If you’re looking for a long-term bargain on the TSX, Air Canada (TSX:AC) might be one of the most intriguing comeback stories in the market. This isn’t a Canadian stock for someone chasing a quick win. Yet for patient investors, it represents a chance to buy into one of Canada’s most strategic companies. All while it’s still trading below its pre-pandemic highs. Air Canada dominates domestic air travel, commands a strong international network, and benefits from brand loyalty that few competitors can match. The Canadian stock was devastated during COVID. Yet its rebound since then has been remarkable, and it’s still only partway through its recovery arc.
Source: Getty Images
The recent past
Air Canada was hit hard by the COVID-19 pandemic when travel essentially ground to a halt. Like many airlines, it faced massive revenue losses, fleet idling, layoffs, and government support. Since then, the Canadian stock has been working its way back, ramping up capacity, restoring international routes, and reducing debt. Historically, the airline business is cyclical and vulnerable to external shocks, and Air Canada was no exception. Prior to the pandemic, it held a strong domestic position in Canada and was expanding globally, so the pullback left a gap that management has been trying to fill.
Currently, Air Canada is showing signs of stabilizing and moderate recovery while also facing headwinds. During the second quarter, the Canadian stock reported operating revenues of CA$5.6 billion up 2% from last year, and shifted to operating income of $418 million from a loss. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose significantly to $909 million, a margin of 16%.
On the operational front, Air Canada is expanding routes (including international), enhancing its loyalty programme through Aeroplan, and optimizing its fleet and operations. Yet the most compelling part of Air Canada’s story today is how much stronger the fundamentals look compared to the market’s perception. The airline has returned to consistent profitability, cut billions in debt, and generated positive free cash flow for several quarters. Demand remains robust across both leisure and business travel, and the Canadian stock’s cost control has improved dramatically. It’s leaner, more efficient, and operating at a scale that gives it pricing power even with competition heating up.
Is it perfect?
In short, no. Air Canada and the flight attendants’ union reached a tentative agreement in August 2025, ending a strike that had disrupted operations. The airline announced several new international routes for 2026 (e.g., Montréal to Palma de Mallorca) and expanded its regional network, signalling its growth ambition. Though all this costs money. Meanwhile, labour negotiations remain unresolved in certain segments. The union representing flight attendants rejected a tentative wage agreement in early September 2025 (99% against), though a strike is not expected thanks to mediation.
So there are certainly items investors will need to watch if they plan on getting in long term. A positive trend in earnings and cash flow will reduce risk and unlock value, and new routes offer growth, though the price per seat needs to hold up. If competition forces fares down, earnings could be hit.
Furthermore, labour disruptions and negotiations matter, with high labour costs potentially eating into margins or forcing reductions. Fuel prices and costs could spike, and that has been passed on to Air Canada and the consumer. Debt also needs to keep coming down, all while the macro trends of air travel demand need to keep up. So there’s a lot to consider for future investors.
Bottom line
All that said, at today’s share price, investors are paying a fraction of what the stock traded at before 2020, even though the airline is financially stronger now. Analysts have noted that Air Canada’s valuation is still well below U.S. peers. That disconnect creates an opportunity, so there’s room for both earnings growth and multiple expansion. For long-term investors, that’s a recipe for compounding gains.
In short, Air Canada looks like a classic value play wrapped inside a recovery story. It’s Canada’s flagship carrier, trading at a discount despite rising earnings, record travel demand, and improving fundamentals. For investors who can stomach some turbulence and think in years, not months, this could be one of the best long-term bargains on the TSX.
