Air travel has always been a volatile business. Between fuel prices, geopolitical tensions, economic slowdowns, and global health crises, airlines are no strangers to turbulence. But some companies, despite all this, manage to emerge stronger, leaner, and more focused. Air Canada (TSX:AC) is shaping up to be one of them. And while many investors still treat the stock with caution, I’d argue that now that while it trades below $19, it’s the time to pay attention.
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What happening now?
Air Canada stock trades at $18.79 as of writing. That’s nearly 30% below its 52-week high of $26.18, giving long-term investors a chance to scoop up the country’s largest airline at a discount. If I had cash to invest in a Tax-Free Savings Account (TFSA) now, I’d feel confident buying this stock at today’s prices.
Let’s start with the company’s second-quarter 2025 results. Air Canada stock reported $5.632 billion in operating revenue, up 2% year over year. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $909 million, for a strong 16.1% margin. Even with a modest dip in net income from $410 million to $186 million, Air Canada stock remains highly profitable with adjusted earnings per share of $0.60. That’s a huge feat in an industry where profitability is often fleeting.
More importantly, the company continues to improve its balance sheet. Net debt sits at $4.76 billion, which may sound hefty, but the leverage ratio is a manageable 1.4. Free cash flow for the quarter was $183 million, and operating cash flow reached $895 million. It’s worth noting that Air Canada stock also completed a $500 million share buyback during the quarter, showing that management believes the stock is undervalued, too.
What to watch
So, what’s holding the stock back? First, demand growth has plateaued after the post-pandemic boom. Revenue passenger miles (RPMs) and load factors were down slightly year over year, even as available seat miles (ASMs) increased. That means more empty seats, and while the airline industry remains vulnerable to shocks like rising fuel prices or new tariffs, Air Canada has shown it can adapt. That’s huge considering recent news of a 35% U.S. tariff on Canadian imports. In fact, its jet fuel costs dropped 15.7% from a year ago, thanks to better hedging and operational efficiency.
Another bright spot is the company’s diversification. Air Canada Cargo, Aeroplan, and Air Canada Vacations are all performing well and offsetting some of the ups and downs in core passenger travel. Not to mention the recent expansion of its Landline luxury motorcoach service to Kingston, Ont., a creative way to expand network reach without adding expensive regional flights. This is smart, low-risk innovation.
Now, let’s talk valuation. Air Canada’s trailing price-to-earnings (P/E) ratio is just 4.83, while its forward P/E is under 10. For a company producing consistent profits and actively returning cash to shareholders, that’s absurdly cheap. It also trades at just 0.31 times sales and 3.16 times book value. Yes, the airline doesn’t currently pay a dividend. But with a solid free cash flow profile and no payout obligations, that cash can be used for reinvestment and buybacks.
Foolish takeaway
Of course, risks remain. Travel demand could weaken. Fuel prices could rise. Another pandemic or geopolitical event could ground aircraft and tank revenue. But betting on Air Canada stock isn’t about avoiding risk. It’s about embracing calculated risk in exchange for significant upside. And right now, you’re buying at a moment when the company is lean, disciplined, and positioned for growth.
To me, this setup is exactly what the TFSA was made for: long-term, tax-free compounding. If Air Canada hits its 2028 target of $30 billion in revenue and sustains an adjusted EBITDA margin above 17%, the earnings growth could be substantial. And if the stock simply returns to its 52-week high, you’d already be sitting on a 39% gain from today’s price.
So, yes, while the skies aren’t completely clear, they’re far from stormy, and at under $19, Air Canada stock offers high-altitude upside with the right combination of patience, confidence, and a strong stomach. For long-term TFSA investors, it’s an opportunity that’s just boarding.
