Shares of Air Canada (AC.TO) fell three per cent on Friday, even after the company reported quarterly earnings that surpassed expectations and reaffirmed previously set guidance despite geopolitical uncertainty.
While the airline is seeing encouraging 2025 booking trends so far, executives say it would redeploy capacity from U.S. destinations if demand dips due to a potential tariff conflict.
The Montreal-based airline saw its stock see-saw on Friday, with shares jumping as much as seven per cent in early trading before shedding four per cent following the release of the earnings. Air Canada’s stock ended the trading day on the Toronto Stock Exchange at $17.75 per share, a decline of three per cent compared to Thursday’s close.
Mark Galardo, Air Canada’s executive vice-president of revenue and network planning, said on a conference call with analysts on Friday that “it’s still premature to discuss the potential impact, if any, of actual or potential regulatory tariffs or possible retaliations.” But so far, he says the booking trends for the second and third quarters of the year are “encouraging.”
“We have ample flexibility to respond by moving capacity around, as we’ve always done,” Galardo said, noting that so far, booking trends have aligned with the airline’s expectations.
“We are proactively looking at capacity to U.S. leisure destinations, and we feel that we’ve got enough opportunity elsewhere to redeploy that capacity… if we do see some softness on the U.S. side, because we’re not seeing it just yet, we can offset it with some technical changes.”
U.S. President Donald Trump has threatened to levy 25 per cent tariffs on Canadian imports into the U.S., with a 10 per cent tariff on Canadian energy. While a 30-day reprieve was announced last week, the tariffs could come into effect early next month. Some Canadians have responded to the threat of tariffs by cancelling travel to the U.S.
Galardo says Air Canada has not seen that trend being reflected in near-term bookings, but the airline is anticipating that there could be a slowdown in U.S. demand.
“If we could de-risk this a little bit and be a bit proactive and move capacity into other sectors where we see strength, I think that’s the right move right now in this context,” he said.
At the same time, Galardo says the airline believes the domestic market within Canada is “over capacity.”
“We see some of our competitors adding capacity levels that might be beyond what the market can absorb short term,” he told analysts on Friday.
