Education
About Us
Working with TipRanks
Follow Us
Air Canada (TSE:AC)
TSX:AC
Top Page
Air Canada
(TSX:AC)
Rating:63Neutral
Price Target:
C$21.00
▲(7.69% Upside)
Positive Factors
Demand Environment
Air Canada experienced a solid overall demand environment, with monthly screened passengers at Canada's largest airports rising each month.
Fleet Modernization
Air Canada aims to modernize its fleet with 87 new aircraft, which supports growth and improves competitive market positioning.
Operational Recovery
The resolution of the flight attendants' strike means Air Canada can begin to restore network operations.
Negative Factors
Cash Flow Concerns
There is an anticipated modest impact on forward bookings and a potential cash flow dent that could impact spare liquidity.
Financial Impact
The flight attendants' strike had an estimated one-time financial impact of around $400 million on EBIT and a modest impact on forward bookings.
Near-term Volatility
The expiry of the SIB and heightened geopolitical risk may lead to near-term stock volatility.
Air Canada (AC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$5.78B
Dividend YieldN/A
Average Volume (3M)3.17M
Price to Earnings (P/E)4.7
Beta (1Y)1.19
Revenue Growth0.33%
EPS Growth-15.99%
CountryCA
Employees37,200
SectorIndustrials
Sector Strength79
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.60
Shares Outstanding296,172,240
10 Day Avg. Volume2,994,718
30 Day Avg. Volume3,173,686
Financial Highlights & Ratios
PEG Ratio-0.20
Price to Book (P/B)3.34
Price to Sales (P/S)0.36
P/FCF Ratio6.16
Enterprise Value/Market Cap2.19
Enterprise Value/Revenue0.56
Enterprise Value/Gross Profit2.76
Enterprise Value/Ebitda4.72
Forecast
1Y Price Target
$26.60Price Target Upside36.39% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering10
Air Canada Business Overview & Revenue Model
Company DescriptionAir Canada (AC) is the flag carrier and largest airline of Canada, headquartered in Montreal, Quebec. It operates a comprehensive domestic and international network, serving over 220 destinations in more than 50 countries. The airline is a member of the Star Alliance, which enhances its global reach. Core products and services include passenger air transportation, cargo services, and various ancillary services such as in-flight entertainment, seat selection, and loyalty programs through Aeroplan.
How the Company Makes MoneyAir Canada generates revenue primarily through passenger ticket sales, which account for a significant portion of its income. Additionally, the airline earns money from cargo services, providing air freight solutions for businesses. Ancillary revenues are also crucial, coming from services such as baggage fees, in-flight sales, and premium services. The Aeroplan loyalty program plays a significant role in revenue generation, as it allows customers to earn and redeem points, creating customer loyalty and additional sales through partnerships with hotels, car rental services, and other travel-related services. Strategic partnerships, including codeshare agreements with other airlines within the Star Alliance, also contribute to its earnings by expanding its market reach and providing customers with more travel options.
Air Canada Earnings Call Summary
Earnings Call Date:Jul 29, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 29, 2025
Earnings Call Sentiment Neutral
Air Canada showcased a robust financial performance with strong revenue growth and recognition in several areas, including Aeroplan and the international network. However, challenges in the transborder market, yield pressures in the Pacific, and rising labor costs posed significant concerns. The ongoing labor negotiations add uncertainty to future operations.Q2-2025 Updates
Positive Updates
Strong Financial Performance
Air Canada reported revenues of $5.6 billion, operating income of $418 million, and adjusted EBITDA of $909 million with a margin of 16.1% for the second quarter.
Recognition and Awards
Air Canada was named the best airline in North America and received multiple awards at the 2025 Skytrax World Airline Awards.
Aeroplan Growth
Aeroplan received three top Freddie Awards and saw third-party gross billings increase by 7% year-over-year.
International Network Expansion
Continued strategic expansion of the international network, including new flights and connections, contributing to solid revenue growth in the Atlantic and Latin American markets.
Cargo Revenue Increase
Cargo revenues increased by 10% to $253 million, showing strong performance.
Sixth Freedom Revenue Growth
Sixth freedom revenues grew by 17%, driven by strong performance in the Atlantic and Pacific markets.
Shareholder Returns
Completed a $500 million substantial issuer bid, returning value to shareholders and reducing share dilution.
Negative Updates
Challenges in Transborder Market
Revenues in the transborder market declined by 11% on 8% less capacity, attributed to reduced demand for trips to the U.S.
Yield Pressure in Pacific Region
Increased competitive capacity in China/Hong Kong led to lower unit revenues in the Pacific region.
Labor Cost Increases
Labor expenses increased by 16% year-over-year, contributing to higher adjusted CASM and unit cost pressures.
Flight Attendant Union Negotiations
Ongoing negotiations with the flight attendant union, CUPE, seeking a strike mandate, which could pose future operational challenges.
