Air Canada (TSX:AC)(TSX:AC.B) has been through some dark days over the past few years. Six years ago, it had a mountain of debt, a fleet of older inefficient planes, problems with unions, problems with pension plans, a shrinking portfolio of international routes, and dwindling supply of cash.

Between the planning of the executive team, and the overall economic turnaround after the recession, shares of Air Canada are now up over 12% year to date, outperforming the TSX by over 50% this year, and up over 600% since those dark days. The airline is now sitting on $3 billion in cash, debt is being reduced, unions are not in arms, the pension plan has a surplus and the airline is refreshing its long-range fleet with new Dreamliner 787s.

How Air Canada is turning itself around

So how did the airline manage to turn itself around? It made changes to debt financing that resulted in lower interest costs. More importantly, the airline created a new subsidiary called “Rouge” that allowed the less efficient planes in the fleet to move to where lower costs and alternate configurations made those planes much more cost-efficient.

In turn, it was able to redirect those savings to purchase a larger order of Dreamliner 787s, which are more cost-efficient, and have allowed the airline to aggressively target more international routes than ever before.

That aggressive international expansion is still in full swing: two new international routes to add to its growing list of destinations were announced this week.

Results that show promise

In the most recent quarter, it recorded an adjusted net income of $122 million, which is a stark difference over the net loss of $132 million reported in the prior quarter. Operating income on a GAAP basis was $200 million, compared to an operating loss of $62 million in the previous period. Operating margins improved by 8.2%, from -2% to 6.2%.

It recorded a 2% decrease in operating expenses despite a capacity growth of 9.3%. This was predominately a result of both lower fuel prices and a weaker Canadian dollar.

So impressive was this turnaround that it prompted President and CEO Calin Rovinescu to declare that the results were the best financial first quarter results reported in Air Canada’s history.

Looking ahead to the next quarter, the expectation is that both margins and adjusted net income will continue to increase, resulting in an even stronger balance sheet and leading to yet another record-breaking quarter.

Air Canada’s price is currently sitting below its 52-week high, with multiple analysts putting targets at or north of $20 with a “buy” rating. This stock is very affordable at the moment and given its results and outlook, I believe Air Canada remains a very good option for investors.

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Fool contributor Demetris Afxentiou has no positions in any of the stocks mentioned in this article.