Air Canada Feels the Chill as U.S. Travel Demand Drops
So, here’s what’s been going on with Air Canada recently, and it’s turning a few heads — especially among investors and frequent flyers. The airline reported a significant decline in U.S.-bound seat sales during the second quarter of the year, dropping by 11%. This dip didn’t come out of nowhere; it’s largely tied to growing trade tensions and political friction between Canada and the U.S., much of it sparked by remarks and tariff threats from U.S. President Donald Trump.
What’s especially interesting is how Canadian travellers are responding — and frankly, they’re pushing back. There’s been a noticeable shift in travel patterns. Rather than heading south of the border, more Canadians are choosing to stay within the country or explore overseas destinations instead. According to Stats Canada, air travel to the U.S. dropped sharply this spring — by 14% in April and a steep 24% in May. Car trips, which make up the bulk of U.S. visits, were down over 35% for those months. Clearly, it’s not just a blip.
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Air Canada’s Chief Commercial Officer, Mark Galardo, admitted it hasn’t been business as usual. During the earnings call, he explained that the airline had to navigate some pretty tough economic and geopolitical headwinds. Besides the U.S. tensions, there was also reduced demand for travel to the Middle East and India, stiff competition in Asian markets like China and Hong Kong, and challenges brought on by a weak Canadian dollar and rising costs — especially a 16% increase in labour expenses.
Financially, things were also a bit rough. Air Canada posted a $186 million profit for the quarter ending June 30, a drop from $410 million the same time last year. Even when adjusted for a tax settlement, the profit stood at $207 million — still well below analyst expectations. Not surprisingly, the stock took a hit, dropping more than 14% in midday trading after the earnings were released.
But it’s not all bad news. The airline acted quickly by adjusting its capacity, pulling back on U.S. routes and focusing more on domestic and international flights. Sales to places like Latin America and Europe saw modest increases, and even domestic travel was up 3%. People seem to be trading in U.S. vacations for European cities like Prague and Naples or sunny destinations in the Caribbean.
Meanwhile, labour negotiations are quietly unfolding in the background. Air Canada’s flight attendants are currently voting on a strike mandate as contract talks continue. While that doesn’t mean a strike is imminent, it’s one more variable the airline has to manage.
So overall, while Air Canada isn’t in a tailspin, the turbulence in the U.S.-Canada relationship is definitely being felt in the skies — and on the balance sheet.
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