Air Canada has withdrawn its full-year 2026 guidance as volatile jet fuel prices and geopolitical tensions add uncertainty to the airline’s outlook, even as demand remains resilient.
BNN Bloomberg spoke with Tom Fitzgerald, analyst at TD Cowen, who said strong revenue performance and network diversity are helping support margins despite near-term pressure from rising fuel costs.
Key Takeaways
- Air Canada withdrew its 2026 outlook due to uncertainty tied to jet fuel prices and geopolitical risks.
- First-quarter results beat expectations, driven by strong passenger demand and pricing across multiple regions.
- Demand remains resilient, with no signs of weakening bookings and strength in international and premium travel.
- Fuel costs remain the key risk, with the airline aiming to offset 50 to 60 per cent of increases through pricing and cost measures.
- The company is taking a flexible approach to capacity, trimming less profitable routes while maintaining overall network strength.
Read the full transcript below:
LINDSAY: We are watching shares of Air Canada today after the Montreal-based company pulled its guidance for 2026 as jet fuel prices remain uncertain. Here to break down the results is Tom Fitzgerald, analyst at TD Cowen. Great to have you with us.
TOM: Thanks for having me.
LINDSAY: Without that guidance, how are you factoring in geopolitical risk and jet fuel volatility moving forward, particularly for Air Canada?
TOM: It’s going to be a very fluid year for airline estimates, with expectations likely shifting week to week and month to month depending on the fuel curve. What’s important for investors is how strong the revenue outlook has been. Over the past year, unit revenues were lagging unit costs, but now they’re growing in the high single digits year over year and exceeding cost growth. Costs should start to moderate in the second half of the year and into 2027 and 2028 as more fuel-efficient aircraft are delivered. That should support margins, and the shares look fairly attractive for long-term investors.
LINDSAY: Air Canada is also temporarily halting flights to JFK from Toronto and Montreal. How do you assess the financial impact of that move?
TOM: I wouldn’t read too much into it. In the New York area, they still have access to Newark and LaGuardia. Management is evaluating where they can trim capacity, particularly on routes where they have excess frequency. In a market like New York, with three major airports, reducing JFK service isn’t overly concerning.
LINDSAY: You mentioned the revenue beat as a bright spot. What’s driving that strength?
TOM: It comes down to the diversity of the network. They’re seeing strength across the Atlantic, Pacific and Latin American markets. There was concern about shifting capacity away from U.S. sun destinations like Florida and Arizona into Mexico and the Caribbean, but they’ve managed that well. Latin capacity grew about 20 per cent year over year, and unit revenues still increased around five per cent, which is impressive. They’re also benefiting from growing connecting traffic, including passengers travelling from Latin America to Europe and Asia.
LINDSAY: Despite higher fuel prices, the airline is expecting a slight increase in capacity in the second quarter. Why?
TOM: Capacity growth is modest, about 0.5 to one per cent year over year, so it’s essentially flat. Third-quarter growth could look a bit higher due to comparisons with last year’s flight attendant strike. Overall, the approach isn’t aggressive. Management is adjusting plans every couple of months based on demand and fuel trends, and they may trim more capacity later in the year if needed.
LINDSAY: In the short term, management expects to offset 50 to 60 per cent of higher fuel costs through commercial and cost actions. What might that look like?
TOM: It likely means higher fares and trimming marginal capacity. There were concerns about uneven pricing due to different hedging strategies across airlines, but the pricing environment appears rational. Competitors are acting in a disciplined way, which supports fare increases.
LINDSAY: The company has also faced some headlines recently, including the planned retirement of CEO Michael Rousseau. Do you expect any change in direction?
TOM: Not significantly. The long-term strategy around fleet renewal, network structure and leveraging geographic diversity as a global connector remains intact. Leadership changes may bring some differences at the margin, but no major overhaul is expected.
LINDSAY: And when it comes to managing fuel costs, you don’t expect a shift in strategy with new leadership?
TOM: It really depends on how fuel prices and demand evolve. If fuel normalizes and demand remains strong, the current strategy likely continues. If fuel stays elevated or demand weakens, the airline could adjust by delaying capital spending or scaling back growth. Flexibility will be key.
LINDSAY: Your price target is $21. What needs to happen for the stock to get there?
TOM: Continued execution. Investors need confidence that costs are coming down over time and that demand remains resilient. That would support improving EBITDA margins and potentially drive the stock higher.
LINDSAY: We’ll leave it there. Tom Fitzgerald, analyst at TD Cowen. Thanks for joining us.
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This BNN Bloomberg summary and transcript of the May 1, 2026 interview with Tom Fitzgerald are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
