EL7.AI
StocksMediumUpdated×3•Originally published 29 October 2026•Updated 30 October 2026•
4 min read

Air Canada Cuts 2026 Earnings Outlook to C$2.4–2.7 Billion

Key Facts

1Air Canada cut its 2026 adjusted earnings guidance to C$2.4–2.7 billion from C$2.9–3.2 billion.
2The company revised its 2026 free cash flow outlook to break-even, with a margin of ±C$150 million, from a surplus of C$200–500 million.
3Third-quarter jet fuel expense rose to C$2.118 billion, up C$906 million from the same period a year earlier.
4The company raised its fourth-quarter fuel price assumption to C$1.72 per liter from C$1.29.
5The normal course issuer bid authorized the purchase of up to 25,197,886 shares from November 9, 2026, to November 8, 2027.

Air Canada cut its 2026 adjusted EBITDA guidance to C$2.4–2.7 billion from C$2.9–3.2 billion, citing expectations for higher fuel prices for the rest of the year. The company also revised its free cash flow outlook to break-even, with a margin of ±C$150 million, from previous guidance for a surplus of C$200–500 million. The update accompanied its third-quarter results, which showed a divergence between revenue growth and lower adjusted earnings. Operating revenue was C$6.984 billion, compared with C$5.774 billion in the same period a year earlier. Adjusted EBITDA, however, fell to C$936 million from C$961 million as fuel costs rose.

Revenue reflected higher passenger yield and growth in cargo activity, alongside improved seat occupancy. Passenger yield rose 11% year over year, cargo revenue increased 33%, and the seat load factor climbed 2.6 percentage points to 89.1%. By contrast, jet fuel expense rose to C$2.118 billion from C$1.212 billion, an increase of C$906 million. Chief Financial Officer John Di Bert said, "Decisive pricing, capacity and cost measures helped mitigate the impact." Adjusted EBITDA margin was 13.4%, compared with 16.6% a year earlier. The results show how stronger demand and revenue indicators coincided with fuel pressure on earnings and margins.

Net income attributable to the company's shareholders fell to C$139 million from C$264 million in the year-earlier quarter. Adjusted diluted earnings per share were unchanged at C$0.75. Free cash flow was a deficit of C$440 million, compared with a surplus of C$211 million in the same period, while cash flow from operating activities was C$266 million. The company therefore revised its annual free cash flow outlook to break-even within a C$150 million range in either direction, from a surplus of C$200–500 million. The company said fuel prices remain the key variable in its outlook, and that the narrower range of remaining variability in the fourth quarter allowed it to narrow its capacity and adjusted cost forecasts.

Air Canada raised its fourth-quarter average jet fuel price assumption to about C$1.72 per liter from C$1.29 in its previous estimate. Its assumptions were based on the forward price curve on October 8, 2026. The company expects about half of its fourth-quarter fuel requirements to be exposed to price fluctuations. It also expects to offset about 70% of the estimated increase in fuel expense above its assumptions in effect immediately before February 12, 2026, compared with a previous offset rate of 100%. The company said disruption to international trade and shipping routes through the Strait of Hormuz compounded the effect of supply disruptions on jet fuel and its prices. It warned that a continuation or escalation of the conflict in the Middle East could disrupt energy markets and keep fuel prices elevated or push them higher.

The company updated its 2026 capacity growth outlook to about 2.75% compared with 2025, from a previous range of 2.25% to 3.25%. It forecast adjusted cost per available seat mile to rise between 5.5% and 6% compared with 2025. On its financial position, total liquidity was C$8.018 billion and net debt was C$4.219 billion as of September 30, 2026. The company said it used proceeds from the Aeroplan transaction to repay C$1.7 billion of debt and complete an C$800 million share buyback. It also recorded C$501 million in proceeds from sale-and-leaseback transactions during the first nine months, under agreements worth up to C$2 billion, with C$1 billion in transactions assumed to be completed during 2026. It ended the quarter with 252.7 million shares outstanding after the previous buyback reduced the number of shares outstanding by about 10%.

In a subsequent step, Air Canada said the Toronto Stock Exchange had accepted its notice of intention to make a normal course issuer bid, authorizing it to purchase and cancel up to 25,197,886 shares, or about 10% of the public float. The program runs from November 9, 2026, to November 8, 2027. The company said it is not obligated to purchase any shares under the authorization. The program sets the maximum authorized amount and purchase period, while actual execution remains at the company's discretion. The announcement follows the previous buyback, which reduced shares outstanding by about 10%, as the company continued to identify fuel as the key variable in its outlook.