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Air Canada (TSE:AC)
TSX:AC
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Air Canada
(TSX:AC)
Rating:73Outperform
Price Target:
C$21.00
▲(3.35%Upside)
Positive Factors
Cost Management
The company has shown strong cost management, maintaining its cost per available seat mile while implementing a $150 million reduction plan.
Fleet Expansion
Air Canada aims to modernize its fleet with 87 new aircraft, which supports growth and improves competitive market positioning.
Strong Demand
Advanced ticket sales have increased significantly, indicating stable broader booking trends and strong demand.
Negative Factors
Geopolitical Risk
Near-term volatility may arise as a result of the SIB expiry and heightened geopolitical risk.
Transborder Bookings
There are reductions in capacity and challenges in US transborder bookings, but strategic actions have mitigated some of these impacts.
Air Canada (AC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$7.17B
Dividend YieldN/A
Average Volume (3M)3.33M
Price to Earnings (P/E)4.3
Beta (1Y)1.22
Revenue Growth0.24%
EPS Growth-23.10%
CountryCA
Employees37,200
SectorIndustrials
Sector Strength87
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)-0.45
Shares Outstanding102,314,030
10 Day Avg. Volume3,864,967
30 Day Avg. Volume3,327,515
Financial Highlights & Ratios
PEG Ratio0.08
Price to Book (P/B)-4.46
Price to Sales (P/S)0.00
P/FCF Ratio8.72
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$23.27Price Target Upside14.49% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering11
Air Canada Business Overview & Revenue Model
Company DescriptionAir Canada (AC) is Canada's largest full-service airline and the country's flag carrier, headquartered in Montreal, Quebec. It operates a comprehensive domestic and international network, providing passenger and cargo air transportation services. Air Canada serves over 200 airports on six continents and is a founding member of the Star Alliance, a global airline network. The airline offers a range of travel classes, including Economy, Premium Economy, and Business, along with various ancillary services to enhance the travel experience.
How the Company Makes MoneyAir Canada generates revenue primarily through the sale of airline tickets for both passenger travel and cargo transportation. Passenger fares constitute the largest portion of its income, with supplementary revenue from additional services such as seat selection, checked baggage fees, in-flight food and beverage sales, and travel insurance. The company also earns money through its Aeroplan loyalty program, which partners with various brands and financial institutions to offer rewards and benefits, thereby incentivizing frequent travel. Cargo operations further contribute to revenue by transporting goods across Air Canada's extensive route network. Strategic partnerships and alliances, such as its membership in the Star Alliance, enable code-sharing and joint ventures, expanding its market reach and optimizing operational efficiencies.
Air Canada Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: 32.81%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
Despite facing challenges such as an operating loss, passenger revenue decline, and reduced demand in the transborder market, Air Canada maintained a stable revenue stream and exhibited strong performance in areas like Aeroplan and cargo. Their effective cost management, balance sheet strength, and strategic network diversification are positive indicators, even as they navigate market uncertainties.Q1-2025 Updates
Positive Updates
Stable Revenue and Advanced Ticket Sales Growth
Air Canada reported first quarter revenues of $5.2 billion, which were essentially the same as last year. Advanced ticket sales grew by $1 billion from the end of 2024, driving $1.5 billion in cash from operations and $831 million in free cash flow generation in the quarter.
Strong Performance in Key Areas
Third-party billings at Aeroplan continued to be very strong, growing 7% year-over-year. Also, cargo revenues increased 16% to $250 million from the previous year.
Cost Management and Balance Sheet Strength
Air Canada launched a $150 million cost reduction program for 2025. They reported a net leverage ratio of 1.3%, and completed a share buyback program with 35.8 million shares purchased and canceled.
Network Diversification and Capacity Reallocation
Air Canada's diversified network allowed for effective capacity reallocation in response to demand changes. New routes such as Montreal-Edinburgh and expansion into Latin America were announced.
Negative Updates
Operating Loss and Passenger Revenue Decline
Air Canada experienced an operating loss of $108 million. Quarterly passenger revenues totaled $4.3 billion, a decrease of 3% year-over-year.
Decline in Transborder Market
There was a reported decline in interest among Canadians for travel to the U.S., with booking declines on the transborder market in the low-teens over the next 6 months.
Operational Challenges
The company faced operational disruptions due to two major winter storms and maintenance challenges with the Airbus A220 fleet. These disruptions had an estimated EBITDA impact of CAD35 million for the quarter.
Updated Guidance Reflecting Market Uncertainty
Air Canada updated its full-year guidance, now expecting 2025 adjusted EBITDA to be between $3.2 billion and $3.6 billion, considering recent market trends and expectations.
