Air Canada's second-quarter corporate demand held steady as the airline benefited from international market expansion, "sixth freedom" traffic and premium sales growth, executives reported Tuesday during a quarterly earnings call.
“On corporate, we had a pretty stable Q2. In fact, we were surprised by how strong we saw corporate performance overall in May and June,” said Air Canada chief commercial officer Mark Galardo, adding he expects such demand to continue to hold throughout September and October.
Economic uncertainty, including reduced demand for transborder travel, the geopolitical landscape affecting the Middle East and India, increased competition in parts of Asia and currency fluctuations made it a challenging quarter overall, he told analysts.
In response to a drop in demand for Canada-U.S. leisure travel—with Q2 transborder travel revenue dropping 11 percent year over year—the airline reduced transborder capacity by 8 percent.
“Where we've really removed capacity [in] the U.S. is into traditional U.S. leisure markets, so think of markets like Florida, Vegas, Arizona—markets where there's a very heavy point-of-sale or product commencement in Canada,” Galardo said. “The one thing we did not do is we did not touch any of our sixth freedom connectivity at all. In fact, we reinforced it.”
So-called sixth freedom connectivity refers to routes that begin in a country outside Canada and end in another country outside Canada but use Canada as a connecting point. In the second quarter, Air Canada added service to international cities like Naples, Porto, Prague and Manila and reintroduced routes to Lima and Rio de Janeiro.
Revenue from sixth freedom traffic rose 17 percent, while premium cabin revenue grew 5 percent compared to the same period last year. Premium revenue represented nearly a third of total passenger revenue in the second quarter.
Air Canada Q2 Metrics
Air Canada reported second-quarter passenger revenue of C$5.03 billion, a 0.8 percent year-over-year increase, on total operating revenue of C$5.63 billion, which rose 2 percent. Net income was C$186 million, down from C$410 million a year prior.
Capacity for the carrier increased 2.5 percent year over year. Transborder capacity declined by approximately 8 percent, while international net routes—including Latin America and the Atlantic—grew. Passenger load factor was 84.9 percent, a 0.8 percentage-point decrease.
Average fuel price fell to $0.88 per liter, down from $1.04 in Q2 2024.
Air Canada maintained its full-year 2025 guidance, which includes expected capacity growth of 1 percent to 3 percent and adjusted EBITDA in the range of C$3.2 billion to C$3.6 billion.