Canadian airline stocks have taken a beating in 2025. Trade wars disrupting global supply chains and spooking investors have sent shares tumbling across the sector. Investors intent on buying this dip, looking for potential rebound candidates, may be inclined towards the obvious giant Air Canada (TSX:AC). It’s Canada’s flagship carrier, after all. But hold on. While AC stock looks tantalizingly cheap on some metrics right now, my pick for stronger, faster recovery and superior long-term returns is its smaller, nimbler cousin: Cargojet (TSX:CJT) stock.
Yes, Air Canada dominates passenger travel, ferrying nearly 50 million people annually. And there’s no denying the surface appeal of AC stock following an 18% year-to-date fall. That forward price-to-earnings (P/E) ratio hovering around 6.7 screams bargain basement, compared to Cargojet’s 14.9. Management seems confident too, repurchasing 15 million shares last quarter and planning a hefty $500 million buyback program this year.
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So why look past AC stock?
The cracks beneath the surface are significant. Air Canada’s core business remains intensely sensitive to volatile passenger demand, geopolitical tensions, fuel costs, and labour dynamics. And those disruptive trade wars? They directly threaten travel sentiment and cross-border flows crucial for AC’s model.
Earnings forecasts paint a concerning picture, with predictions of a 38% drop this year. First-quarter results offered little comfort: a slight revenue dip to $5.2 billion and a net loss of $102 million.
Most noteworthy, Air Canada stock’s cheaper valuation may be for good reasons, reflecting real, persistent challenges.
Cargojet stock: A better recovery play for long-term growth
While Air Canada grapples with passenger jitters, Cargojet is quietly powering ahead in the essential air cargo business. Forget discretionary travel; CJT moves the goods that keep economies running, especially vital time-sensitive shipments. The cargo airline’s latest results tell a compelling story. While AC saw revenue slip, Cargojet posted an impressive 8.1% revenue jump during the first quarter, hitting a new record. Even more striking? Net income soared by over 47% year-over-year, speaking to its fundamentally stronger position.
4 reasons Cargojet stock may outperform Air Canada
Here’s why Cargojet is a growth stock that holds the edge for recovery:
- Trade war resilience and opportunity: Trade tensions involving U.S. tariffs are ironically a potential tailwind for Cargojet. More cargo is looking to bypass the United States entirely. Canada becomes a crucial alternative gateway, and Cargojet’s extensive domestic and international network is perfectly positioned to capture this rerouted volume. This structural shift could drive sustained business volume growth.
- E-commerce engine: A sustained rise in online shopping in Canada demands efficient, reliable air cargo. Cargojet’s specialized overnight network within Canada is irreplaceable infrastructure for major retailers and logistics players. This demand is far less discretionary than booking a holiday flight.
- Long-term contracts and stability: A significant portion of Cargojet’s revenue is locked in under multi-year contracts with minimum revenue guarantees. This provides crucial cash flow visibility and insulation from short-term market gyrations that plague passenger airlines like Air Canada.
- A proven growth trajectory: Cargojet is demonstrably growing through recent market turbulence. Its record revenue and surging net income amidst a wider airline stock slump is a powerful testament to its business model and execution. The smaller airliner remains firmly in expansion mode.
The CJT investment case
Buying any Canadian airline stock right now requires conviction in a recovery. With Air Canada, you’re betting on a rebound in passenger confidence overcoming significant headwinds, hoping that the current deep discount (low P/E) accurately reflects future earnings power rather than ongoing struggles. The substantial share buybacks are supportive, but may feel somewhat defensive.
With Cargojet stock, you’re investing in a company already demonstrating growth despite the downturn, capitalizing on structural shifts in global trade, and underpinned by the relentless, non-discretionary force of e-commerce. Its profitability is currently heading sharply upwards, not down.
While not immune to economic cycles, Cargojet’s core business is demonstrably more resilient and aligned with powerful, lasting trends.
Investor takeaway
Air Canada stock might tempt value hunters with its low multiples and buybacks. However, Cargojet presents the far more compelling opportunity for investors seeking a Canadian airline stock poised for an earlier and stronger recovery, and superior returns over the next three to five years. The current dip in Cargojet stock looks less like a warning sign and more like a potential entry point for long-term growth investors. That’s why my money and my conviction for the recovery phase lean decisively towards CJT over AC stock today.
