Air Canada (TSX:AC): Evaluating Value After Q3 Earnings Slide and Announced Share Buyback

Air Canada (TSX:AC) released third-quarter earnings showing a sharp decline from last year, largely due to a labor disruption. At the same time, the company announced a major share buyback program.

See our latest analysis for Air Canada.

Shares of Air Canada recently moved higher as investors weighed its third-quarter earnings dip, mainly linked to a labor disruption, along with the new share buyback plan. While 2025’s events have kept momentum muted, the 1-year total shareholder return sits at -17.4%, reflecting challenges yet highlighting long-term recovery potential.

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With the stock still trailing its analyst price targets and a major share buyback on deck, investors may wonder if Air Canada is undervalued at these levels or if the market is already accounting for its future rebound. Is now the right time to buy, or has the opportunity passed?

Most Popular Narrative: 23.6% Undervalued

Market-watchers see Air Canada's fair value, according to the most popular narrative, coming in well above its last close. That difference has investors debating if today's price truly reflects underlying prospects or if upside is being left on the table.

Fleet modernization and upcoming entry of next-generation fuel-efficient aircraft (A220s, 737 MAX, and A321XLRs) are expected to drive down per-seat costs and enhance operational efficiency. This supports margin expansion and improved long-term earnings. Digital and loyalty initiatives, including Aeroplan partnership growth and enhanced member amenities such as free Wi-Fi, are increasing ancillary revenues and building a recurring, high-margin earnings stream. These efforts diversify the revenue base and support more consistent free cash flow and earnings growth.

Read the complete narrative.

Curious how these bold efficiency moves and loyalty tweaks could shape the future? The fair value hinges on a tight blend of margin shifts, recurring cash flows, and one assumption lurking beneath these headline projections. Only a closer look reveals just what kind of transformation the narrative is betting on. What number is at the heart of this bullish view?

Result: Fair Value of $24.36 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising labor costs and stiffening international competition still threaten to undermine Air Canada's margin rebound and long-term growth story.

Find out about the key risks to this Air Canada narrative.

Build Your Own Air Canada Narrative

If these perspectives aren't quite your own, you can dive into the data and shape a fresh narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Air Canada.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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