Air Canada to divert capacity on tariff fallout

Article content

U.S. President Donald Trump‘s tariff threats dominated the earnings calls of some of Canada’s top publicly listed companies this week.

Article content

Article content

Even though duties have yet to be implemented, some companies like Air Canada are already making contingency plans while others brace for the impact.

Here’s a look at what executives had to say about the tariff threat facing Canada.

Article content

Air Canada

The carrier, which reported fourth-quarter earnings on Thursday, said it may decide to reduce capacity to U.S. sun destinations, including Florida, Arizona and Las Vegas, anticipating that fewer Canadians will head to these popular locations.

“We are anticipating proactively that there could be a slowdown,” Mark Galardo, executive vice-president of revenue and network planning, said during an earnings call with analysts. “We don’t see it right now. In our near-term booking in the U.S., we don’t see any major slowdown or anything substantial that would change our view of the market. That being said, if we can derisk this a little bit and be a bit proactive and move capacity into other sectors we see strength, I think that’s the right move right now in this context.”

Canadians have been reacting against Trump’s tariffs and sovereignty attacks against Canada, on social media sites with calls to defend the country by buying Canadian goods and cancelling plans to travel to the U.S.

Air Canada executives also suggested the U.S. sun destinations’ losses could be the domestic travel market’s gains as more Canadians look to vacation at home.

Article content

Article content

“We think there’s an opportunity in some Canadian markets to move a little bit of capacity,” an Air Canada executive said. “Again, these are tweaks to our potential offset of the U.S. leisure situation.”

West Fraser Timber

West Fraser Timber Co. Ltd.’s chief executive called Donald Trump’s proposed tariffs “the elephant in the room” during an earnings call for the company’s fourth quarter.

Sean McLaren said the still-theoretical duties “have created considerable uncertainty for the outlook of our business.”

Among the company’s many concerns is that the duties would reignite inflation.

“There is considerable macro uncertainty in the form of potential tariffs and global trade that may impact inflation expectations and demand for our products,” McLaren said on Thursday.

He said West Fraser Timber is pursuing several actions, such as remaining in contact with Canada’s provincial and federal governments on their “engagement” with the U.S.

The company is also running scenarios for a variety of outcomes, including U.S. tariffs, countermeasures and other options, and “we are preparing our business operations, updating our operation plans.”

Article content

Canadian Tire

Canadian Tire Corp. Ltd. executives say budding consumer optimism has been almost wiped out as tariff uncertainty continues to muddy the waters.

The retail giant’s chief executive, Greg Hicks, said it looked like the economy was throwing up green shoots and consumer sentiment was starting to turn around coming out of the fourth quarter.

“Interest rate cuts have had a distinct positive psychological effect on consumers, and we believe an economic benefit may follow,” he said during an earnings call following the release of the company’s fourth-quarter results.

Canada’s economy is vulnerable to interest rates, given that most mortgages reset at five-year intervals. The Bank of Canada cut interest rates to three per cent from five per cent starting last June.

“For our customers, rate relief is real relief,” Hicks said, adding the company was seeing “multiple green shoots.”

However, United States President Donald Trump’s tariff threats may have turned the tables on the retail giant.

“I’d be remiss if I didn’t caveat this optimism with the looming threat of tariffs,” Hicks said. “I suspect that the consumer confidence uptick I mentioned has now been substantially erased with tariff talk.”

Article content

He said that even though the threatened 25 per cent tariffs on exports to the U.S. are on pause until March, Canadian Tire is reviewing its U.S. suppliers and seeking alternatives to try to “insulate” customers from the “inevitable inflation pressure these tariffs would deliver.”

Chief financial officer Gregory Craig said the company will be tracking economic performance and consumer behaviour over the next 100 days before updating its growth outlook and buying plans for the fall and winter.

Hicks also tapped into some Canadian nationalism during the earnings call.

“I applaud the provincial and federal government’s unified response to the unjustified economic assault from our nation’s longest-standing ally and I’m hopeful for an effective resolution near term,” he said. “Longer term, we need a plan to build Canadian prosperity.”

• Email: gmvsuhanic@postmedia.com

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content