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Air Canada (TSE:AC)
TSX:AC
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Air Canada
(TSX:AC)
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Rating:61Neutral
Price Target:
C$20.00
▲(12.49% Upside)
Air Canada's overall stock score reflects strong revenue recovery and strategic initiatives, tempered by high leverage and operational challenges. The undervaluation based on P/E ratio and positive earnings call sentiment are significant positives, while technical indicators suggest caution due to potential bearish momentum.
Positive Factors
Negative Factors
Air Canada (AC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$5.27B
Dividend YieldN/A
Average Volume (3M)2.71M
Price to Earnings (P/E)4.3
Beta (1Y)1.22
Revenue Growth0.33%
EPS Growth-15.99%
CountryCA
Employees37,200
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.60
Shares Outstanding296,202,850
10 Day Avg. Volume2,734,473
30 Day Avg. Volume2,710,415
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap2.40
Enterprise Value/Revenue0.56
Enterprise Value/Gross Profit2.76
Enterprise Value/Ebitda4.72
Forecast
1Y Price Target
$25.25Price Target Upside42.02% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering12
Air Canada Business Overview & Revenue Model
Company DescriptionAir 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 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 strong revenue recovery post-pandemic, but profitability and cash flow metrics indicate ongoing challenges. High leverage remains a significant risk, requiring careful management to ensure financial stability.Income Statement
Air Canada's income statement shows a strong recovery in revenue with a TTM growth rate of 50.8%. However, profitability metrics like gross profit margin (20.44%) and net profit margin (6.60%) are moderate, reflecting industry challenges. EBIT and EBITDA margins have declined compared to previous years, indicating pressure on operational efficiency.65
Positive
Balance Sheet
The balance sheet reveals high leverage with a debt-to-equity ratio of 6.60, which poses a financial risk. Return on equity is strong at 63.72%, but the equity ratio is low, indicating reliance on debt financing. This high leverage could impact financial stability if not managed carefully.45
Neutral
Cash Flow
Cash flow analysis shows a decline in free cash flow growth (-25.07%) and a moderate operating cash flow to net income ratio (0.29). While free cash flow to net income ratio is 0.21, indicating some cash generation, the overall cash flow position suggests potential liquidity challenges.55
Neutral
| 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
Negative
17.78
Price Trends
19.53
Negative
19.49
Negative
18.64
Negative
Market Momentum
-0.36
Positive
28.07
Positive
11.69
Positive
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 17.78 is below the 20-day moving average (MA) of 18.84, below the 50-day MA of 19.53, and below the 200-day MA of 18.64, indicating a bearish trend. The MACD of -0.36 indicates Positive momentum. The RSI at 28.07 is Positive, neither overbought nor oversold. The STOCH value of 11.69 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:AC.
Air Canada Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | 12.73B | 30.62 | 8.44% | ― | 8.04% | ― | |
65 Neutral | 1.44B | 10.44 | 19.91% | 1.51% | 14.37% | ― | |
65 Neutral | 19.23B | 30.35 | -28.41% | ― | 6.69% | 64.89% | |
64 Neutral | 933.07M | 24.50 | 4.71% | 0.92% | 6.58% | 121.23% | |
61 Neutral | $5.27B | 4.30 | 101.32% | ― | 0.33% | -15.99% | |
56 Neutral | 578.23M | -17.30 | 11.82% | 0.35% | -16.92% | 77.04% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
Performance Comparison
TSE:AC
Air Canada
17.78
1.39
8.48%
CAE
CAE
28.51
9.76
52.05%
BDRBF
Bombardier
137.84
61.80
81.27%
TSE:CHR
Chorus Aviation
22.60
2.72
13.68%
TSE:MAL
Magellan Aerospace
16.33
7.14
77.69%
CGJTF
Cargojet
66.74
-33.45
-33.39%
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.