Should You Buy Air Canada Stock While it’s Below $19?

Trump tariffs and the escalating war in the Middle East don’t seem to have dampened the vacation plans of Canadians. Air Canada’s (TSX:AC) advance ticket sales rose 23.6% year over year to $5.4 billion in the first quarter.

These figures drove the stock up 24% between May 8 and 13, 2025, to over $18. The stock surged even when the airline reported weak first-quarter earnings due to a weaker Canadian dollar and reduced traffic in the U.S. transborder owing to tariff uncertainty.

Air Canada stock hovers above $18 

Air Canada’s share price plateaued since May 13 as it was undergoing a $500 million share-buyback program. It offered to buy shares in the price range of $18.50 to $21 per share.

The share buyback comes on the heels of the equity capital the airline raised during the pandemic to stay afloat. This diluted its earnings per share. Initially, the company reduced its net debt from $7.5 billion in 2022 to $4.92 billion in 2024 and initiated a share buyback last year. It plans to keep its total shares under 300 million in the long term.

Should you buy Air Canada stock below $19?

As per the June 23 press release, the issuer bid was oversubscribed. With this buyback behind, the airline stock could resume its seasonal rally from April to July. This rally comes as most of the advanced ticket sales convert into revenue between July and September.

The 23% jump in advanced ticket sales hints that the airline stock can ride the seasonal rally in 2025. You can consider buying the stock below $19 and selling it at $25, giving you a 31.5% gain in the short term. Note that the stock may not breach the $25 price as the 2023 growth spurt normalizes.

In December 2024, Air Canada gave positive guidance for 2025. This guidance was based on the assumptions that in 2025:

• The average U.S. dollar rate is $1.36-$1.40.
• The average jet fuel price is $1.00-$0.95 per litre.
• Canadian gross domestic product (GDP) growth is moderate.

In light of the recent developments around Trump tariffs and the Israel-Iran war, the above assumptions have changed. The traffic in the U.S. transborder and Atlantic markets fell in the first quarter, and revenue from the Pacific market normalized as capacity increased.

Air Canada has lowered its 2025 guidance for:

• Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $3.2-$3.6 billion from the previous guidance of $3.4-$3.8 billion.
• Capacity increases to 1% to 3% from the previous guidance of 3% to 5%. 

However, it retained its free cash flow (FCF) guidance to achieve breakeven, with a possibility of a $200 million positive or negative FCF. It is way lower than the $1.3 billion FCF achieved in 2024.

Is Air Canada stock a buy for the long term?

2025 could be a slightly challenging year for Air Canada. But what about the next three to five years?

2022 and 2023 were remarkable for all airlines, as revenge travel and lower capacity inflated demand and load factor. However, airlines worldwide have been growing their capacity. The competition from the Middle East and Indian airlines is increasing as they launch long-haul services. The travel demand is normalizing.

Air Canada showed resilience in the airline industry’s worst crisis thanks to its strong balance sheet. It is strengthening its balance sheet post-pandemic by reducing debt and share count.

For 2030, Air Canada targets annual revenue growth of 7-8% to reach $30 billion, an adjusted EBITDA margin of 17%, and consistent positive FCF. The airline plans to achieve this target by expanding its global network, modernizing its fleet, and focusing on growing high-yield segments like Air Canada Cargo.

However, macro and geopolitical conditions may stall growth. Unless the stock breaks its $25 resistance, it is better to avoid holding it for the long term.