Air Canada during the fourth quarter continued to see softness in its U.S. transborder segment, executives said on a Friday morning earnings call, although overall business travel revenue increased year over year.
Outbound demand from Canada to the U.S. slowed throughout 2025, "primarily driven by ongoing concerns regarding tariffs and related geopolitical uncertainties," according to the carrier.
"We leveraged our diversified geographic exposure to pivot capacity to areas of strength, such as to Canada and the Atlantic in the summer months, fully mitigating the impact from reduced U.S.-Canada demand," Air Canada chief commercial officer Mark Gallardo said.
Demand trends "to, from and within Canada" remain favorable, Gallardo added.
Corporate revenue "accelerated" in the later part of the year, "and was another sign of progress, increasing 8 percent in the fourth quarter from a year ago," Gallardo said. "We restored A220 schedules, achieved corporate growth in our long-haul flying and kept working to stay competitive while building loyalty with business travelers."
In the spring, Air Canada will begin transborder flights from Billy Bishop Airport in downtown Toronto "to major business centers in North America," Gallardo added.
The carrier also is seeing "at this time a lot of corporate demand growth on the North Atlantic," Gallardo said. "We've seen almost a 30 percent increase in the amount of corporate traffic going to Europe and the Pacific, and we attribute part of that to Canada looking to diversify trade corridors."
Gallardo did not indicate whether that increase was year over year for the quarter or the full year; however, Air Canada increased its capacity to the Atlantic region by 4.9 percent for the quarter, and to the Pacific region by 9.5 percent.
Air Canada Q4, Full-Year 2025 Metrics
Air Canada reported fourth-quarter passenger revenue of C$5 billion, a 6 percent increase year over year. Total quarterly revenue was nearly C$5.8 billion, a 7 percent increase from a year prior. Q4 net income was C$296 million, compared with a loss of C$644 million in Q4 2024.
Passenger revenue during the quarter benefitted from "robust underlying demand, with traffic growth outpacing capacity," according to Air Canada. Premium-cabin revenue increased 4 percent year over year for the quarter. U.S. transborder revenue declined nearly 8 percent during the period.
For the full year, the transborder segment declined more than 10 percent, "reflecting a broad softening in demand beginning in the second quarter of 2025, compounded by the effects of the August labor dispute," according to the carrier. A three-day strike in August 2025 by the carrier's flight attendants led to the cancellation of more than 3,200 flights.
Air Canada's full-year passenger revenue was C$19.6 billion, down 1 percent year over year, with total 2025 revenue up 1 percent for the period to nearly C$22.4 billion. Full-year net income was C$644 million, down from the more than C$1.7 billion reported in 2024.
Capacity for the fourth quarter increased 3.4 percent year over year, although U.S. transborder capacity for the period declined 12.3 percent. Full-year capacity increased 0.8 percent compared with 2024, with U.S. transborder capacity down 9.6 percent compared with a year prior.
Fourth-quarter average fuel cost was 91.7 cents Canadian and 91.4 cents Canadian for the full year.
Air Canada projects a full-year 2026 capacity increase of 3.5 percent to 5.5 percent year over year.
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