The case for & against
Bull & Bear analysis
Bullish
Air Canada (TSX: AC) is Canada's largest airline and the flag carrier, providing an extensive range of domestic and international passenger and cargo services. The company operates a diversified business model that includes premium services and loyalty programs, positioning it advantageously in the competitive aviation market. Air Canada's strategic focus is on value creation and operational excellence amid evolving travel demand dynamics, including a recovery in corporate travel and a heightened interest in premium offerings.
Bull says
- ↑Q2 2026 revenue $6.3B (+11% YoY); Adjusted EBITDA $719M (11.5% margin).
- ↑Aeroplan minority investment $2.5B values loyalty program at $10B and underpins 22% share count reduction since 2024.
- ↑Passenger revenue +11% YoY driven by premium and corporate travel; expects >100% fuel cost pass‐through in H2 2026.
- ↑2026 capex $3.6B for fleet renewal and efficiency, expanding premium and international routes.
- ↑High earnings yield, robust FCF/EV ratio, strong ROE and positive momentum indicate attractive valuation.
- ↑Improving earnings revisions reflect rising analyst optimism on future earnings.
Bear says
- ↓Operating expenses +24% YoY driven by a 49% fuel price surge, pressuring profit margins.
- ↓Adjusted CASM expected to rise 5%-6% due to wage and labor-related charges.
- ↓Competitive pressure from low-cost carriers and increased capacity may erode yields.
- ↓Geopolitical tensions could disrupt international traffic, risking revenue on key routes.
- ↓High short interest and elevated leverage ratio raise doubts on financial flexibility.
- ↓Declining sales growth factor and volatility exposure may amplify underperformance risk.
Earnings Call · Q2 2025 · Mgmt. Guidance
Updated 08-16-2026neutral
Transcript signals
Bull points
- In the second quarter, we reported an operating income of $418 million and adjusted EBITDA of $909 million, with an adjusted EBITDA margin of 16.1%.
- Cash from operations reached $895 million, showing strong conversion of EBITDA to cash from operations over the past 12 months, aligning well to our long-term targets.
- In Q2, we made another very important step in our shareholder return program by launching and completing a $500 million substantial issuer bid, repurchasing 26.6 million shares at $18.80. As you may recall, we have earmarked up to $2 billion for share buyback initiatives from 2024 through 2028.
Bear points
- Operating expenses grew 3%, supporting capacity and traffic growth, absorbing the impact of a weaker Canadian dollar while benefiting from the lower jet fuel prices, which declined 16% year-over-year in Q2.
- labor expenses increased 16% year-over-year on less than 1% headcount growth. While largely in line with our expectations and planning, year-over-year compares in overall labor costs will be challenging in Q2 and Q3.
- we expect some unit cost pressures to continue as cost escalation makes its way through the system on items such as labor, airport and navigation fees, depreciation and maintenance.
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