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Air Canada (TSE:AC)
TSX:AC
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Air Canada
(TSX:AC)
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Rating:47Neutral
Price Target:
C$18.00
▼(-7.31% Downside)
Air Canada's overall stock score reflects significant financial challenges, including high leverage and declining revenues. Technical analysis and valuation metrics offer limited support, while the earnings call provides some positive future outlooks but is overshadowed by recent disruptions and revenue declines.
Positive Factors
Fleet Expansion
The introduction of new aircraft types and routes enhances Air Canada's capacity and market reach, supporting long-term growth and competitiveness.
Cabin Renewal Program
The cabin renewal program improves customer experience and operational efficiency, potentially increasing customer loyalty and market share.
Strong Q4 Booking Trends
Strong booking trends indicate robust demand recovery, supporting revenue growth and financial performance in the near to medium term.
Negative Factors
High Leverage
High leverage increases financial risk, potentially limiting Air Canada's ability to invest in growth opportunities and weather economic downturns.
Decline in Passenger Revenues
Declining passenger revenues reflect challenges in maintaining market share and pricing power, impacting long-term revenue stability.
Fleet Delivery Challenges
Delays in fleet delivery could hinder capacity expansion and operational efficiency, affecting Air Canada's ability to meet demand and grow.
Air Canada (AC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$5.75B
Dividend YieldN/A
Average Volume (3M)2.24M
Price to Earnings (P/E)―
Beta (1Y)1.25
Revenue Growth-0.09%
EPS Growth-109.21%
CountryCA
Employees37,200
SectorIndustrials
Sector Strength72
IndustryAirlines, Airports & Air Services
Share Statistics
EPS (TTM)0.75
Shares Outstanding294,549,620
10 Day Avg. Volume2,409,892
30 Day Avg. Volume2,235,681
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 Cap1.84
Enterprise Value/Revenue0.48
Enterprise Value/Gross Profit2.15
Enterprise Value/Ebitda4.56
Forecast
1Y Price Target
$23.12Price Target Upside19.07% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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 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 Earnings Call Summary
Earnings Call Date:Nov 04, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Feb 13, 2026
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there are strong booking trends and improvements in operational metrics, the significant impact of the labor disruption and decline in passenger revenues are concerning. The company's future outlook with new routes and fleet expansion is positive, but fleet delivery delays present a challenge.Q3-2025 Updates
Positive Updates
Strong Q4 Booking Trends
Booking trends for Q4 are strong with an expectation of year-over-year growth in adjusted EBITDA for the last quarter of the year.
Operational Metrics Improvement
On-time performance and Net Promoter Score exceeded both internal targets and last year's levels for the quarter and year-to-date.
Strong Premium Cabin and Corporate Performance
Front cabin revenues outperformed the economy cabin by 6 percentage points. Corporate revenues improved with roughly 11% year-over-year growth from corporate customers in September.
Continued Network and Fleet Expansion
Air Canada plans to introduce new international routes and receive new aircraft types, including the A321XLR and the 787-10 in 2026.
Cost Reduction Program Progress
The $150 million cost reduction program is on target, with key components including operational efficiencies and management headcount reductions.
Negative Updates
Impact of Labor Disruption
The labor disruption resulted in a $430 million impact to revenues and a 5% decline in operating revenues compared to a year ago.
Decline in Passenger Revenues
Third quarter passenger revenues of $5.2 billion declined 6% from the same period last year on 2% less capacity.
Adjusted EBITDA Decrease
Adjusted EBITDA of $961 million declined $562 million from the same quarter in 2024 due to the labor disruption.
Challenges with Fleet Delivery
Fleet delays in 2026 are anticipated, with about 6 fewer A220 and 737 MAX aircraft and 6 fewer A321XLR or 787-10s than originally expected.
