Air Canada expects higher labor costs, record number of new planes in 2026

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(Reuters) -Air Canada is set to wrestle with higher labor costs and sluggish U.S. leisure travel in 2026, as the country’s largest carrier plans to bring 35 new planes into its fleet, company executives told analysts on Wednesday.

Canada’s largest carrier reported late on Tuesday a lower third-quarter profit, after striking cabin crew forced the cancellation of thousands of flights and waning demand for travel to and from the U.S. weighed on results. Shares were down 2.9% in early trading on Wednesday.

The airline said capacity would rise 0.75% in available seat miles in 2025, compared with a year earlier.

Cross-border leisure travel between Canada and the U.S. has slowed significantly this year after President Donald Trump’s steep tariffs on Canadian imports sparked a widespread backlash. Quarterly revenues from transatlantic travel were flat on an annual basis.

Air Canada executives, however, see strength in consumer demand for premium services, and anticipate continued double-digit growth in overall corporate revenue during the last three months of 2025.

Air Canada CEO Mike Rousseau said the carrier is expecting to receive 35 new aircraft in 2026, the most it has ever taken in a single year, even as it retires some of its aging planes. New Boeing 787 wide-body aircraft that can fly across the Atlantic or to Asia will allow Air Canada to take advantage of Canadian government efforts to diversify trade away from the U.S.

“You know Canada is diversifying trade around the world and we think we can play a big part,” Rousseau said.

Air Canada is also working on fleet changes to enable its leisure carrier Rouge to operate only Boeing 737 aircraft by the end of 2026.

(Reporting by Allison Lampert in Montreal and Nandan Mandayam in Bangalore; Editing by Paul Simao)