TORONTO — Aircraft can’t turn on a dime – and neither can an airline.

And yet that’s essentially what Canada’s carriers are having to do these days, as declining demand for U.S. destinations impacts long-planned spring and summer schedules.

Earlier this month Air Canada said its drop in cross-border flight bookings for the next six months was comparable to an industry-wide drop of about 10%. On its Q4 and FY 2024 earnings call, the airline noted “redeployment opportunity, if required” in sun markets. Last month came reports of reduced service from YVR on three U.S. routes: IAD, IAH and MIA.

WestJet has cut back on its Kelowna-Seattle flights, and cut short its Kelowna-Las Vegas service. Other carriers (like Porter) have said they’re reining in marketing for U.S. destinations. A report in The New York Times, citing data from Visual Approach Analytics, notes that seat reductions on cross-border routes range from 7% by Air Canada to 25% by Flair Airlines.

Looking ahead to winter 2025-2026, Flair has said cross-border trips will comprise 12% of its network, down from 20%.

“MAINTAINING A BRAVE FACE”

Amid the trade war turbulence, and with high season on the horizon, Canada’s airlines are working hard to stay on course, so far with just minor adjustments. But what’s next? It’s no COVID-19, but these are unprecedented times nevertheless.

“Uncertainty in the air travel market is definitely hampering the decision-making process of Canadian commercial air carriers,” aviation industry analyst John Gradek told Travelweek. “We’ve read snippets of information from reputable sources about the softening of U.S. transborder demand over the past several weeks, and how such drops have yet to permeate carrier capacity plans through the spring and summer months. Pundits have observed a limited number of sources of forward-looking travel data, resulting in lingering questioning of carriers’ transborder capacity and the lack of initiatives reflective of this demand drop-off.”

So far carriers have pulled back on the fringes of transborder capacity, said Gradek, “closing down the tag-ends of select winter programs in secondary markets as well as reducing frequencies on off-peak travel days. Low-cost carriers have even gone so far as to remove U.S. destinations from the operating plan, deciding to refocus their spring / summer initiatives on the Canadian domestic market.”

He added: “We have Canadian carriers such as Porter continuing to expand their North American fleet and maintaining their launch of new U.S. city-pair services. Air Canada and WestJet have maintained a brave face despite the shouts of gloom and doom on transborder routes.”

The latest cross-border travel data highlights the downward slide, with Canadian-resident return trips by car down 32% YOY, and air travel down 13.5%, according to StatCan’s numbers.

How easy is it for airlines to make sudden changes to capacity? Gradek said that for airlines the size of Air Canada and WestJet, “it’s relatively easy on their established routes. On new services, it’s a little more difficult as you would have to consider route startup costs and the costs of suspending such services.”

PRICE WAR SPURRED BY MORE DOMESTIC CAPACITY?

Gradek said the real question is what airlines would do with all the capacity freed up by transborder route /frequency reductions. “Many such routes are being flown by narrow-bodied aircraft which have very little alternate use other than on other North American services. So, if not the U.S., then it’s a Canadian redeployment, increasing capacity in an already saturated market, putting pressure on airport slot availabilities in Toronto and Montreal, and creating a higher probability of significant pricing action to fill this new capacity,” he said.

In other words, a price war, one that Canadians would no doubt welcome for sky-high domestic fares.

Already airlines are making moves. On April 22 WestJet announced an expansion of its domestic network, with new nonstop service between Halifax and three Canadian cities for the summer: Saskatoon, Regina and Vancouver. WestJet also announced new flights between Winnipeg and St. John’s for summer, plus increased frequency on Halifax routes from Winnipeg and Edmonton, as well as between Calgary and Deer Lake.

Gradek predicts a transborder traffic demand drop in the 20% to 30% range over the next few months, “possibly reaching 30% to 40% in the peak summer travel months. And that ought to bring the financial considerations into play, with further capacity cuts becoming inevitable. Marginal route suspensions, aircraft downgauging, reducing day-of-week frequencies – all are options on the table.”

“CANCELLATIONS AREN’T LOVED BY THE REGULATORS”

As Gradek noted, carriers don’t like to disclose future booking levels. “And flight cancellations are not loved by the regulators, with the APPRs (Air Passenger Protection Regulations) kicking in penalties if these cancellations are declared close to departure times. Carriers will be walking a fine line in adjusting capacity, but they cannot afford to operate flights much under their breakeven load factors for too long.”

The dilemma is one that faces any carrier making unexpected cuts: “If capacity reductions are announced too quickly, could that be interpreted as a sign of brand weakness, or a true market drop? If the reductions are delayed, how are the existing advanced bookings to be handled?”

As bookings for summer travel kick into high gear, airlines could find themselves between a rock and a hard place. “The risk of publishing an operating schedule that hasn’t got much chance of being flown is not acceptable,” said Gradek. “Do the [airlines] have the aircraft capacity to continue on the published transborder schedules as well as increase their domestic services? I’m guessing that they do not.”

He said that while domestic tourism is forecast to increase as transborder demand drops, “there are major infrastructure limits at Canadian airports that will come into play.”

Gradek added: “I’m thinking carriers are betting on a significant drop in fuel prices to help them through this summer’s operations. Time will tell.”

This article appears in the April 24, 2025 edition of Travelweek; click here