Air Canada has lowered its profit expectations for 2025, responding to a significant drop in bookings from the US as tensions around President Trump’s policies intensify.
The airline, based in Montreal, revealed on Friday that travel demand to and from the US is anticipated to decrease by a “low teenager” percentage over the next six months.
Reportedly, there was a 4.6% fall in passenger revenue on routes within Canada and the US during the first quarter, with a 7% dip in traffic volumes.
Canadians are opting out of US products and are canceling trips south due to Trump’s tariffs on Canadian goods and his suggestion to make Canada the 51st state.
In a recent meeting with newly-elected Canadian Prime Minister Mark Carney, Trump reiterated his controversial desire to take Canada as part of the US. Carney, on the other hand, firmly stated that Canada would never agree to that.
The strained relations between the US and Canada have significantly impacted New York City’s tourism sector.
Canada has typically been a reliable source of tourists for the city, but the visitor numbers have plummeted, forcing a downward revision of the 2025 forecast.
NYC Tourism had initially anticipated a return to pre-pandemic visitor levels but now expects only about 64.1 million visitors, dropping from a previous estimate of 67.6 million.
This updated figure allows for an increase of 400,000 domestic travelers but reflects a loss of about 800,000 international tourists, mostly from Canada. In March, Air Canada recorded a 10% decrease in bookings for flights to the US from April to September compared to last year.
New York’s economy relies heavily on international visitors to sustain its hospitality and cultural industries. These travelers typically stay longer and spend more than their domestic counterparts.
Last year, tourists spent around $51 billion in the city, with foreign visitors accounting for half of that amount. This year, that figure is projected to fall by about $4 billion.
Several major attractions have also noticed fewer visitors, such as the Empire State Building Observatory, which has experienced nearly a 5% decrease in attendance in the first quarter. Tourist bus operators are reporting foreign ridership drops as high as 25%.
Some tour operators are adjusting their offerings to cater to more budget-conscious international travelers.
Others, meanwhile, are holding off on hiring and investment plans amid economic uncertainty and diminishing demand from key markets like Canada.
Regional airports have reported around 117,000 fewer foreign arrivals compared to the same timeframe in 2024, according to port authorities.
In response to the booking downturn, Air Canada has raised fares, but this has led the airline to lower its revenue projections by about $144 million.
The company now forecasts full-year revenues before interest, taxes, depreciation, and amortization to be between $2.3 billion and $2.6 billion, adjusting down from a previous expectation that had exceeded $2.755 billion.
CEO Michaelsaw commented that “uncertainty was the main theme of the first quarter,” noting the decline in cross-border bookings anticipated over the coming months.
Despite the first quarter losses being less severe than analysts predicted, the ongoing uncertainty surrounding tariffs, retaliatory measures from Canada, and the declining Canadian dollar continue to burden airlines’ operations across the border.
Air Canada’s stock jumped over 10% in morning trading, despite quarterly losses surpassing expectations.
While overall air travel demand seems stable, analysts are highlighting underlying weakness and potential for future fluctuations.
The company reported total revenues of $3.9 billion for the first quarter, yet its shares have tumbled more than 30% since the start of the year.
