Dreadful is an understatement when describing the impact of the global pandemic on businesses. The global aviation industry was hit hardest by government-mandated lockdowns. People well remember this high-flying stock before the disaster struck.
Air Canada (TSX: AC) was the standout performer at the start of 2020, but it sank 66% or more during the height of the pandemic. Today, the airline stock is up nearly 19% year-to-date but is absurdly cheap relative to its all-time high of $52.09 on January 13, 2020. The current share price of $22.94 is 56% below the peak, making the cheap thesis very much alive.
Market analysts’ 12-month high price target is $32. A climb back to pre-pandemic levels is a strong possibility with the way revenues and free cash flow (FCF) are piling up in 2026. Air Canada remains a top value buy-and-hold candidate.
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Record quarterly results
Air Canada closed 2025 with a best-ever fourth quarter. In the three months ending December 31, 2025, operating revenue rose nearly 7% year-over-year to a record $5.8 billion. Net income reached $296 million compared to the $644 million net loss in Q4 2025. However, net income for the full year increased 53.2% year-over-year to $789 million. Michael Rousseau, President and CEO of Air Canada, was encouraged by the momentum in bookings heading into 2026.
In Q1 2026, Canada’s flagship carrier reported a record first-quarter operating revenue of $5.8 billion, citing strong demand across the network. Net income reached $123 million versus the $167 million net loss in Q1 2025. “Our operating income of $117 million was a positive $225 million swing from a year ago, and we generated record adjusted EBITDA of $623 million, up 61%,” Rousseau said.
Air Canada also generated $1.6 billion in FCF and repurchased $140 million worth of shares during the quarter. Rousseau added, “We are committed to maintaining a strong financial footing while delivering long-term shareholder value. As evidenced by two consecutive record quarters, the airline is performing well, and the team is consistently executing on our long‑term strategy.”
Limited guidance
Air Canada provided financial guidance for Q2 2026, but suspended giving one for full‑year 2026 due volatility and uncertainty in jet fuel prices. Airline companies are spending more on fuel. The International Air Transport Association (IATA) forecasts jet fuel to average US$152 per barrel this year, or 75% higher than in 2025.
For Q2 2026, Air Canada forecasts a $575 million to $725 million in Adjusted EBITDA and 0.5% to 1% increase in Available Seat Miles (ASM) capacity versus Q2 2025. The assumptions were based on current demand trends, foreign currency exchange rates, and jet fuel prices.
Rousseau said, “Supported by solid demand, our second quarter 2026 guidance reflects our expectation to offset between 50% and 60% of the estimated incremental fuel expense through various commercial and cost actions.” “The company also confirmed that there is no fuel shortage affecting its operations. Moreover, it does not expect any significant impact through the summer.
Financial target
Air Canada’s long-term financial target since December 2024 remains unchanged. The airline targets operating revenues of approximately $30 billion and aspires to exceed the figure by 2030. This goal is realistic, given the actual $22.4 billion operating revenues in 2025. AC is well-positioned to rise with it.
