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Air Canada is continuing to strengthen its sixth-freedom strategy, a key driver behind the airline’s recent expansion into South America.
While geopolitical tensions dampened travel demand between Canada and the United States last year, the carrier saw solid momentum in its sixth-freedom markets. During a Feb. 13 earnings call, Chief Commercial Officer and President, Cargo, Mark Galardo said that enhancements to the airline’s schedule improved connectivity and helped lift sixth-freedom revenues by 10% in 2025 compared with 2024, reaching an all-time high.
To counter weaker U.S. transborder demand, Air Canada has been redirecting growth toward Latin America and the Caribbean. In mid-2025, the airline announced plans to increase winter seat capacity to the region by 16% year-over-year.
It has since confirmed the return of its Toronto–Quito route beginning in December 2026, after the service was suspended in March 2020. Flights to Lima and Rio de Janeiro will also resume earlier than in the previous winter season, advancing the restart by up to six weeks.
Galardo described Latin America and the Caribbean as a vast and diverse marketplace. He stressed that expansion into South America is not simply a shift away from U.S. flying. Instead, the strategy capitalizes on Canada’s geographic position to channel traffic between Europe and Latin America through the airline’s hubs.
Some transborder capacity has also been redeployed to the Caribbean, where performance has been encouraging. Galardo noted that load factors and yields have been positive across nearly all destinations in the region, with additional seats being absorbed effectively.
In 2025, Air Canada’s U.S. transborder revenue declined 10.4% year-over-year, reflecting a 9.6% reduction in capacity. Passenger traffic fell 12%, though yields improved by 1.9%. According to Galardo, the airline expects similar market conditions on these routes to continue for now.
Domestically, Air Canada plans roughly 5% capacity growth for the spring and summer seasons. However, demand trends remain strongest at its core hubs—Montreal, Toronto and Vancouver—where the balance between supply and demand is favorable. Competitive pressures are more evident in smaller Canadian markets, though the airline’s exposure there is limited.
On long-haul routes, corporate demand across the North Atlantic has been particularly strong. Galardo reported nearly a 30% increase in corporate travel to Europe and the Pacific, partly reflecting Canada’s efforts to diversify trade partnerships and global business ties.
The airline expects to receive 35 aircraft in 2026. Chief Financial Officer John Di Bert cautioned that capacity growth will be somewhat moderated because many aircraft deliveries are scheduled for the latter part of the year. Additional constraints include the transfer of Boeing 737 MAX aircraft to Rouge and the retirement of older jets.
Air Canada’s first Airbus A321XLR is due to arrive early this year. The aircraft will initially operate seasonal service between Montreal and Palma de Mallorca, and will also be deployed on year-round Montreal–Toulouse and seasonal Montreal–Edinburgh routes. Galardo added that the A321XLR will play a broader role within North America, with plans to introduce a consistent year-round product on select routes to enhance the airline’s premium offering.
The carrier has also ordered eight Airbus A350-1000 aircraft, with options for eight more. Di Bert said the new jets will replace the airline’s oldest Airbus A330-300s. According to fleet data, Air Canada currently operates 18 A330-300s, with two additional aircraft inactive.
For the full year 2025, Air Canada reported net income of C$644 million (US$474 million), down from C$1.7 billion a year earlier. Operating revenue rose slightly to C$22.3 billion, while expenses increased to C$21.4 billion. In the fourth quarter, the airline posted net income of C$296 million, reversing a C$644 million loss recorded in the same period of 2024. Quarterly revenue climbed to C$5.8 billion, and expenses declined to C$5.4 billion.
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