In a bold move that underscores its ambition to dominate the Canada-Latin America travel corridor, Air Canada has unveiled its largest-ever Latin America expansion for the Winter 2025-26 season. With four new destinations, 13 new routes, and a 16% capacity increase, the Canadian flag carrier is poised to redefine connectivity between North and South America. This strategic expansion not only strengthens Air Canada’s market position but also carries profound implications for South American airlines and the region’s aviation ecosystem. As Latin American carriers navigate a complex landscape of rising demand and competitive pressures, this move highlights both opportunities and challenges for the industry.
A Strategic Power Play
Air Canada’s Winter 2025-26 schedule introduces direct flights to Rio de Janeiro, Cartagena, Guatemala City, and Guadalajara, alongside new routes to Santiago, Pointe-à-Pitre, Fort-de-France, Nassau, Montego Bay, and Huatulco. With over 55 daily flights and 80,000 weekly seats, the airline will operate the most extensive Latin America network of any Canadian carrier. This expansion, part of Air Canada’s “New Frontiers” strategy, is a calculated effort to capture leisure and connecting traffic while tapping into the region’s burgeoning cargo market.
The strategic importance of this move lies in its multifaceted approach to market penetration. By targeting high-demand leisure destinations, Air Canada caters to Canadian travelers seeking winter escapes, a segment that has seen consistent growth. Routes like Toronto to Rio de Janeiro and Montreal to Cartagena tap into the allure of vibrant cultural hubs, positioning Air Canada as the preferred carrier for sun-seeking travelers. Simultaneously, new services to business-oriented destinations like Guadalajara and Guatemala City enhance connectivity for corporate travelers, aligning with Latin America’s growing economic integration with North America.
The expansion also leverages Canada’s geographic advantage as a hub for North-South American travel. By offering direct flights from Toronto, Montreal, Vancouver, and secondary cities like Ottawa, Halifax, and Quebec City, Air Canada facilitates seamless connections for passengers traveling to and from the United States and beyond. This connectivity strengthens Canada’s role as a transit hub, potentially diverting traffic from traditional Latin American hubs like Bogotá or São Paulo.
Cargo is another critical dimension of the strategy. Latin America’s air cargo market grew by 11.7% in 2024, driven by demand for perishable goods, electronics, and e-commerce. Air Canada’s increased capacity, supported by its freighter operations, positions the airline to capture a larger share of this lucrative market. As Mark Galardo, EVP & President, Cargo, noted, the expansion “fulfills our New Frontiers strategy, serving both leisure and connecting traffic, and tapping into cargo growth opportunities.” This dual focus on passenger and cargo revenue underscores the strategic depth of the move.
Implications for South American Aviation
The 2024 full-year report for benchmark Latin American airlines, as noted by FlightGlobal, highlights a region exceeding 2023’s operating profit but falling short of net profit goals. Air Canada’s aggressive expansion introduces new dynamics that could reshape this landscape, challenging South American carriers like LATAM, Avianca, and Copa Airlines while fostering broader market growth.
Competitive Pressure on Key Routes
Air Canada’s new routes directly compete with South American carriers on high-demand city pairs. For instance, the Toronto-Rio de Janeiro route challenges LATAM’s dominance in the Canada-Brazil market, while Montreal-Cartagena competes with Avianca’s services to Colombia. The 16% capacity increase, coupled with Air Canada’s competitive pricing and loyalty programs, could pressure local carriers to lower fares or enhance service offerings, potentially squeezing already tight margins. In 2024, Latin American airlines faced rising operational costs, including fuel and labor, which limited net profit growth. Increased competition from Air Canada may exacerbate these challenges, particularly for carriers with less diversified revenue streams.
Shifting Connecting Traffic
Air Canada’s focus on connecting traffic could disrupt the hub-and-spoke models of South American airlines. Traditionally, carriers like Avianca (Bogotá) and LATAM (São Paulo, Santiago) have relied on their hubs to funnel passengers across the Americas. By offering direct flights and connections through Canadian hubs, Air Canada may divert passengers who previously transited through Latin American gateways. This shift could reduce load factors for South American carriers, increasing per-seat costs and further straining profitability. For example, a U.S. traveler to Guatemala City might now choose Air Canada’s Montreal connection over Avianca’s Bogotá hub, impacting the latter’s network efficiency.
