Air Canada (TSX:AC) has had quite the ride over the past few years. From pandemic lows to record revenue highs, it’s weathered a volatile travel industry and come out flying. But as investors and passengers alike look to the future, the question becomes more important than ever: where will Air Canada stock be in four years?
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Looking back
To get a sense of what’s ahead, it’s worth starting with where things stand today. Air Canada stock recently posted record revenue of $22.3 billion in 2024, a 2% increase over the prior year. That revenue growth came despite a tough operating environment that included inflation pressures, staffing shortages, and the lingering effects of travel disruptions. Capacity was up 5%, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $3.6 billion, slightly higher than guidance. Perhaps more importantly, it also generated $1.3 billion in free cash flow, giving it some breathing room to pay down debt and invest in growth.
Operationally, Air Canada stock shows signs of improvement. Its on-time performance improved by 8% compared to 2023. While delays and cancellations are always a challenge in air travel, especially during Canadian winters, this jump signals better logistics, more efficient crew scheduling, and perhaps a bit of good luck with the weather. These improvements aren’t just good for customer satisfaction, but also good for costs.
What about the stock?
Still, there’s the matter of the stock. On the TSX, Air Canada stock is currently hovering around $14.15. Analysts are divided on where it might go over the next few years. Some forecasts suggest it could rise steadily to around US$20.21 by 2029, while others are more conservative, citing potential downside closer to US$6.94. These differences come down to how well Air Canada stock can manage future challenges, especially when it comes to margins, debt, and macroeconomic shocks. It’s not a straightforward path, but few airlines ever have one.
So, what is Air Canada doing to prepare for the long haul? One key initiative is its international expansion strategy. The airline is betting big on long-haul routes, particularly in Asia-Pacific. These routes tend to be more profitable than domestic flights, especially when demand is strong and competition is light. By building out its global network, Air Canada stock is hoping to capture more high-yield traffic, especially from business and international travellers.
What to watch
Another area of growth is cargo. During the pandemic, Air Canada stock leaned heavily into cargo operations, converting some of its passenger planes to freighters. Even as passenger travel rebounds, cargo continues to offer a valuable revenue stream. In a world that increasingly depends on fast, global logistics, especially for pharmaceuticals and e-commerce, Air Canada’s cargo segment could continue to grow well beyond expectations.
Debt is another factor to watch. The company took on significant debt during the pandemic to stay afloat, and while it has begun to pay it down, its leverage is still higher than it was pre-2020. Continued free cash flow generation will be key to improving its balance sheet and reducing financial risk. The good news is that its profitability metrics have been moving in the right direction, suggesting management has a solid grip on the reins.
Bottom line
So, where will Air Canada stock be in four years? If it continues improving operations, growing its international footprint, and paying down debt, it could be in a stronger and more competitive position than ever. The path might not be without turbulence, but the fundamentals are improving, and the long-term outlook is getting brighter.
For investors, Air Canada stock represents both opportunity and risk. It’s not a steady dividend payer or a defensive stock, but for those comfortable with a little volatility, it offers exposure to one of the best-known brands in Canadian transportation. If international travel continues its upward trend, and if management executes well on its strategy, Air Canada stock could very well be flying higher by 2029.
