Air Canada TSE: AC said strong travel demand, diversified revenue sources and pricing actions have helped the carrier navigate fuel-price volatility in 2026, while a growing aircraft fleet is expected to support future margin expansion.
Speaking at the 25th Annual CIBC Eastern Institutional Investor Conference, Chief Financial Officer John Di Bert said the company’s revenue resilience has been demonstrated despite pressure from fuel costs. He pointed to contributions from cargo, Air Canada Vacations, Aeroplan, premium travel and corporate demand, as well as the airline’s network strategy.
“Demand remains very strong,” Di Bert said, adding that the company is focused on deploying incoming aircraft and using its growth cycle to expand margins over time.
Aeroplan transaction supports capital allocation
Di Bert said Air Canada’s sale of a minority stake in its Aeroplan loyalty program was intended to highlight the value of an asset whose cash flows had not been fully reflected in the airline’s valuation. The transaction implied a valuation of 21 times trailing-12-month EBITDA, according to the conference moderator.
Aeroplan benefits from co-brand credit-card partnerships, frequent customer engagement and its ability to support loyalty among passengers, Di Bert said. He added that the program participates broadly in Canadian consumer spending and provides travelers with access to lounges, premium cabins and other benefits.
The proceeds also enabled Air Canada to strengthen its balance sheet and accelerate share repurchases. Di Bert said the company had returned approximately C$2.4 billion through buybacks, including an C$800 million substantial issuer bid, since the end of 2024. He said Air Canada aimed to reduce its share count to roughly 260 million shares, compared with approximately 370 million shares previously.
Air Canada’s capital-allocation priorities remain a strong balance sheet, investment in the airline and shareholder returns, Di Bert said. He said pro forma leverage following the second quarter was expected to be around 1.2 times.
Fuel recovery and capacity adjustments
Fuel costs have been a major pressure point this year because a substantial portion of second-quarter revenue had been booked before the fuel-price increase, Di Bert said. He estimated that tickets sold when fuel was around C$0.90 per liter were ultimately serviced when fuel was closer to C$1.40 per liter, creating an estimated C$500 million to C$600 million headwind.
Since then, Air Canada has raised fares in an effort to match fuel costs with ticket pricing. Di Bert said the carrier expected its fuel-cost recovery rate to reach 100% or more by the fourth quarter, subject to booking timing and fuel-price movements.
More recently, fuel prices approached US$5 per gallon before declining somewhat, he said. Air Canada has been pricing fares at approximately 5% to 10% above the roughly US$4-per-gallon level referenced during its second-quarter call. The carrier may rationalize fourth-quarter capacity by one to two percentage points and will also review first-quarter capacity, Di Bert said.
Amanda Murray, Air Canada’s head of financial planning, strategy and investor relations, said the carrier’s mix of premium, corporate, sixth-freedom and cargo demand has supported its ability to raise fares. She said booking strength has continued across cabin segments, including premium and business cabins.
Network strategy and fleet growth
Murray said transborder travel has remained strong, along with domestic traffic, even after Canadian leisure bookings to destinations such as Arizona, Orlando and Las Vegas fell 25% following Labour Day last year. Rather than leave those markets, Air Canada retained its airport slots and gates, reduced frequencies, used smaller aircraft and shifted more leisure capacity toward sun destinations including Cancun and Punta Cana.
She said the Pacific market has shown some weakness because Russian overflight restrictions continue to affect Air Canada on routes where some competitors do not face the same limitations.
Di Bert said cargo has grown into a C$1 billion business, supported by six dedicated freighters and the company’s global belly-freight network. Over the next several years, the aircraft entering the fleet are expected to increase belly-freight capacity by 20% to 25%, he said. Cargo also allows the airline to pass through fuel costs more quickly through pricing, he added.
Air Canada expects margin expansion to begin on a normalized basis in 2027, driven by a larger operating scale, aircraft fuel efficiency, productivity investments and a greater mix of wide-body and premium-oriented flying. Di Bert said new-generation aircraft can offer about 20% lower fuel burn in certain cases.
The company expects cost per available seat mile, or CASM, to evolve at less than the rate of inflation as growth produces scale benefits. Di Bert said execution remains the principal risk to the margin-expansion plan, including aircraft deliveries, crew training, route deployment and maintaining yields as capacity is added.
Air Canada plans to receive 18 Airbus A220 aircraft over roughly the next 12 months, bringing the A220 fleet to about 65 aircraft. Di Bert said the aircraft are central to the carrier’s sixth-freedom strategy, which connects passengers from smaller U.S. markets through Canadian hubs to international destinations. The company aims to increase its share of the U.S. international travel market served by global carriers from about 1% to 2%.
On the Canadian government’s proposal to privatize the country’s four major airports, Di Bert said Air Canada supports solutions that accelerate investment in world-class airport infrastructure while improving the cost structure for passengers.
About Air Canada (TSE:AC)
Air Canada is Canada's largest airline, the country's flag carrier and a founding member of Star Alliance, the world's most comprehensive air transportation network. Headquartered in Montréal, Air Canada provides scheduled service directly to more than 180 airports in Canada, the United States and Internationally on six continents. It holds a Four-Star ranking from Skytrax. Air Canada's Aeroplan program is Canada's premier travel loyalty program, with more than 10 million members worldwide. Members can earn or redeem points on the world's largest airline partner network of more than 50 airlines, plus through an extensive range of merchandise, hotel and car rental partners.
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