US-Canada airline market: demand steady but tariffs create doubts

Despite the trade rift between the US and Canada triggered by tariffs imposed by the US, the air travel market between the two countries remains stable. All of the largest airlines serving the market have increased their seat capacity between the two countries as the high season in the Northern Hemisphere kicks in.

The largest airline operating between the US and Canada - Air Canada - is forecasting continued solid revenue growth in its transborder markets for 2Q2018, as it continues to execute its transit strategy for international travel through its hubs from smaller US markets. Some of its new introduced routes reflect its efforts to shore up its transit traffic.

It remains to be seen whether the trade dispute will affect the ambitions of Delta and WestJet to form a cross-border joint venture, as well as the potential similar tie-up between Air Canada and United. Trade spats shouldn't have any bearing on those pacts materialising, but uncertainty driven by US trade policy could change the calculus for those tie-ups.