused competitor WestJet to suspend some routes between Canada and the US.

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Air Canada earned 60 Canadian cents per share on an adjusted basis in the second quarter, below the 70 cents expected by analysts in a Bloomberg survey. Total operating revenue of C$5.6 billion was broadly in line with forecasts. 

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The shares were down 11% as of 10:35 a.m. in Toronto, the most intraday since February 2023. 

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“Despite some modest impacts, we expect 2025 tariff costs to remain rather contained, particularly considering our plane deliveries for the remainder of this year,” Chief Financial Officer John Di Bert said on the call.

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Air Canada’s flight attendants are currently voting on whether to authorize a strike after months of talks ended without a deal. Workers want higher wages and remuneration for unpaid pre- and post-flight tasks, according to the Canadian Union of Public Employees. If approved, a strike could begin in August. Voting runs until Aug. 5.

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Chief Executive Officer Michael Rousseau said the company remains committed to negotiating a fair and equitable collective agreement.

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A potential strike is among the near-term risks that “warrant caution,” National Bank analyst Cameron Doerksen wrote in a note on Monday, but he remains positive on Air Canada’s shares over the long term.

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