Air Canada (AC) AI Stock Analysis

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Air Canada

(TSX:AC)

Select Model

Neutral 61 (OpenAI - 4o)

Rating:61Neutral

Price Target:

C$20.00

▲(5.76% 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

$5.60B

Dividend YieldN/A

Average Volume (3M)2.55M

Price to Earnings (P/E)4.6

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. Volume2,432,641

30 Day Avg. Volume2,551,087

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 Cap2.25

Enterprise Value/Revenue0.56

Enterprise Value/Gross Profit2.76

Enterprise Value/Ebitda4.72

Forecast

1Y Price Target

$26.53

Price Target Upside40.30% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering10

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

Positive

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

Neutral

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

Neutral

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	22.34B	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

Technical Analysis Sentiment

Negative

Last Price18.91

Price Trends

50DMA

19.94

Negative

100DMA

19.29

Negative

200DMA

18.81

Positive

Market Momentum

MACD

-0.25

Negative

RSI

42.69

Neutral

STOCH

51.15

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 18.91 is below the 20-day moving average (MA) of 19.16, below the 50-day MA of 19.94, and above the 200-day MA of 18.81, indicating a neutral trend. The MACD of -0.25 indicates Negative momentum. The RSI at 42.69 is Neutral, neither overbought nor oversold. The STOCH value of 51.15 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

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CAE	73 Outperform	12.37B	29.76	8.44%	―	8.04%	0.00%
CJT	68 Neutral	1.53B	10.71	19.91%	1.42%	14.37%	0.00%
BBD.B	65 Neutral	18.21B	28.76	-28.35%	―	6.69%	64.89%
MAL	64 Neutral	957.07M	25.24	4.71%	0.90%	6.58%	121.23%
AC	61 Neutral	$5.60B	4.57	101.32%	―	0.33%	-15.99%
CHR	50 Neutral	507.10M	-15.17	11.82%	0.40%	-16.92%	77.04%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

* Industrials Sector Average

Performance Comparison

TSE:AC

Air Canada

18.91

2.95

18.48%

CAE

27.95

9.97

55.45%

BDRBF

Bombardier

130.44

58.11

80.34%

TSE:CHR

Chorus Aviation

19.82

1.06

5.65%

TSE:MAL

Magellan Aerospace

16.75

7.56

82.26%

CGJTF

Cargojet

71.47

-24.63

-25.63%

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.Date of analysis: Sep 03, 2025