Tariff dispute: Air Canada to reduce U.S. capacity, WestJet sees 25% drop

Air Canada plans to reduce capacity on select routes to Florida, Las Vegas, and Arizona starting in March, citing the ongoing Canada-U.S. tariff dispute and the weakened Canadian dollar.

The update was shared during a Q4 2024 earnings call last Friday (February 14) after the airline reported record full-year revenue of $22.3 billion (CAD).

Addressing some of the “external pressures” of 2025, Air Canada's Executive Vice President of Revenue and Network Planning and President of Cargo Mark Galardo said it would be premature to discuss the potential impact of the tariffs U.S. President Donald Trump may implement on imports from Canada.

“We're diligently and continuously monitoring customer behaviour and market dynamics,” Galardo said during the call. “If these shift in the future, we have ample ability to respond by moving capacity around as we've always done.”

READ MORE: As Canadians rethink U.S. travel, industry pros pivot to mitigate potential losses

Galardo went on to say that the revenue environment Air Canada experienced in Q4 2024 is “continuing into 2025.”

“January booking trends have aligned with our expectations despite some uncertainty,” he said. "We see encouraging booking trends and yield signals for Q2 and into Q3. Keep in mind, the shift of Easter from March 2024 to April 2025 naturally shifts revenues to Q2, which will translate into less relevant compares year-over-year to Q1.”

READ MORE: Trump's tariffs – should the Canadian travel industry be worried?

That being said, Air Canada is “proactively acting in specific markets,” such as Florida, Vegas and Arizona, and reducing capacity exposure starting in March, Galardo confirmed. 

Will capacity be deployed to other markets? “There might be some opportunity in domestic and we see some opportunity in some leisure markets as well,” Galardo said. 

$2.1 billion in lost spending

Anxieties around Canada entering a trade war with its closest ally remain, despite a pause, announced earlier this month, on the U.S. levying tariffs on Canada for at least 30 days.

The concern is whether Prime Minister Justin Trudeau’s deal with Trump – which will see Canada expand its existing $1.3-billion border protection plan to fight drug trafficking – will hold.

READ MORE: Canadian U.S. travel boycott could cost $2.1 billion, says U.S. Travel

For the travel industry, there’s a lot at stake. Amid calls to “buy Canadian,” along with requests from politicians to cancel trips to the U.S., and a weak loonie, some Canadians are rethinking where they should spend their travel budgets.

It’s a movement that could hit economies hard. Earlier this month, the U.S. Travel Association, which represents all components of the U.S. travel industry, revealed that a mere 10 per cent reduction in Canadian visitation could result in two million fewer visits, including $2.1 billion (USD) in lost spending.

It currently isn’t known just how many Canadians are, in fact, cancelling trips to the United States (all we have is anecdotal evidence), but stats like that are hard to ignore.

If Air Canada does see significant “softness” on the U.S. side, it will offset it with “typical changes,” Galardo said last week. 

READ MORE: “I’m absolutely concerned”: Travel advisors, execs respond to trade war; some cancellations reported

The airline may, for example, redeploy capacity into its sun markets, “where we see a lot of demand [and] interest right now,” Galardo explained.

The strategy, Galardo reiterated, is to prepare for a potential slowdown in U.S. bookings.

“In our near-term bookings in the U.S., we don't see any major slowdown or anything substantial that would change our view of the market,” he said. “That being said, if we can derisk this a little bit and move capacity into other sectors where we see strength…I think that's the right move right now in this context.”

WestJet sees drop in U.S. sales

The update adds to remarks recently made by Alexis von Hoensbroech, chief executive officer at WestJet.

The Calgary-based airline says demand for U.S. travel has been “soft” over the last few weeks since a possible trade war started boiling between Canada and its biggest trading partner.

“What we have seen though, since the tariff announcements, is that our sales from Canada into the U.S. have actually dropped very significantly,” von Hoensbroech said last week, as reported by CTV News.

The demand to fly to the U.S. has dropped by about 25 per cent, von Hoensbroech noted, adding the exchange rate also likely has something do with the slump.

“We are watching and we don’t know how sustainable this is,” he said.

ACTA warns of reduced travel spending

The Association of Canadian Travel Agencies and Travel Advisors (ACTA), meanwhile, is strongly condemning the sweeping tariffs imposed by the U.S. on Canadian goods.

In a statement posted Feb. 1, ACTA said that while travel agencies and advisors may not be directly targeted by Trump’s 25 per cent tariff on most Canadian goods, “the economic consequences will be severe,” resulting in higher costs for businesses, weaker consumer confidence, and reduced travel spending.

“Canada has long been one of the United States’ closest allies and most reliable trading partners,” the association stated. “These tariffs harm not only Canadian businesses but also American consumers and companies that rely on seamless trade with Canada. History has proven that protectionist policies do not strengthen economies; they weaken them.”

Don't miss a single travel story: subscribe to PAX today!  Click here to follow PAX on Facebook.