There was a time when Air Canada Vacations didn’t even appear as an asterisk in Air Canada’s quarterly or yearly reports as the airline was laser focused on higher yield traffic. Times have changed and the leisure market is recognized as the powerhouse that it is.
Within the first two minutes of CEO Michael Rousseau’s remarks, Air Canada Vacations was named as a strong contributor to the carrier’s financial results. In fact, ‘sun markets’ were referred a number of times throughout the one hour analysts’ call.
Overall, Air Canada’s second quarter profits were down sharply from last year as the airline battled a double digit drop in US flight revenue.
Canada’s largest airline is reporting a profit of $186 million for Q2 of this year, down from $410 million in the same quarter last year.
US revenues were down 11% on an 8% capacity reduction, officials said.
Air Canada, WestJet and other carriers have significantly reduced their exposure to the US market given political tensions between Ottawa and the Trump administration.
“We think we’re going to restore some of that capacity gradually,” Mark Galardo, Executive Vice President & Chief Commercial Officer and President, Cargo, said on a conference call on 29JUL. “But right now we continue to plan an environment where things stay the same.
“There’s no real improvement in the overall demand posture” for US routes, he said.
On the other hand, officials said demand for European travel will continue into the fall, corporate travel is strong, and the airline will soon be announcing new routes for its A321XLR aircraft.
Galardo said Air Canada is seeing “a shift in the booking curve” for Europe, with greater relative strength than normal for flights in September, October and into early November.
For the third quarter of this year, Air Canada plans to increase its ASM capacity between 3.25% and 3.75% from the same quarter in 2024. Galardo said the majority of that growth will occur in the international market.
While the airline trimmed its US capacity, Galardo said Air Canada’s sixth freedom revenues grew 17% in the second quarter, with strong performance in the Atlantic and Pacific market.
“We did not touch any of our sixth freedom connectivity at all,” he said. “In fact, we reinforced it, and there was a strong commercial execution plan to really focus on that because some of the yields that we saw coming out of the US were quite favourable. As we go into Q3 and Q4 … we've made more tweaks to our hub airports to favour sixth freedoms.”
Galardo also cited strong corporate travel numbers.
“On corporate, we had a pretty stable Q2. In fact, we were surprised about how strong we saw corporate performance overall in May and June. Going into September and October, we have no reason to believe that that will slow down.”
Galardo said Air Canada has “built a strong revenue base with Air Canada Vacations, on which we’ll expand in the second half as travellers seek out new and exciting destinations. We see strong momentum for the sun market for the balance of the year.”
He also said Air Canada has “exciting plans” for the A321XLR, a “game-changing aircraft which is poised to unlock new and profitable market opportunities. Stay tuned as we plan to unveil our summer 2026 XLR destinations in the coming weeks.”
Asked about the recent strike vote by Air Canada flight attendants, airline president and CEO Michael Rousseau called it a “normal step in the negotiation process” and said it doesn’t mean a disruption will take place.
“Air Canada's second quarter 2025 results showcase the airline's many strengths in the face of a challenging environment,” said Rousseau. “We generated operating revenues exceeding $5.6 billion, up $113 million from the previous year.
“Operationally, we had an excellent spring, leading all major North American carriers in on-time performance for both May and June, which corresponded with strong gains in customer service scores.”
Rousseau said the airline has “strategically redirected capacity to high-demand markets and captured demand for premium services, leveraging the breadth and strength of our global network. Our results were further lifted by strong performances by Air Canada Cargo, Air Canada Vacations, and Aeroplan.”
He didn’t offer details, but Rousseau also said Air Canada will be “raising our game” from a Star Alliance perspective.
