Air Canada (TSX:AC) stock has dipped 15% since its last quarterly earnings release on July 28, 2025. And more downside could come as the airline faces the risk of a potential strike, which could disrupt flight operations across key Canadian cities, including Toronto, Montreal, Vancouver, and Calgary.
This is not the first time the airline has faced labour unrest. The management will find a way to circumvent the situation. Until then, the uncertainty will keep investors concerned.
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Why is Air Canada’s stock price falling?
Apart from the strike, Air Canada’s stock price is down because of a slowdown in travel demand to the United States. The airline reported 2% year-over-year revenue growth driven by strong demand from the Atlantic, Domestic, and Latin American markets. However, its net profit fell 54.6% year-over-year to $186 million. The dip came as the airline expanded its average seat mile capacity by 2.5%, at a time when passenger count was reduced by 0.3% due to a slowdown in transborder services. The revenue decline was partially offset by a 15.6% decline in fuel cost.
The decline in profits partly reflected a higher mix of domestic travel and a slowdown in transborder traffic. Opportunistically, Air Canada diverted capacity from the United States to routes where it saw demand, mitigating the impact of lower transborder traffic, which accounts for 21.6% of its revenue.
Is Air Canada a deal to buy now?
In the airline industry, maintaining capacity and occupancy at an optimum level is important to thrive. An occupancy of 84% is a minimum standard for profits, given the industry’s high expenditures.
Air Canada has two seasonal rallies: one in the summer and one during the holidays. The airline is seeing strong demand from tourism. After the pandemic, most airlines downsized, including Air Canada. Moreover, the airline has significantly diluted its share price by raising capital from equity during the pandemic. All this has pulled down its share price to the new normal of $18 from a high of $40–$50 pre-pandemic.
With the end of revenge travel, Air Canada’s growth is normalizing. The management is buying back shares to reduce the impact of equity dilution. It aims to reduce diluted outstanding shares to less than 300 million by 2030. The airline is also reducing its debt, but at a slower pace. Lower leverage is important for an airline as it gives financial flexibility to withstand a crisis.
The improving fundamentals reassure investors that the airline will thrive. You could consider buying the airline stock while it trades near $18. The strong demand for tourism drove Air Canada’s advance ticket sales 24% year-over-year to $5.4 billion in the first half of 2025, hinting at a strong second half.
What to expect from this stock?
Air Canada has sustained its 2030 target to grow its annual revenue to $30 billion by growing revenue by 7–8% annually. It expects to sustain an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 18%–20%, and achieve a 5% free cash flow margin by 2030.
However, the current macro and geopolitical headwinds could stall growth and keep the airline stock range-bound.
You could consider buying Air Canada stock below $18 and selling it when the stock reaches $23. It is not a good stock to hold for the long term, as capacity expansion in airlines may not be a good sign if demand remains stable.
In your portfolio, you can consider allocating 5–7% towards short-term opportune stocks, wherein you can buy a few stocks to take advantage of a seasonal rally. However, allocate a larger portion to long-term growth and dividend stocks to maintain a good balance of risk and reward.