Company Guidance
In the Air Canada Second Quarter 2025 results call, the company reaffirmed its full-year guidance, highlighting several key metrics. Air Canada reported revenues of $5.6 billion for the quarter, with an operating income of $418 million and an adjusted EBITDA of $909 million, resulting in an adjusted EBITDA margin of 16.1%. The company carried over 11 million customers in the second quarter. Despite the challenges faced due to economic and geopolitical uncertainties, Air Canada achieved strong performance through disciplined capacity management and leveraging its diverse network. The company expects full-year capacity to grow between 1% and 3%, with third-quarter capacity anticipated to increase between 3.25% and 3.75%. Additionally, Air Canada completed a $500 million share buyback, reducing pandemic-induced share dilution. The airline also reported that premium cabin revenues grew by 5% year-over-year, with premium revenues representing close to 31% of total passenger revenues. The company maintained its full-year adjusted CASM guidance of $0.1425 to $0.145, despite acknowledging some cost pressures. Furthermore, Air Canada is focused on enhancing shareholder returns and executing on its long-term strategic plan, with a strong emphasis on customer experience and operational efficiency.Air Canada Financial Statement Overview
Summary
Air Canada's financial performance shows a positive trajectory with strong revenue growth and profitability, despite high leverage. Efficient equity utilization supports a strong ROE, but the high debt-to-equity ratio poses financial risks. Cash flow metrics are generally solid, although free cash flow growth requires attention.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 | 22.34B | 22.25B | 21.83B | 16.56B | 6.40B | 5.83B |
| Gross Profit | 4.57B | 5.46B | 6.15B | 2.80B | -1.62B | -2.31B |
| EBITDA | 2.67B | 3.04B | 4.83B | 1.00B | -1.65B | -2.39B |
| Net Income | 1.48B | 1.72B | 2.28B | -1.70B | -3.60B | -4.65B |
Balance Sheet | ||||||
| Total Assets | 31.15B | 31.21B | 30.20B | 29.51B | 30.61B | 28.91B |
| Cash, Cash Equivalents and Short-Term Investments | 6.19B | 6.98B | 8.55B | 7.99B | 8.80B | 7.50B |
| Total Debt | 11.79B | 12.67B | 13.86B | 16.31B | 16.52B | 12.99B |
| Total Liabilities | 29.36B | 28.82B | 29.40B | 31.06B | 30.61B | 27.20B |
| Stockholders Equity | 1.79B | 2.39B | 796.00M | -1.55B | 9.00M | 1.72B |
Cash Flow | ||||||
| Free Cash Flow | 801.00M | 1.29B | 2.76B | 796.00M | -2.64B | -3.56B |
| Operating Cash Flow | 3.83B | 3.93B | 4.32B | 2.37B | -1.56B | -2.35B |
| Investing Cash Flow | -881.00M | -1.36B | -1.83B | -2.50B | -1.87B | -733.00M |
| Financing Cash Flow | -2.64B | -2.87B | -2.37B | -1.61B | 4.01B | 4.70B |
Air Canada Technical Analysis
Neutral
19.50
Price Trends
20.42
Negative
18.58
Positive
19.19
Positive
Market Momentum
-0.20
Negative
45.95
Neutral
59.03
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:AC, the sentiment is Neutral. The current price of 19.5 is above the 20-day moving average (MA) of 19.38, below the 50-day MA of 20.42, and above the 200-day MA of 19.19, indicating a neutral trend. The MACD of -0.20 indicates Negative momentum. The RSI at 45.95 is Neutral, neither overbought nor oversold. The STOCH value of 59.03 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:AC.
Air Canada Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
64 Neutral | $10.84B | 16.10 | 8.24% | 1.99% | 2.74% | -14.89% | |
63 Neutral | $5.78B | 4.71 | 101.32% | ― | 0.33% | -15.99% | |
| ― | $8.64B | 29.17 | 8.73% | ― | ― | ― | |
| ― | $11.70B | 25.65 | ― | ― | ― | ||
56 Neutral | C$910.79M | 24.02 | 4.85% | 0.78% | 6.58% | 121.23% | |
50 Neutral | C$522.78M | ― | 2.81% | 0.39% | -16.92% | 77.04% | |
| ― | $1.14B | 11.21 | 19.73% | 1.36% | ― | ― |
* Industrials Sector Average
Performance Comparison
TSE:AC
Air Canada
19.50
4.29
28.21%
CAE
CAE
26.94
9.26
52.38%
BDRBF
Bombardier
116.64
53.04
83.40%
TSE:CHR
Chorus Aviation
20.32
2.12
11.65%
TSE:MAL
Magellan Aerospace
15.94
6.92
76.72%
CGJTF
Cargojet
73.60
-19.74
-21.15%
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.