International Travel Expansion And Rising Costs Will Define Future Prospects

Air Canada’s consensus price target was slightly reduced to CA$24.89, reflecting analyst caution amid weak Q3 results, strike disruptions, ongoing labor risks, and few near-term catalysts.

Analyst Commentary

• Recent downgrade driven by weak Q3 results due to strike disruptions, ongoing labor risks, and anticipated yield pressure.
• Analysts note a lack of near-term positive catalysts to drive the stock higher, reflecting caution on future growth momentum.
• Bearish analysts point to macro and operational headwinds, including labor disputes and potential fare softness.
• Bullish analysts see some company-specific improvements, reflected in modest price target increases earlier in the period, supported by industry-wide lower tariff risk and defense tailwinds.
• Slightly reduced price targets from several firms signal a more cautious sector outlook despite maintaining generally positive longer-term ratings.

What's in the News

• Intense labour unrest has gripped Air Canada, with 10,000 flight attendants (CUPE) striking over unpaid work and sub-minimum wages; a tentative agreement failed ratification, forcing the dispute through mediation and binding arbitration after the government declared the strike illegal and ordered a return to work, though CUPE has vowed to disobey (WSJ, Key Developments).
• The labour disruptions led Air Canada to suspend all operations temporarily in August 2025, resulting in the cancellation of hundreds of daily flights and affecting 130,000 customers per day; service resumed after mediated progress, but instability remains (Key Developments).
• Air Canada has issued updated Q3 2025 earnings guidance, projecting operating income of $250–300 million, but this includes $175 million in one-time non-cash pension and labour charges related to the dispute; previous forward guidance was suspended due to the work stoppage (Key Developments).
• Despite labour unrest, Air Canada continues aggressive network expansion: launching new international routes for Summer 2026 (e.g., Montreal-Catania, Montreal-Palma de Mallorca, Toronto-Shanghai), increasing transborder capacity 15% year-over-year, and introducing new regional connections and intermodal services in Canada (Key Developments).
• Strategic partnerships are being strengthened, notably with ITA Airways (expanded codeshare, rail integration in Italy), while product enhancements include upcoming Airbus A321XLR aircraft with lie-flat seats and expanded services to Latin America, positioning Air Canada for long-term growth despite near-term labour and operational challenges (Key Developments).

Valuation Changes

Summary of Valuation Changes for Air Canada

• The Consensus Analyst Price Target remained effectively unchanged, moving only marginally from CA$25.29 to CA$24.89.
• The Net Profit Margin for Air Canada has fallen slightly from 3.30% to 3.22%.
• The Future P/E for Air Canada remained effectively unchanged, moving only marginally from 9.48x to 9.55x.