Previous to the pandemic, Air Canada (TSX:AC) was reaching for the skies. Its story was certainly one of bettering efficiencies, money flows, and profitability in opposition to a backdrop of low oil costs and powerful demand. Â
Right this moment, Air Canadaâs inventory worth trades at a fraction of pre-pandemic ranges and the airliner faces an entire set of headwinds. Can Air Canada’s inventory rise to its pre-pandemic ranges within the face of macroeconomic uncertainty, political threat, and rising prices?
Letâs discover.
Air Canada: Labour stress
In September 2025, greater than 99% of flight attendants voted to reject Air Canadaâs last wage supply. Which means at the moment, the Canadian Union of Public Staff (CUPE) is trying to achieve a settlement with Air Canada by means of arbitration.
Including to this labour strain, Unifor, which is the union representing Air Canadaâs airport and customer support staff, has just lately entered contract negotiations. These staff are additionally an necessary a part of the entire Air Canada operation. As such, the result of those negotiations may be very related.
All of which means the upward strain on the airlinerâs labour prices stays. That is clearly factor for workers, as the price of dwelling has risen so considerably in recent times. However clearly, this isn’t factor for the airlinerâs backside line.
Air Canada’s Cuba flights â cancelled
In one other blow, Air Canada has just lately suspended flights to Cuba amid a gasoline disaster. That is the results of a scarcity of aviation gasoline on the island of Cuba. In actual fact, it’s anticipated that any day now, jet gasoline won’t be commercially obtainable on the islandâs airports â an issue created by a U.S. blockade of oil stopping Cuba from importing or exporting petroleum merchandise.
Whereas the airliner has dedicated to sending empty flights to carry these stranded in Cuba house, this isn’t good for the airline business. As one more instance of the mounting dangers and risks current on the earth at the moment, suspensions like it will certainly deter customers from airline journey.
The underside line right here is that Air Canadaâs Cuba flights are cancelled with no indication of when issues will return to regular. However we are able to guess that this battle with the U.S. and, due to this fact, Cubaâs gasoline disaster won’t be solved in a single day. It provides one more nation thatâs crossed off as a doable vacation spot for air journey in a world that appears to be getting smaller and smaller.
Newest quarterly outcomes
Within the airlinerâs newest quarterly outcomes, the indicators of mounting prices and dangers had been already displaying. Air Canadaâs third quarter was negatively impacted by labour disruptions, rising prices, and delicate U.S. journey demand. Whereas the airlinerâs makes an attempt to compensate for all of this have been strategically sound, they’re combating an uphill battle, in my opinion.
For instance, Air Canadaâs price per obtainable seat mile, or CASM, is rising. CASM is a key metric that the airline business tracks with a purpose to assess the operational effectivity of the enterprise. In its newest quarter, Air Canadaâs adjusted CASM elevated 15% to 14 cents. Thatâs an enormous enhance.
Trying forward, we are able to anticipate these price pressures to proceed into 2026. For instance, Air Canada will see a step change in its unionized labour prices. This step change will mirror the brand new wage phrases reached by means of arbitration with CUPE, in addition to enhancements to floor pay and advantages. Along with this, there are the labour price pressures from airport staff and airport charges. Lastly, doable will increase in jet gasoline expense pose a threat, relying in your outlook for oil costs. All these dangers will take their toll.
The underside line right here is that the airliner faces many headwinds â and the pressures are mounting.
Valuation
So, whereas itâs tempting to conclude that Air Canadaâs inventory worth is undervalued, I’ve to say that I donât suppose it’s. Sure, the inventory is buying and selling at lower than 10 occasions anticipated 2026 earnings. However in my opinion, these earnings estimates are in danger. There are too many indications pointing to downward strain on income in addition to upward pressures on the associated fee facet. Collectively, they translate into the proper storm for Air Canada, signalling future bother.
The submit Air Canada: Purchase, Promote, or Maintain in February? appeared first on The Motley Idiot Canada.
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* Returns as of January fifteenth, 2026
Extra studying
- TSX Right this moment: What to Look ahead to in Shares on Tuesday, February 10
- Don’t Contact Air Canada Inventory Till This Threat Is Off the Desk
- These Canadian Shares Have Severe Progress Potential in 2026
- Ought to You Stick With Air Canada Inventory By way of 2030?
- Outlook for Air Canada Inventory in 2026
Idiot contributor Karen Thomas has no place in any of the shares talked about. The Motley Idiot recommends Air Canada. The Motley Idiot has a disclosure coverage.