Cargo Market Dynamics
The 11.7% growth in Latin America’s air cargo market presents both opportunity and competition. Air Canada’s expanded freighter schedule, integrated with its passenger network, positions it to compete with LATAM Cargo and other regional players. South American carriers may need to accelerate investments in cargo infrastructure or form alliances to maintain their market share. The ability to offer combined passenger-cargo services on new routes gives Air Canada a cost advantage, as shared operational expenses can subsidize competitive pricing in both markets.
Economic and Tourism Benefits
Despite competitive pressures, Air Canada’s expansion could stimulate economic growth in Latin America. New routes to Rio de Janeiro, Cartagena, and Guatemala City align with regional efforts to boost tourism, a key economic driver. Brazil, for instance, has invested heavily in promoting Rio as a global destination, while Colombia’s tourism sector has grown steadily post-pandemic. Increased connectivity from Canada could drive higher visitor numbers, benefiting local economies and creating demand for South American carriers to expand their own networks. Additionally, Air Canada’s code-sharing strategy, common in its international operations, may open opportunities for partnerships with Latin American airlines, allowing them to share revenue on connecting flights and mitigate competitive impacts.
Structural Challenges in Context
The expansion also highlights structural challenges in Latin American aviation, mirroring issues seen in other regions like Africa, as outlined in The Paradox of African Skies. High operational costs, fragmented regulatory frameworks, and limited competition characterize both markets. Latin American carriers face elevated fuel costs (25-30% of expenses) and high airport fees, which drive up ticket prices. Unlike transatlantic routes, where dense demand and modern fleets keep fares competitive, Latin American routes often suffer from low passenger volumes and older aircraft, inflating per-seat costs. Air Canada’s modern fleet, including fuel-efficient Boeing 787s and Airbus A330s, gives it a cost advantage over some regional competitors, enabling competitive pricing that could force South American carriers to accelerate fleet modernization.
Regulatory barriers, such as restrictive bilateral air service agreements, also limit market efficiency in Latin America. While initiatives like the Latin American Civil Aviation Commission (LACAC) aim to liberalize air transport, progress has been slower than in Europe or North America. Air Canada’s ability to secure traffic rights for new routes underscores its diplomatic and commercial leverage, which smaller Latin American carriers may struggle to match.
The Path Forward for South American Airlines
To navigate Air Canada’s expansion, South American airlines must adopt proactive strategies. Fleet modernization is critical to reducing operating costs and enabling competitive pricing. Carriers like LATAM, which has invested in Airbus A320neo and Boeing 787 aircraft, are better positioned to compete, but smaller operators may require access to affordable financing to upgrade their fleets.
Regulatory reform is equally essential. Accelerating open-skies agreements within Latin America could foster competition, lower fares, and increase passenger volumes, mirroring the benefits seen in Europe’s single aviation market. Collaboration with Air Canada through code-shares or joint ventures, as seen in transatlantic markets, could also help regional carriers maintain market presence while sharing costs and revenues.
Finally, South American airlines should leverage ancillary revenue streams, such as premium cabin upgrades and baggage fees, to offset competitive pressures. While Air Canada has mastered this model, many Latin American carriers lag in developing sophisticated ancillary strategies, limiting their financial flexibility.
A Transformative Moment
Air Canada’s Winter 2025-26 expansion is a transformative moment for Latin American aviation. Strategically, it positions the airline as a dominant player in the Canada-Latin America corridor, leveraging leisure demand, cargo growth, and connectivity to strengthen its global network. For South American airlines, the move introduces fierce competition but also opportunities for growth through increased tourism and potential partnerships.
As Latin America’s aviation market evolves, the interplay of competition, regulation, and infrastructure will shape its future. Air Canada’s bold bet underscores the region’s untapped potential, but it also challenges local carriers to innovate and adapt. The skies over Latin America are becoming more connected—and more contested—than ever before.
Disclaimer: The insights shared in this article are for informational purposes only and do not constitute strategic advice. Aviation markets and circumstances vary, and decisions should be based on your organization’s specific context. For tailored consultancy and guidance, please contact info@avaerocapital.com.
