Is Air Canada Stock a Buy Today?

Air Canada (TSX:AC) stock has had a rocky past, but there could still be some turbulence in this top airlines future.

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Air Canada (TSX:AC) stock has had a long, treacherous flight over the last few years. Soaring to all-time highs, the stock crashed and burned during the pandemic. It’s been a rough few years since then, with high fuel costs, geopolitical concerns, and a potential recession all weighing on the stock. Yet now, as shares start to recover slightly and restrictions relax, is it a solid buy on the TSX today?

Air Canada Stock: About to fly high?

Air Canada stock remains one of the largest airlines in Canada. The stock and other airlines all continue to recover from the COVID-19 pandemic. In fact, the company’s passenger revenue has increased to nearly 2019 levels. Bookings are back to where they were before the pandemic as well.

Further, after seeing their revenue burn out, the stock is almost back in the black. Government bailouts certainly helped, but cost-cutting measures also allowed the stock to recover to nearly no loss. This has allowed the company to continue investing in its aircraft fleet as well as new technology.

Finally, Air Canada stock continues to see strong passenger bookings with pandemic restrictions relaxed, even with higher inflation and interest rates putting pressure on Canadians. The global air travel market is expected to grow by 4.8% per year over the next five years, putting the company in a strong position.

The rough ride isn’t over yet

Despite the positivity surrounding the airline industry, there is still a long road ahead for Air Canada stock. It’s taken years for the company to recover from the pandemic, and it’s still not out of the woods yet. Further, taking on more debt at higher interest rates is also putting more pressure on the company.

Air Canada stock also faces pressure from other airlines as well. Despite being well known in Canada, its long-haul and business flights may not support its future growth. The company continues to try and branch out into low-cost flights, but there are far too many well-established carriers out there today.

Rising fuel costs, labour shortages, and market volatility all put pressure on Air Canada stock as well, which will again put pressure on profitability. Factor in the company’s history of losses before the pandemic, as well as its flight network that needs major work, and Air Canada stock may not be the best buy today.

Bottom line

Air Canada stock was once a top recommendation by analysts, with a solid future of growth ahead. But times have changed since the pandemic, and we remain in a volatile global market. Shares are now back where they were after the March 2020 crash, or nearly so, hardly shifting away from $25 in the last few years. While the rest of the market has recovered somewhat, it’s unclear when Air Canada stock could do the same. So, until their debt load is all but gone, and perhaps more acquisitions and growth are on the table, I would perhaps steer clear of Air Canada stock — at least for now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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