Air Canada (AC) AI Stock Analysis

• Market Cap: $5.60B
• Dividend Yield: N/A
• Average Volume (3M): 2.24M
• Price to Earnings (P/E): 9.3
• Beta (1Y): 1.21
• Revenue Growth: -0.09%
• EPS Growth: -109.21%
• Country: CA
• Employees: 37,200
• Sector: Industrials
• Sector Strength: 72
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 0.65
• Shares Outstanding: 293,473,180
• 10 Day Avg. Volume: 2,409,892
• 30 Day Avg. Volume: 2,235,681
• PEG Ratio: -0.16
• Price to Book (P/B): 2.32
• Price to Sales (P/S): 0.27
• P/FCF Ratio: 8.03
• Enterprise Value/Market Cap: 2.57
• Enterprise Value/Revenue: 0.64
• Enterprise Value/Gross Profit: 2.10
• Enterprise Value/Ebitda: 4.42
• 1Y Price Target: $26.11
• Price Target Upside: 38.12% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 11
• EPS Forecast (FY): 2.15
• Revenue Forecast (FY): $23.87B

• Rating: 58 Neutral
• Price Target: C$20.00 ▲(5.82% Upside)
• Action: Reiterated Date: 02/18/26
• Date: Action: Reiterated 02/18/26

The score is held back primarily by compressed profitability and a still highly leveraged balance sheet with uneven free-cash-flow conversion. Offsetting factors include constructive technical positioning (above major moving averages with positive MACD) and a relatively low P/E, while the latest earnings call was mixed due to disruption impacts and fleet delivery delays despite strong booking trends.

Positive Factors

Market Position & Alliance

Air Canada's status as Canada's largest carrier and a Star Alliance member creates durable network scale and global connectivity. That scale supports steady corporate and international traffic, loyalty program feed, and route depth that help stabilize long-term revenue and competitive positioning.

Stable Revenue Base

A roughly $22B revenue run-rate sustained since the pandemic signals resilient core demand and diversified route exposure. Stable top-line helps absorb cyclicality in fares, underpins fixed-cost coverage, and provides a consistent foundation for multi-year operational and network planning.

Cost Reduction Program

A targeted $150M cost program that is on track is a structural lever to restore margin durability. Persistent savings from operational efficiencies and management actions can improve CASM control, support margin recovery, and partially offset industry headwinds over the coming 2–6 months.

Negative Factors

Elevated Leverage

High absolute debt and a ~4.5x debt-to-equity ratio leave limited balance-sheet cushion. Elevated leverage increases vulnerability to demand shocks, fuel or interest-rate swings, and constrains strategic flexibility for fleet investments or opportunistic moves over the medium term.

Margin Compression

A decline from ~10% to ~3% net margin indicates structural pressure from higher costs and softer yields. Narrower margins reduce the company's ability to self-insure against shocks, limit reinvestment capacity, and make profitability more sensitive to modest volume or cost moves.

Weak Free Cash Flow Conversion

Operating cash is positive but free cash flow has been uneven and much lower than net income, limiting internal funding for capex and debt paydown. Continued weak FCF conversion raises refinancing risk and heightens dependence on external financing in adverse periods.

Air Canada Business Overview & Revenue Model

Company Description

Air Canada provides domestic, U.S. transborder, and international airline services. It offers scheduled passenger services under the Air Canada Vacations and Air Canada Rouge brand name in the Canadian market, the Canada-U.S. transborder market, and in the international market to and from Canada, as well as through capacity purchase agreements on other regional carriers. As of December 31, 2021, the company operated a fleet of 175 aircraft under the Air Canada mainline brand name comprising 97 Boeing and Airbus narrow-body aircraft, and 78 Boeing and Airbus wide-body aircraft; 123 aircraft under the Air Canada Express brand name, including 50 Mitsubishi regional jets, 48 De Havilland Dash-8 turboprop aircraft and 25 Embraer 175 aircraft; and 39 aircraft under the Air Canada Rouge brand name consisting of 14 Airbus A321 aircraft, 5 Airbus A320 aircraft, and 20 Airbus A319 aircraft. It also provides air cargo services in domestic and U.S. transborder routes, as well as on international routes between Canada and markets in Europe, Asia, South America, and Australia. In addition, the company operates, develops, markets, and distributes vacation travel packages in the Caribbean, Mexico, the United States, Europe, Central and South America, South Pacific, Australia, and Asia; offers cruise packages in North America, Europe, and the Caribbean; and provides travel loyalty programs. Air Canada was founded in 1937 and is headquartered in Saint-Laurent, Canada.