Company Guidance
During the Air Canada Third Quarter 2025 Earnings Conference Call, the company provided updated guidance amid a challenging quarter impacted by a labor disruption. The call highlighted a 5% year-over-year decline in third-quarter operating revenues to $5.8 billion due to a 2% capacity drop from strike-related cancellations. Adjusted EBITDA was $961 million, down $562 million from the previous year, with expectations to align with full-year guidance if the disruption hadn't occurred. Despite these setbacks, operational metrics such as on-time performance and Net Promoter Score surpassed internal targets and prior-year levels. Air Canada anticipates strong booking trends for Q4, projecting year-over-year growth in adjusted EBITDA. The company updated its full-year guidance, now expecting a 0.75% capacity increase over 2024, adjusted CASM in the $0.146 to $0.147 range, and adjusted EBITDA between $2.95 billion and $3.05 billion. Additionally, they forecast free cash flow between breakeven and $200 million for the year, with a focus on handling delayed payments from the third quarter. Looking ahead, Air Canada plans to add 35 new aircraft in 2026, albeit with some delivery delays, and continue executing its fleet strategy to support growth and efficiency.Air Canada Financial Statement Overview
Summary
Air Canada's financial performance shows a 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. The company needs to focus on improving operational efficiency and cash flow generation to strengthen its financial position.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.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.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.| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 22.01B | 22.25B | 21.83B | 16.56B | 6.40B | 5.83B |
| Gross Profit | 4.93B | 5.46B | 6.15B | 2.79B | -1.23B | -2.31B |
| EBITDA | 2.32B | 3.04B | 4.84B | 1.01B | -1.63B | -2.37B |
| Net Income | -296.00M | 1.72B | 2.28B | -1.70B | -3.60B | -4.65B |
Balance Sheet | ||||||
| Total Assets | 31.02B | 31.21B | 30.17B | 29.51B | 30.61B | 28.91B |
| Cash, Cash Equivalents and Short-Term Investments | 6.40B | 6.98B | 8.55B | 7.99B | 8.97B | 7.61B |
| Total Debt | 11.77B | 12.67B | 13.86B | 16.31B | 16.52B | 12.99B |
| Total Liabilities | 28.84B | 28.82B | 29.38B | 31.06B | 30.61B | 27.20B |
| Stockholders Equity | 2.18B | 2.39B | 796.00M | -1.55B | 9.00M | 1.72B |
Cash Flow | ||||||
| Free Cash Flow | 730.00M | 1.29B | 2.76B | 796.00M | -2.64B | -3.56B |
| Operating Cash Flow | 3.91B | 3.93B | 4.32B | 2.37B | -1.56B | -2.35B |
| Investing Cash Flow | -641.00M | -1.36B | -1.83B | -2.50B | -1.87B | -733.00M |
| Financing Cash Flow | -2.78B | -2.87B | -2.37B | -1.61B | 4.01B | 4.70B |
Air Canada Technical Analysis
Positive
19.42
Price Trends
18.89
Positive
18.77
Positive
18.43
Positive
Market Momentum
0.23
Positive
53.10
Neutral
39.22
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 19.42 is above the 20-day moving average (MA) of 19.29, above the 50-day MA of 18.89, and above the 200-day MA of 18.43, indicating a bullish trend. The MACD of 0.23 indicates Positive momentum. The RSI at 53.10 is Neutral, neither overbought nor oversold. The STOCH value of 39.22 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 |
|---|---|---|---|---|---|---|---|
72 Outperform | C$1.16B | 25.94 | 5.64% | 0.93% | 8.84% | 131.58% | |
67 Neutral | C$1.36B | 11.38 | 16.75% | 1.67% | 7.71% | 3170.43% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
56 Neutral | C$504.84M | -13.44 | 2.09% | 0.76% | -12.42% | 69.23% | |
47 Neutral | $5.75B | -29.63 | -10.66% | ― | -0.09% | -109.21% | |
39 Underperform | C$69.11M | -33.66 | ― | ― | 16.18% | 87.47% |
* Industrials Sector Average
TSE:AC
Air Canada
19.42
-1.20
-5.82%
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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.