Company Guidance
During Air Canada's first quarter 2025 results call, the company provided updated guidance reflecting a cautious outlook due to ongoing market uncertainties. The airline reported first quarter revenues of $5.2 billion, with an operating loss of $108 million and adjusted EBITDA of $387 million, surpassing market expectations. Despite challenges, including a 3% year-over-year decline in quarterly passenger revenues to $4.3 billion and a 5% reduction in transborder revenue, Air Canada highlighted several positive metrics. Advanced ticket sales grew by $1 billion, contributing to $1.5 billion in cash from operations and $831 million in free cash flow. The company maintained its full-year guidance, projecting adjusted EBITDA between $3.2 billion and $3.6 billion, and outlined a $150 million cost reduction program. The guidance also factored in a slight moderation in capacity growth, with ASMs now expected to increase by 1% to 3% for the year. Despite the challenges, Air Canada remains focused on strategic capacity adjustments and cost management to navigate the uncertain environment while targeting long-term commitments.Air Canada Financial Statement Overview
Summary
Air Canada shows a positive recovery trajectory with significant revenue growth and healthy gross profit margin. While the high debt-to-equity ratio indicates significant leverage, a strong ROE reflects efficient equity utilization. Cash flow metrics are solid, but there is a need for attention to free cash flow growth. Overall, the financial statements indicate a strong recovery, though vigilance on debt levels and cash flow is advised.Income Statement
Air Canada shows a positive trajectory in its income statement with significant revenue growth from 2022 to TTM (Trailing-Twelve-Months). The gross profit margin for TTM stands at approximately 30.5%, indicating a healthy profitability relative to revenue. The net profit margin of about 7.6% reflects improved profitability compared to previous years. Despite the slight decline in EBIT margin from 5.7% in 2024 to 5.1% in TTM, the EBITDA margin remains strong at 13.3%, indicating effective cost management.78
Positive
Balance Sheet
The balance sheet reveals a high debt-to-equity ratio of approximately 6.39 in TTM, indicating significant leverage. However, the return on equity (ROE) is strong at about 85.3% in TTM, illustrating efficient use of equity to generate profits. The equity ratio is relatively low at 6.2%, suggesting a high level of liabilities compared to assets, which could pose financial risks.65
Positive
Cash Flow
Cash flow analysis for Air Canada reflects robust operational cash flow, with a solid operating cash flow to net income ratio of around 2.3 in TTM, signifying strong cash earnings. The free cash flow to net income ratio of about 0.63 indicates a moderate level of free cash generated relative to net income. However, the free cash flow growth rate shows a decline from 2024 to TTM, reflecting potential challenges in maintaining cash flow growth.72
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 22.23B | 22.25B | 21.83B | 16.56B | 6.40B | 5.83B |
| Gross Profit | 6.77B | 5.46B | 6.15B | 2.80B | -1.62B | -2.31B |
| EBITDA | 2.95B | 3.04B | 4.83B | 1.00B | -1.65B | -2.39B |
| Net Income | 1.70B | 1.72B | 2.28B | -1.70B | -3.60B | -4.65B |
Balance Sheet | ||||||
| Total Assets | 31.95B | 31.21B | 30.20B | 29.51B | 30.61B | 28.91B |
| Cash, Cash Equivalents and Short-Term Investments | 7.09B | 6.98B | 8.55B | 7.99B | 8.80B | 7.50B |
| Total Debt | 12.73B | 12.67B | 13.86B | 16.31B | 16.52B | 12.99B |
| Total Liabilities | 29.96B | 28.82B | 29.40B | 31.06B | 30.61B | 27.20B |
| Stockholders Equity | 1.99B | 2.39B | 796.00M | -1.55B | 9.00M | 1.72B |
Cash Flow | ||||||
| Free Cash Flow | 1.07B | 1.29B | 2.76B | 796.00M | -2.64B | -3.56B |
| Operating Cash Flow | 3.86B | 3.93B | 4.32B | 2.37B | -1.56B | -2.35B |
| Investing Cash Flow | -1.51B | -1.36B | -1.83B | -2.50B | -1.87B | -733.00M |
| Financing Cash Flow | -1.73B | -2.87B | -2.37B | -1.61B | 4.01B | 4.70B |
Air Canada Technical Analysis
Positive
20.32
Price Trends
17.54
Positive
16.64
Positive
18.68
Positive
Market Momentum
0.58
Negative
68.58
Neutral
91.96
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:AC, the sentiment is Positive. The current price of 20.32 is above the 20-day moving average (MA) of 19.01, above the 50-day MA of 17.54, and above the 200-day MA of 18.68, indicating a bullish trend. The MACD of 0.58 indicates Negative momentum. The RSI at 68.58 is Neutral, neither overbought nor oversold. The STOCH value of 91.96 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:AC.
Air Canada Peers Comparison
Overall Rating
UnderperformOutperform
Sector (67)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $7.17B | 4.32 | 132.28% | ― | 0.24% | -23.10% | |
73 Outperform | C$1.06B | 26.50 | 5.12% | 1.08% | 8.59% | 242.80% | |
72 Outperform | $1.45B | 11.83 | 15.65% | 1.50% | 16.28% | 239.02% | |
72 Outperform | $11.57B | 30.03 | -18.58% | ― | 16.31% | 4.12% | |
67 Neutral | $12.33B | 30.30 | 8.87% | ― | 1.44% | -183.14% | |
67 Neutral | €9.99B | 16.66 | 3.59% | 3.43% | 3.93% | -21.04% | |
59 Neutral | C$561.87M | ― | -0.09% | ― | -17.58% | -703.93% |
* Industrials Sector Average
Performance Comparison
TSE:AC
Air Canada
20.32
2.38
13.27%
TSE:CAE
CAE
38.47
12.85
50.16%
TSE:CJT
Cargojet
93.42
-44.11
-32.07%
TSE:BBD.B
Bombardier
115.67
27.45
31.12%
TSE:CHR
Chorus Aviation
21.64
4.56
26.70%
TSE:MAL
Magellan Aerospace
18.55
10.62
133.92%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.