Assessing Air Canada (TSX:AC) Valuation as U.S. Travel Trends Spur Route Cuts and Recovery Plans

Air Canada (TSX:AC) finds itself in the spotlight after news broke of a 27% drop in Canadians returning from trips to the U.S., leading the airline to cancel flights to some secondary U.S. cities. The company is already targeting a return to its previous summer flight capacity by next year, suggesting a forward-looking approach to shifting travel demand.

See our latest analysis for Air Canada.

Looking at the bigger picture, Air Canada's share price has faced pressure this year as investors respond to cooling cross-border demand and competitive moves in the airline space. The stock is down 18% year-to-date. Despite this, the long-term trajectory shows more resilience, with a 1-year total shareholder return of nearly 2% and a 17% gain over five years. This hints at underlying recovery potential if travel trends rebound.

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With Air Canada trading well below analyst targets and after a year of mixed returns, investors are left to wonder whether the current weakness is a bargain or if the market is simply reflecting realistic expectations for future growth.

Most Popular Narrative: 24.9% Undervalued

At $18.30 per share, Air Canada is trading notably below what the consensus narrative considers a fair value of $24.36. This sets the stage for debate about overlooked upside if the projections play out as expected.

Aggressive international long-haul network expansion (notably into Latin America, Europe, and Southeast Asia), alongside successful development of sixth freedom traffic, positions Air Canada to capture a larger share of connecting global passengers. This supports both top-line growth and load factor resilience.

Read the complete narrative.

Curious what’s beneath that bullish target? There’s a surprising set of growth drivers and margin assumptions hidden just beneath the surface. Wonder which numbers are fueling this expectation for higher value? Dive in. The narrative lays out the pivotal forecasts you won’t want to miss.

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 weaker transborder demand could quickly undermine the optimism that is driving these higher valuation targets.

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

Build Your Own Air Canada Narrative

If you see things differently or want to dig into the numbers for yourself, it only takes a few minutes to craft your own perspective. Do it your way

A great starting point for your Air Canada research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

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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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