Canadian airlines reduce U.S. services amid rising political discord
In the wake of heightened political discord — highlighted by new tariffs and provocative comments from former U.S. President Donald Trump suggesting Canada might become “the 51st state” — Canadian travel to the United States has seen a significant downturn. In March 2025, U.S. Customs and Border Protection noted an 18% reduction in border crossings from Canada, marking one of the largest decreases in recent years.
This decline has prompted a rapid strategic reaction from Canadian airlines. Air Canada and WestJet, two leading carriers in the country, are beginning to reduce their services to major U.S. cities such as San Francisco, Austin, Miami, and Las Vegas. This strategy indicates a broader adjustment of route networks as airlines aim to lessen their involvement in politically sensitive and underperforming markets.
Mark Galardo, Air Canada’s Executive Vice President of Revenue and Network Planning, spoke about this transition during a briefing for investors in March. “If we can minimize risk a bit and shift capacity towards sectors where we see strength, I believe that’s the right decision to make in this context,” stated Galardo, indicating a shift towards more stable and lucrative markets.
For Australian investors, these changes highlight the growing unpredictability in North American aviation — a region once viewed as stable. The swift withdrawal by Canadian airlines from U.S. routes could create fresh opportunities in transpacific and intra-Asia routes, where demand continues to be strong and Australian carriers like Qantas and Virgin Australia are expanding operations.
As Canadian airlines redistribute capacity, the consequences may affect global route dynamics, especially for carriers with codeshare agreements or alliance connections. This strategic repositioning also emphasizes the critical role of geopolitical risk assessment in aviation investment strategies — a consideration that both Australian institutional and retail investors should examine thoroughly when assessing exposure to international airline stocks or infrastructure related to cross-border travel.
Global airline alliances transform North American industry
The recent investments made by Delta Air Lines and Korean Air in WestJet represent a broader shift in global airline alliances, with ramifications that reach far beyond North America. For Australian investors, this situation serves as a prime illustration of how strategic partnerships are utilized to navigate geopolitical uncertainties and changing demand trends.
Delta’s $330 million USD investment for a 15% stake in WestJet, together with Korean Air’s $220 million USD for a 10% stake, is not merely financial support — it represents a strategic maneuver to enhance their influence within the SkyTeam alliance and secure prolonged access to the Canadian market. These shifts occur at a time when traditional bilateral travel routes are being challenged, and airlines are aiming to broaden their exposure via cross-border equity investments and joint ventures.
From the Australian standpoint, this trend reflects the strategic challenges facing Qantas and Virgin Australia. As these airlines pursue new international routes and strengthen their alliance frameworks, the Delta–WestJet–Korean Air collaboration may provide a valuable model. The capacity to pool resources, share risks, and optimize fleet distribution across various jurisdictions is becoming an essential differentiator in the post-pandemic aviation landscape.
“Aligning our interests guarantees that we stay focused on delivering a world-class global network and customer experience,” stated Delta CEO Ed Bastian, emphasizing the operational advantages that such alliances are designed to unlock.
For institutional investors in Australia, particularly those with stakes in aviation infrastructure, transport ETFs, or sovereign wealth funds, the implications are twofold:
- Firstly, equity-driven alliances are increasingly being employed as a safeguard against regional instability. As demonstrated by WestJet, private ownership under Onex Corporation has facilitated more nimble decision-making and strategic realignment — a model that may attract Australian private equity firms interested in aviation assets.
- Secondly, the integration of transpacific and transatlantic networks through alliance-centric investments could result in heightened competition on long-haul routes, including those linking Australia to North America and Europe. While this may exert pressure on profit margins, it also presents new arbitrage possibilities for carriers possessing strong financial positions and adaptable fleet strategies.
With WestJet now recalibrating its network and enhancing its global partnerships, the airline is effectively evolving from a regional player into a strategic player within the SkyTeam framework. For Australian investors, this reinforces the necessity of observing alliance dynamics — not only for their influence on route economics but also for their role in shaping competitive factors across key aviation corridors.
