Air Canada (TSX:AC) is one of Canada’s most recognized brands and the country’s largest airline. But is its stock a smart investment right now? With no dividend, heavy debt, and exposure to economic cycles, it’s far from a conservative pick. Yet, for the right investor, it could offer short-term upside. Let’s dig into what makes Air Canada stock tick – and whether it’s worth a spot in your portfolio.
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How Air Canada makes money
Air Canada earns revenue from multiple streams, but its core business remains passenger flights, both domestic and international. Additional income flows in from its cargo division, vacation packages (Air Canada Vacations), and a number of ancillary services — think checked bags, seat selection fees, and in-flight food purchases.
Here’s a snapshot of the company’s financials for the first half of 2025, compared to the same period in 2024:
- Operating income: down 35% to $310 million
- Adjusted EBITDA (a cash flow proxy): down 5.2% to $1.3 billion
- Operating revenue: up 0.8% at $10.8 billion
- Operating margin: dropped to 2.9% from 4.4%
- EBITDA margin: declined to 12% from 12.7%
Margins are compressing despite stable revenue — a potential red flag for investors seeking profitability momentum.
Dividends or growth? Only one option here
Generally, investors profit from stocks through either dividends or capital gains. Air Canada doesn’t pay a dividend and hasn’t since before the pandemic. That leaves stock price gains as the only route to profit.
The good news? The stock does have historical seasonal strength. April through July often sees momentum from advance ticket sales, and the October to December period typically benefits from holiday travel demand. That said, this pattern isn’t guaranteed — factors like fuel costs, geopolitical risks, and increased competition can easily disrupt these trends.
Air Canada also carries notable debt. Its long-term debt-to-capital ratio sits at 75%, and it holds a BB credit rating from S&P — below investment grade. This adds another layer of risk, especially if interest rates tick up or if economic growth stalls.
What’s the opportunity right now?
Air Canada has shown it can rebound from tough situations. During the COVID-19 crisis, it received a $5.9 billion federal support package in 2021, including a mix of loans and equity injections. That kind of government backing — though unlikely to repeat — demonstrates the strategic importance of the airline to Canada’s economy.
As for the current valuation: the stock recently traded at $18.73, below the midpoint of its 52-week range ($12.69 to $26.18). Analysts on Yahoo Finance have an average price target of $25.36, which implies a potential upside of 35%.
In other words, if you’re a speculative investor looking for a swing trade or short-term opportunity — particularly ahead of the holiday travel season — Air Canada could offer an attractive risk/reward setup. But this is not a “buy-and-forget” stock.
Investor takeaway: Only for the risk-tolerant
So, is Air Canada a good stock to buy?
Only if you’re willing to accept the risks. There’s no dividend to fall back on, earnings are under pressure, and its debt load is heavy. But for investors who can time the trade right — or who hope to ride on the holiday season — the stock offers potential upside that may be worth the turbulence.
