Air Canada expects strong fall travel, shares jump after loyalty program deal (updated)

Air Canada

12/08/2026 15:30

Adds context, updates impact on shares
Funds commit C$2.5 billion for minority equity stake in Aeroplan loyalty program
Air Canada targets 2026 adjusted core profit of C$2.9 billion to C$3.2 billion
Fitch revises Air Canada outlook to positive from stable and affirms BB issuer default rating
By Allison Lampert and Nandan Mandayam
MONTREAL, Aug 12 (Reuters) - Air Canada said on Wednesday it is expecting one of its strongest fall seasons, helped by corporate travel, despite cost pressures that led the carrier to set its latest annual core profit target below analysts’ expectations.
Air Canada shares were up 10% in midday trade, paring more extensive gains, following a deal announced on Tuesday by funds to take a minority stake in its loyalty program Aeroplan. 
 Proceeds of the deal will be used to repay a $1.2 billion debt maturity and buy back up to C$800 million in shares in September.
Canada’s largest carrier restored its annual core profit target on Tuesday, but at a lower level than its previously suspended outlook due to volatility from the U.S.-Israeli war with Iran.
North American airlines see less seasonality in flying than during prior years, when travel on certain routes was concentrated in peak months such as summer, and as demand for corporate travel rises in the fall. 
“We're looking at a very constructive setup for the fall, you know, probably one of the stronger (ones) that we've probably seen in our history,” Air Canada Chief Commercial Officer Mark Galardo told analysts.
     
RISING LABOR AND FUEL COSTS
U.S. and Canadian travelers are continuing to fly internationally and splurge on airlines’ premium offerings, helping North American carriers whose balance sheets are under strain from higher labor and volatile fuel costs due to war in the Middle East.
Air Canada Chief Financial Officer John Di Bert told analysts he expects the airline’s costs to rise more slowly during the back half of the year, with unit costs set to rise 4% to 5%. Adjusted cost per available seat mile rose 6.55% during the first half of the year.
The company expects to post 2026 adjusted core profit of C$2.9 billion ($2.1 billion) to C$3.2 billion. Before the outlook suspension, it had projected C$3.35 billion to C$3.75 billion.
Analysts on average were expecting C$3.23 billion, according to data from LSEG.
Aircraft jet fuel typically accounts for about ​a quarter of airline operating costs, making them vulnerable to sudden spikes or swings.
Air Canada expects to offset, for the third quarter, approximately 60% of the estimated incremental jet fuel expense above its assumptions before the Iran war began in late February. This includes expected hedging gains. It expects to offset 100% of incremental fuel costs for the fourth quarter.
Air Canada CEO Michael Rousseau, who is retiring by the end of the third quarter, told analysts the loyalty program deal will strengthen the carrier's balance sheet and help its path toward an investment grade rating. 
Fitch Ratings revised its rating outlook for Air Canada on Tuesday to positive from stable, citing the Aeroplan deal, and affirmed the carrier’s issuer default rating at BB.
($1 = 1.3915 Canadian dollars)

(Reporting By Allison Lampert in Montreal and Nandan Mandayam in Bangalore
Editing by Rod Nickel)
((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters Messaging: allison.lampert.reuters.com@reuters.net/))