Starting in March, Air Canada will proactively reduce some capacity exposure to certain United States leisure destinations as demand from Canadian travellers shifts away from the once-friendly neighbour to the south amid President Donald Trump‘s threats and upcoming regulatory tariffs.

The company said it is not currently seeing a slowdown in demand to the U.S., but has decided to take this action in anticipation of some weakness. It added that while it’s still too early to discuss the actual and potential impact of U.S. regulatory tariffs, as well as Canada’s possible retaliations, the airline continuously monitors customer behaviours and market dynamics as Canadians look for alternatives.

Mark Galardo, Air Canada’s executive vice-president for revenue and network planning, told investors during the company’s earnings call on Feb. 14 that, despite some uncertainty and external pressures such as currency, the airline is still seeing “encouraging” booking trends and yield signals as demand for other destinations, such as the transatlantic market, rebound for the spring and summer seasons.

“We do have redeployment opportunity, if required, in sun markets, where you see a lot of demand interest right now, and the booking curve is much closer than we have seen the last couple years, and there could be an opportunity for us in some domestic Canadian leisure markets as well,” Galardo said.

On its cargo business, Galardo said they see better outcomes continuing into the first quarter of 2025, while it is tough to say exactly what the second and third quarters will look like due to potential shifts in trade or geography.

The company reported its fourth quarter earnings results on Feb. 13, when it announced it will maintain its outlook for 2025 in spite of the turmoil. The full-year guidance for adjusted EBITDA remans $3.4 billion to $3.8 billion, while the company still expects three to five per cent growth in available seat per miles capacity, as provided during its investor day in December.

Air Canada had record operating revenues of $5.4 billion for the fourth quarter — four per cent higher than the previous year on a two per cent capacity growth.

Its adjusted pre-tax income was $135 million, an increase from $182 million, while it had a net loss of $644 million compared to the previous year’s net income of $184 million.

It also reported a diluted loss of $1.81 per share in the fourth quarter, compared to diluted earnings of $0.41 per share.

On an adjusted basis, it had a net income of $93 million and adjusted earnings per diluted share of $0.25. This is compared to the previous year’s adjusted net loss of $44 million and adjusted loss per diluted share of $0.12.

Adjusted cost per available seat mile was 15.05 cents compared to 14.25 cents, up 5.7 per cent.

National Bank analyst Cameron Doerksen said the fourth quarter results were ahead of consensus forecasts, despite such risks as a weaker Canadian dollar that increases costs and impacts Canadian demand for travel to the U.S.; incrementally higher jet fuel costs; lower demand for Canadian travel to the U.S. due to strained political relations and fears that a tariff war could push Canada into recession, thereby lowering demand for air travel.

“Although Air Canada faces a number of investor sentiment headwinds, the company has the ability to mitigate possible impacts,” Doerksen wrote in a note.

Fadi Chamoun, a transportation analyst for Bank of Montreal, said the adjusted EBITDA of $696 million in the fourth quarter was roughly 11 per cent above expectations.

Royal Bank of Canada analyst James McGarragle said yields were also better than anticipated in Q4, which they see as positive and potentially indicating that ancillary revenue programs are having an impact.

“Overall, we view the results and maintained 2025 guide as positive, however, we believe sentiment will be driven by impacts on travel due to tariff uncertainty,” said McGarragle.

• Email: dpaglinawan@postmedia.com

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