Air Canada (TSE:AC)
TSX:AC
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Air Canada
(TSX:AC)
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Rating:56Neutral
Price Target:
C$19.00
▲(0.21% Upside)
Action:Reiterated
Date:05/02/26
The score is primarily held back by balance-sheet leverage and thinner/softening profitability versus the prior peak, despite solid operating cash flow. Technicals also lean slightly negative with the stock below major moving averages. These are partially offset by a generally positive earnings-call outlook and guidance indicating continued EBITDA and free-cash-flow generation, while valuation appears demanding for a cyclical airline and lacks dividend support.
Positive Factors
Solid cash generation
Sustained, material operating cash flow and positive free cash flow provide durable funding for fleet investment, debt servicing, and shareholder returns. For a cyclical airline, multi‑billion operating cash generation improves resilience to demand and fuel shocks and supports strategic initiatives over 2–6 months.
Negative Factors
Elevated leverage
High absolute debt and a ~4.5x debt-to-equity ratio constrain financial flexibility and amplify cyclicality. In a capital‑intensive, fuel‑sensitive industry, elevated leverage increases refinancing, interest and covenant risk and limits the firm's ability to absorb shocks or opportunistically invest over coming quarters.
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Positive Factors
Negative Factors
Solid cash generation
Sustained, material operating cash flow and positive free cash flow provide durable funding for fleet investment, debt servicing, and shareholder returns. For a cyclical airline, multi‑billion operating cash generation improves resilience to demand and fuel shocks and supports strategic initiatives over 2–6 months.
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Air Canada (AC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$5.39B
Dividend YieldN/A
Average Volume (3M)2.24M
Price to Earnings (P/E)27.7
Beta (1Y)1.21
Revenue Growth3.31%
EPS Growth-44.10%
CountryCA
Employees37,200
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)2.63
Shares Outstanding280,771,360
10 Day Avg. Volume2,409,892
30 Day Avg. Volume2,235,681
Financial Highlights & Ratios
PEG Ratio-0.16
Price to Book (P/B)2.32
Price to Sales (P/S)0.27
P/FCF Ratio8.03
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$22.68Price Target Upside19.63% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering12
EPS Forecast (FY)0.91
Revenue Forecast (FY)C$24.85B
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, a...
How the Company Makes Money
Air Canada primarily makes money by selling air transportation and related travel services. Its largest revenue stream is passenger revenue, earned from ticket sales across its route network and fare classes (including economy and premium cabins)....
Air Canada Earnings Call Summary
Earnings Call Date:Feb 12, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Aug 05, 2026
Earnings Call Sentiment Positive
The call emphasized strong execution in 2025 with an exceptional Q4: record quarterly revenues and EBITDA, robust cash generation, improved operations, and diversified revenue streams (international, Sixth Freedom, cargo, Aeroplan). Management acknowledged notable near-term headwinds—higher CASM driven by labor and depreciation, the carryover impact of summer labor stoppages, a peak CapEx cycle and transitional fleet timing that will pressure 2026 free cash flow and unit costs. However, leadership presented clear mitigation plans (cost reduction programs, sale-and-leasebacks, fleet modernization, pricing/route strategy) and confidence in medium-term margin and cash generation improvement driven by network scale and new aircraft economics. Overall, the positive financial results, strong balance sheet and strategic positioning materially outweigh the transitional cost challenges described.Positive Updates
Record Q4 Revenue and Profitability
Q4 revenues reached $5.8 billion, up nearly 7% year-over-year, and Q4 adjusted EBITDA was a record $867 million (approximately a 25% increase YoY), representing a 15% margin in the quarter.
Negative Updates
Rising Unit Costs (CASM) and Inflationary Pressures
Full-year 2025 adjusted CASM closed at $0.147, a 6.7% YoY increase. Management attributes ~270 basis points of the increase to labor, ~140 basis points to depreciation, and ~150 basis points to nonrecurring impact from summer stoppages.
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Q4-2025 Updates
Positive
Negative
Record Q4 Revenue and Profitability
Q4 revenues reached $5.8 billion, up nearly 7% year-over-year, and Q4 adjusted EBITDA was a record $867 million (approximately a 25% increase YoY), representing a 15% margin in the quarter.
