Air Canada forecast its 2025 core profit above analysts' estimates on Thursday, as the country's largest carrier relies on consistent international travel demand and a rebound in business bookings.

The airline expects its 2025 adjusted earnings before interest, taxes, depreciation and amortization in the range of C$3.4 billion ($2.39 billion) to C$3.8 billion, compared with analysts' average estimates of C$3.5 billion.

The carrier has seen strong demand for its services to Asia Pacific and China and has been expanding capacity on these routes.

Canada's largest carrier reported a quarterly operating revenue of C$5.40 billion in the quarter ended December 31, up 4% from a year earlier.

Airlines with international routes are capitalizing on the growing demand for global travel, as consumers place greater emphasis on experiences rather than material goods.

The Montreal-based company reported fourth-quarter adjusted per-share profit of C$0.25, versus a loss of C$0.12 in the year-ago period due to rising labor costs.

However, costly labor agreements and rising aircraft maintenance expenses are squeezing carriers' profit margins.

Last year, the Canadian flag carrier signed a new labor deal with its pilots, which would give the aviators a general four-year cumulative pay hike of about 42%, generating about C$1.9 billion in additional value.

Air Canada is also facing significant foreign exchange costs due to the Canadian dollar's decline against the greenback, as investor concerns grow over the potential impact of a trade war between the two neighboring countries.

The airline is also expected to take a hit from decreased cross-border traffic to the U.S., as Canadians choose to avoid trips south of the border after Trump's 25% tariffs on most Canadian goods.

Trump has paused those tariffs for a period of 30 days.

($1 = 1.4198 Canadian dollars)

(Reporting by Shivansh Tiwary, Devika Nair and Mrinmay Dey in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)