How the Company Makes Money

Air Canada primarily generates revenue through its passenger transport services, which account for the bulk of its earnings. The airline charges customers for tickets, with prices varying based on factors such as route, demand, and travel class. In addition to ticket sales, Air Canada earns revenue from ancillary services, including baggage fees, seat selection, and in-flight services. Cargo transport is another key revenue stream, as the airline provides freight services for various industries. The company also benefits from loyalty programs, such as Aeroplan, which encourage repeat business and generate income through partnerships with hotels, car rental services, and retail outlets. Strategic partnerships, including those with other airlines in the Star Alliance, enhance connectivity and expand Air Canada's market reach, further contributing to its earnings.

Air Canada Financial Statement Overview

Summary

Post-pandemic recovery is intact with stable revenue (~$22B) and continued profitability, but margins have compressed sharply since 2023 (net margin ~10% to ~3%). Leverage remains high (debt ~$11.6B; ~4.5x debt-to-equity) and free cash flow has been uneven and relatively weak versus earnings in 2025.

Income Statement

Revenue rebounded sharply from 2020–2022 and has stabilized around ~$22B in 2023–2025, but recent top-line growth has cooled (2024 low-single-digit; 2025 essentially flat). Profitability improved materially versus the pandemic period, yet margins have compressed notably from 2023 to 2025 (net margin down from ~10% to ~3%, and operating profitability also lower), indicating higher costs and/or softer pricing. The company remains profitable in the latest annual period, but earnings power appears less durable than the 2023 peak.

Balance Sheet

Leverage remains elevated: total debt is still ~$11.6B in 2025 and debt relative to equity is high (~4.5x), though improved from 2023–2024 and dramatically better than periods when equity was near-zero/negative. Equity is positive but modest (~$2.6B) versus a ~$31B asset base, leaving limited balance-sheet cushion for an industry prone to demand and fuel-cost volatility. Overall, the balance sheet is improving but still carries meaningful financial risk due to high leverage.

Cash Flow

Cash generation is positive and meaningful, with operating cash flow of ~$3.7B in 2025. However, free cash flow fell sharply versus 2023 and is lower than 2024, and free cash flow is small relative to reported earnings in 2025 (free cash flow covers only about one-fifth of net income), which weakens cash-quality. The trend shows the business can generate cash, but free-cash-flow durability has been uneven across the last three years.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	22.37B	22.25B	21.83B	16.56B	6.40B
Gross Profit	6.85B	5.46B	6.15B	2.79B	-1.23B
EBITDA	2.91B	3.04B	4.84B	1.01B	-1.63B
Net Income	644.00M	1.72B	2.28B	-1.70B	-3.60B
Balance Sheet
Total Assets	31.21B	31.21B	30.17B	29.51B	30.61B
Cash, Cash Equivalents and Short-Term Investments	5.53B	6.98B	8.55B	7.99B	8.97B
Total Debt	11.58B	12.67B	13.86B	16.31B	16.52B
Total Liabilities	28.62B	28.82B	29.38B	31.06B	30.61B
Stockholders Equity	2.59B	2.39B	796.00M	-1.55B	9.00M
Cash Flow
Free Cash Flow	747.00M	1.29B	2.76B	796.00M	-2.64B
Operating Cash Flow	3.66B	3.93B	4.32B	2.37B	-1.56B
Investing Cash Flow	-1.00B	-1.36B	-1.83B	-2.50B	-1.87B
Financing Cash Flow	-2.37B	-2.87B	-2.37B	-1.61B	4.01B

Air Canada Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 18.90
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:AC, the sentiment is Negative. The current price of 18.9 is below the 20-day moving average (MA) of 20.45, below the 50-day MA of 19.84, and below the 200-day MA of 19.36, indicating a bearish trend. The MACD of 0.08 indicates Positive momentum. The RSI at 41.13 is Neutral, neither overbought nor oversold. The STOCH value of 20.69 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:AC.

Air Canada Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHR	72 Outperform	C$557.52M	7.03	2.09%	0.76%	-12.42%	69.23%
MAL	72 Outperform	C$1.45B	18.44	5.64%	0.93%	8.84%	131.58%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
CJT	59 Neutral	$1.42B	16.01	16.75%	1.67%	7.71%	3170.43%
AC	58 Neutral	$5.60B	9.32	-10.66%	―	-0.09%	-109.21%
JET	39 Underperform	C$69.11M	-7.43	―	―	16.18%	87.47%