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Company Guidance
Air Canada’s guidance and 2025 results point to continued cash-generation and disciplined investment: Q4 revenues were $5.8B (≈+7% YoY) with record Q4 adjusted EBITDA of $867M (+$171M YoY, ~25% lift) at a ~15% margin; full-year revenues were $22.4B (+1%) with adjusted EBITDA of $3.1B (14% margin) and adjusted CASM of $0.147 (+6.7% YoY, including ~270 bps labor, ~140 bps depreciation and ~150 bps stoppage impacts). The company ended 2025 with $3.7B cash from operations, $747M free cash flow (3% of revenues), $7.5B liquidity and 1.7x net leverage, returned >$850M to shareholders in 2025 (>$1.3B since 2024) and has ~307M fully diluted shares (target <300M by 2028). For 2026 Air Canada expects capacity growth of 3.5%–5.5%, ~35 aircraft deliveries (including first A321XLR and 787‑10), net CapEx around 12% of revenue, adjusted CASM of $0.1505–$0.1535, adjusted EBITDA of $3.35B–$3.75B, free cash flow of $400M–$800M (≈100% conversion of EBITDA to cash), fuel assumption CAD $0.90/L and FX CAD 1.36/USD (≈17% H1 fuel hedged at CAD $0.69/L), plus $150M of new cost savings and up to $2B of sale‑and‑leasebacks (≈$1B assumed in 2026) to move fleet ownership toward a 65%–70% target.Air Canada Financial Statement Overview
Summary
Income Statement
68
Positive
Balance Sheet
41
Neutral
Cash Flow
57
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 22.96B | 22.37B | 22.25B | 21.83B | 16.56B | 6.40B |
| Gross Profit | 7.14B | 6.85B | 5.46B | 6.15B | 2.79B | -1.23B |
| EBITDA | 3.54B | 3.41B | 3.04B | 4.84B | 1.01B | -1.63B |
| Net Income | 794.00M | 644.00M | 1.72B | 2.28B | -1.70B | -3.60B |
Balance Sheet | ||||||
| Total Assets | 33.09B | 31.21B | 31.21B | 30.17B | 29.51B | 30.61B |
| Cash, Cash Equivalents and Short-Term Investments | 6.69B | 5.53B | 6.98B | 8.55B | 7.99B | 8.97B |
| Total Debt | 12.30B | 11.58B | 12.67B | 13.86B | 16.31B | 16.52B |
| Total Liabilities | 30.37B | 28.62B | 28.82B | 29.38B | 31.06B | 30.61B |
| Stockholders Equity | 2.72B | 2.59B | 2.39B | 796.00M | -1.55B | 9.00M |
Cash Flow | ||||||
| Free Cash Flow | 1.24B | 747.00M | 1.29B | 2.76B | 796.00M | -2.64B |
| Operating Cash Flow | 3.93B | 3.66B | 3.93B | 4.32B | 2.37B | -1.56B |
| Investing Cash Flow | -1.05B | -1.00B | -1.36B | -1.83B | -2.50B | -1.87B |
| Financing Cash Flow | -2.17B | -2.37B | -2.87B | -2.37B | -1.61B | 4.01B |
Air Canada Technical Analysis
Positive
18.96
Price Trends
18.36
Positive
19.09
Positive
18.91
Positive
Market Momentum
0.20
Negative
54.00
Neutral
48.18
Neutral
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 18.96 is above the 20-day moving average (MA) of 18.83, above the 50-day MA of 18.36, and above the 200-day MA of 18.91, indicating a bullish trend. The MACD of 0.20 indicates Negative momentum. The RSI at 54.00 is Neutral, neither overbought nor oversold. The STOCH value of 48.18 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:AC.
Air Canada Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | C$1.53B | 18.22 | 4.83% | 0.93% | 10.42% | 12.81% | |
67 Neutral | C$556.35M | 18.72 | 12.73% | 0.76% | -7.22% | ― | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
58 Neutral | C$69.11M | 4.24 | 11.06% | ― | 7.42% | 89.31% | |
56 Neutral | C$5.39B | 27.75 | 34.23% | ― | 3.31% | -44.10% | |
52 Neutral | C$1.25B | 72.99 | 4.92% | 1.67% | -2.16% | -69.46% |
* Industrials Sector Average
TSE:AC
Air Canada
18.78
0.42
2.29%
TSE:JET
Global Crossing Airlines
1.36
0.00
0.00%
TSE:CHR
Chorus Aviation
23.60
3.48
17.27%
TSE:MAL
Magellan Aerospace
27.21
11.38
71.90%
TSE:CJT
Cargojet
82.97
-5.50
-6.22%
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.