Air Canada eyes strong revenue growth by 2028 on robust leisure travel demand

Air Canada’s latest earnings report and accompanying forward‑looking statement from CEO Michael Rousseau paint an optimistic picture for the national carrier. The airline is targeting a revenue of $13.5 billion by 2028, a marked increase from the roughly $10.5 billion it reported in the most recent quarter. The central driver behind this upside is a projected surge in leisure travel—both domestic and international—as consumer confidence rebounds in the post‑pandemic era. The article on The Globe and Mail delves into how the airline is positioning itself to capture this upside, the strategic measures it is adopting, and how these moves align with broader industry trends.

1. The Current Landscape: A Quick Recap

The article opens with a brief overview of Air Canada’s quarter‑end performance. Revenues rose 18 % to $2.8 billion in the first quarter, driven by higher load factors and a mix of domestic and cross‑border traffic. Profit margins improved after a cost‑reduction initiative that cut discretionary spending by 12 % over the prior year. Importantly, Air Canada highlighted a record number of leisure passengers—over 8 million on the Canada‑United States corridor alone—an indicator that many travelers are shifting from business to personal travel.

Air Canada’s earnings call also mentioned that it had just signed a fuel hedging agreement that locks in jet‑fuel prices for the next 12 months, a move aimed at protecting margins in an environment of volatile fuel costs. The article also notes that the airline’s capital expenditures for the year were $1.2 billion, a figure that represents a 6 % increase from the previous year. These investments are earmarked for fleet renewal and digital initiatives, with the overarching goal of improving the customer experience and operational efficiency.

2. The Vision: $13.5 billion in 2028

Rousseau’s strategic vision centers on a five‑year plan that hinges on three pillars: expansion, efficiency, and sustainability.

Expansion
Air Canada intends to add 30 new wide‑body aircraft to its fleet over the next five years, with a focus on the Airbus A330‑900neo and Boeing 787‑9. The additional capacity is earmarked primarily for leisure routes to South America, the Caribbean, and Asia—markets that have seen a rapid rebound in demand.
The carrier will also enhance its network in the United States by adding new nonstop services to cities such as Miami, Atlanta, and Denver. This is part of a broader strategy to capture a larger share of the North American leisure market, which the airline estimates could grow by 5–7 % annually through 2028.
Efficiency
Air Canada is investing in digital transformation, launching a revamped booking platform that integrates real‑time seat allocation and dynamic pricing. The platform is expected to increase ancillary revenue by 12 % over the next three years.
Labor efficiency is another focus area. The airline plans to renegotiate pilot and cabin crew contracts to align compensation with industry benchmarks while preserving high levels of employee engagement.
Sustainability
* A key commitment is to achieve net‑zero emissions by 2050. Between now and 2028, Air Canada will invest in sustainable aviation fuel (SAF) and other low‑carbon technologies. The company is also exploring partnerships with biofuel producers in Canada and the U.S. to secure a reliable supply chain.

3. Leveraging Leisure Travel Trends

The article provides a contextual backdrop by linking to a Globe and Mail piece on the global leisure travel outlook. That piece underscores that leisure spending has rebounded to near‑pre‑COVID levels, with domestic leisure travel in North America showing a 9 % year‑on‑year growth in 2023. A major driver identified is the shift toward “staycations” and short, high‑value trips, which are more amenable to leisure airlines’ pricing structures.

Air Canada’s marketing strategy reflects this trend. The carrier has rolled out a new “Vacation Packages” bundle that includes flexible cancellation policies, free checked bags, and an optional in‑flight entertainment upgrade. By bundling ancillary services, the airline hopes to lock in revenue that would otherwise be cannibalized by competitors offering cheaper base fares.

The article also notes that Air Canada’s customer‑segmentation analysis shows that millennials and Gen‑Z travelers are particularly attracted to the airline’s updated in‑flight Wi‑Fi and “social‑first” cabin décor. These demographics are projected to comprise over 25 % of the total passenger mix by 2028, further validating the company’s focus on modern amenities.

4. Competitive Dynamics

While Air Canada is poised to capitalize on the leisure boom, the article reminds readers of WestJet’s aggressive expansion strategy. WestJet has recently announced a $300 million stake in a new leisure‑focused brand, targeting the same routes Air Canada aims to grow. The competition is not only between the two carriers but also includes low‑cost carriers such as Ryanair and Spirit Airlines, which continue to erode market share on the Canadian‑U.S. corridor.

To counter these pressures, Air Canada is enhancing its customer loyalty program. The updated Aeroplan rewards system now offers tiered travel perks and a family‑sharing option. Early feedback suggests that the revamped program has already increased repeat bookings by 4 % among its top 10 % of travelers.

5. Risks and Mitigations

Air Canada acknowledges several risks that could temper its growth trajectory:

Fuel price volatility: Though the airline has hedged its fuel for the next year, a sustained spike could erode margins. The company plans to rotate more fuel‑efficient aircraft into the schedule to offset costs.
Economic downturns: A recession could reduce discretionary spending. Air Canada’s strategy of offering flexible fares and discounted packages is intended to mitigate this risk.
Regulatory changes: The airline remains vigilant about potential changes in carbon‑pricing mechanisms. Early talks with regulators suggest that Air Canada will meet future compliance by integrating SAF and carbon offsetting into its operational model.

6. Bottom Line

In sum, The Globe and Mail article frames Air Canada’s forward‑looking narrative as one that is deeply rooted in the resurgence of leisure travel and the company’s ambitious expansion plan. By strategically adding fleet capacity, leveraging technology to boost ancillary revenue, and committing to sustainability, Air Canada is positioning itself to capture a larger slice of the Canadian and U.S. leisure market. While competition remains fierce and macroeconomic headwinds are a reality, the airline’s proactive risk mitigation and customer‑centric innovations give it a solid footing to realize its $13.5 billion revenue goal by 2028.

Read the Full The Globe and Mail Article at:
[ https://www.theglobeandmail.com/business/article-air-canada-eyes-strong-revenue-growth-by-2028-on-robust-leisure-travel/ ]