Air Canada Earnings: International Travel Taking Off, but Some Costs, Too

With no-moat Air Canada’s AC second-quarter financial results and revised 2023 expectations in hand, we have lowered our fair value estimate to CAD 18 from CAD 18.30.

Air Canada continues to rebuild capacity and refine its network as postpandemic travel restrictions have ceased and demand for air travel has bounced back to approach pre-COVID-19 levels. Fueled primarily by strong international travel, Air Canada’s rebound has nonetheless been more gradual than other major North American airlines—its passenger miles flown in the second quarter of 2023 approached 92% of the same period in 2019 compared with 94% among global airlines. Strong demand and some lingering constraints on supply mean record revenue for Air Canada, with second-quarter operating revenue totaling 114% of the same period in 2019. As with many of its peers, we also observed cost growth in Air Canada’s operations, which caused management to revise upward its 2023 expectations for operating costs and shaved CAD .30 from our fair value estimate as we built these operating costs for items like ground services and catering into our ongoing forecast, as well.