The weakening Canadian dollar is casting a shadow over Air Canada’s cross-border prospects, with the airline now forecasting a significant decline in U.S.-bound travel through 2024. At yesterday’s quarterly earnings call, Air Canada executives revealed that southbound passenger volumes could drop by as much as 7% compared to last year—a troubling trend for Canada’s largest carrier.
“We’re seeing a clear correlation between currency fluctuations and booking patterns,” explained Michael Rousseau, Air Canada’s CEO. “With the loonie hovering around 73 cents to the U.S. dollar, many Canadians are reconsidering their travel plans, particularly for discretionary trips.”
The currency situation has created a perfect storm for Air Canada, coming at a time when the airline has been aggressively expanding its U.S. route network. Last summer, the carrier launched new direct flights to Minneapolis, Nashville, and Pittsburgh from its Toronto hub, investments that now face uncertain returns amid shifting consumer behavior.
The financial impact is already being felt. First-quarter cross-border revenue fell 3.8% year-over-year despite a 2.1% increase in overall capacity. Industry analysts from TD Securities noted this marks the first quarterly decline in this lucrative market since the post-pandemic recovery began.
“The currency effect is real and immediate,” said Richard Vanderlubbe, president of tripcentral.ca. “When a Canadian family of four looks at a week in Florida or California and sees their purchasing power reduced by nearly 30% compared to five years ago, many are choosing domestic alternatives or destinations where their dollar stretches further.”
This trend stands in stark contrast to the northbound market, where American travelers continue to find Canada increasingly affordable. Air Canada reported a 9% increase in U.S. originating traffic, though this hasn’t been enough to offset the declining Canadian demand.
The airline’s response includes a strategic pivot toward more international long-haul flights and enhanced focus on CO24 Business travel segments, which tend to be less sensitive to currency fluctuations. The carrier announced plans to increase capacity to Europe by 8% this summer and boost flights to Asia and South America, where currency advantages may actually benefit Canadian travelers.
Air Canada isn’t alone in facing these challenges. WestJet and smaller carriers like Porter have also acknowledged the currency headwinds in recent statements to investors. The issue extends beyond airlines to the broader tourism economy, with potential ripple effects for hotels, rental car companies, and attractions that rely on Canadian visitors.
Economic forecasts provide little immediate comfort. Most major Canadian banks project the loonie will remain below 75 cents through 2024, with any significant appreciation dependent on Bank of Canada rate moves relative to the Federal Reserve.
For now, Air Canada remains cautiously optimistic about the long term while adjusting to the new reality. “We’ve weathered currency cycles before,” Rousseau reminded investors. “Our diversified network and flexible fleet deployment give us options to adapt as market conditions evolve.”
Canadian travelers hoping for deals may find some silver lining, as carriers could introduce more aggressive promotions to stimulate demand. But for the moment, the message is clear: the persistent weakness of the Canadian dollar is reshaping travel patterns in ways that even our national carrier must reckon with.
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