Is Air Canada Stock Worth Considering in 2025?

Air Canada (TSE: AC) remains one of the most closely watched airline stocks on the Toronto Stock Exchange. Investors are especially interested in the AC stock price after a turbulent period during COVID-19 and a multi-year recovery. Now they want to know:

Is AC undervalued or overpriced?
How strong is the company’s financial recovery?
What is the long-term outlook for Canada’s largest airline?
Is AC a smart investment compared to U.S. airline peers?

This article provides a complete deep-dive investment analysis, including valuation, risks, catalysts, financial performance, and technical trends — offering far more depth than a basic quote page.

Company Overview: What Air Canada Does and Why It Matters

Air Canada is the largest airline in Canada, servicing more than 180 destinations worldwide and carrying over 50 million passengers per year (pre-pandemic). Its business segments include:

✔ Passenger Flights

The core revenue driver, spanning domestic, transborder, and international routes.

✔ Cargo Operations (Air Canada Cargo)

A rapidly expanding logistics business that saw massive demand growth during global supply chain disruptions.

✔ Loyalty Program (Aeroplan)

A high-margin segment providing predictable, recurring revenue.

✔ Air Canada Vacations

An integrated travel-package business benefiting from tourism surges.

Air Canada’s financial strength is tied closely to macro travel demand, fuel costs, regulatory climate, and CAD–USD exchange rates.

Air Canada Financial Performance (2023–2025): Recovery in Action

While exact metrics change with each quarterly report, the broader trend is clear:

✔ Revenues have surged back toward pre-COVID levels

Air travel demand rebounded faster than most analysts expected.

✔ Passenger load factors continue rising

Planes are flying increasingly full, improving margins.

✔ Cash flow is stabilizing

Strong bookings drive recurring liquidity improvements.

✔ Debt remains high but manageable

Air Canada took on significant debt during the pandemic. It is gradually paying down but still elevated compared with peers.

Key Financial Strengths

Improving operating margins
Robust travel demand
Strong loyalty program economics
Cargo and ancillary revenue diversification

Major Financial Weaknesses

High long-term debt
Sensitivity to jet fuel and currency
Cyclical revenue patterns
Labour-cost pressures

Air Canada Stock Valuation: Is AC Undervalued?

Airlines are often valued using EV/EBITDA, P/E multiples, and cash flow analysis.

Air Canada Valuation Trends

Historically, AC traded at a discount to U.S. peers due to higher leverage.
Even in recovery phases, the stock rarely reaches premium multiples.
Institutional investors focus heavily on balance-sheet risk.

Is Air Canada Undervalued Now?

Possibly — but not purely on traditional metrics.

Air Canada often appears undervalued when revenues surge, yet heavy debt reduces equity attractiveness. Many investors classify AC as:

a medium-risk cyclical recovery stock
with high volatility
and long-term upside tied to macro travel demand

Key Catalysts for Air Canada Stock (2025 and Beyond)

Bullish Catalysts

1. Global Travel Boom

Passenger traffic continues to increase across long-haul, leisure, and business travel segments.

2. Aeroplan Growth

The loyalty program’s recurring cash flows and partner expansion strengthen Air Canada’s earnings stability.

3. Cargo Expansion

E-commerce growth and global supply chain normalization benefit Air Canada Cargo.

4. Fuel Efficiency Upgrades

New, more efficient aircraft reduce operating expenses over time.

Bearish Catalysts

1. Rising Jet Fuel Prices

Fuel is one of the largest expenses; spikes can significantly impact quarterly profits.

2. High Debt Load

Limits flexibility for share buybacks or aggressive growth strategies.

3. Economic Slowdowns

Air travel demand is highly sensitive to GDP contraction.

4. Labour Disputes & Wage Pressures

Unionized workforce agreements can create strain during inflationary periods.

Technical Analysis: Air Canada (TSE: AC) Price Trends

While real-time charts fluctuate, AC stock has shown historically:

✔ Strong resistance near pre-pandemic highs

Buyers typically hesitate at upper ranges due to debt overhang concerns.

✔ Support levels around long-term recovery zones

Institutional buying often occurs when the stock falls into deep-value territory.

✔ High volatility and large price swings

Airlines are notorious for rapid changes due to fuel or travel-demand shifts.

Best Technical Indicators for Trading AC

RSI for swing-trade oversold levels
MACD for trend confirmation
200-day EMA for long-term reversal signals
Volume analysis to track institutional accumulation

Should You Buy Air Canada Stock? (Investor Profiles)

AC Stock Is Attractive For:

Long-term value investors willing to tolerate volatility
Recovery-cycle traders who buy dips during macro lows
Investors seeking exposure to Canadian aviation
Momentum traders during seasonal travel surges

AC Stock May Not Suit:

Conservative income investors (no consistent dividends)
Investors with low risk tolerance
Those avoiding cyclical industries
Anyone seeking stable, predictable earnings

Air Canada (TSE: AC) Price Forecast

Analysts generally maintain AC as a:

Hold or
Speculative Buy

AC’s stock potential depends heavily on:

macroeconomic direction
fuel prices
sustained travel-demand resilience
the company’s ability to reduce debt

Long-Term Forecast Themes

If debt reduction stays on track: moderate upside
If fuel prices remain stable: margin improvement
If travel demand remains elevated: revenue strength continues

Competitor Comparison: How Air Canada Stacks Up

Canadian Competitors

WestJet (private)
Porter Airlines (expanding aggressively)

U.S. Competitors

Delta
United
American Airlines
Southwest

Air Canada benefits from international dominance, but U.S. airlines often enjoy larger markets and more diversified fleets.

Risks to Consider Before Buying AC Stock

Investing in airline stocks — especially leveraged carriers — involves significant uncertainty.

Major Risks Include:

Fuel price spikes
Recessionary travel declines
High interest expense from debt
Potential dilutions in extreme downturns
Fleet maintenance and replacement costs
Labour disputes
Currency fluctuations (CAD vs USD)

Investors considering Air Canada should size positions accordingly.

Final Verdict: Is Air Canada (TSE: AC) a Buy?

Air Canada remains a high-risk, high-reward cyclical stock in 2025.

Reasons to Buy

Strong recovery trajectory
Growing loyalty and cargo segments
Improving margins
Potential long-term upside if debt decreases

Reasons to Avoid

Elevated leverage
Cyclical volatility
Sensitive to macroeconomic shocks

Bottom Line:
Air Canada is best suited for experienced investors who understand the volatility inherent in airline stocks and see value in AC’s recovery story. It is not a stable defensive holding but can offer substantial returns in a strong economy.