Air Canada shares rise on strong earnings, outlook

Air Canada shares rose sharply on Tuesday, extending gains after the airline reported second-quarter earnings that exceeded expectations and raised its full-year outlook.

The Montreal-based carrier posted adjusted net income of C$840 million ($618 million) for the quarter, up from C$729 million a year earlier, while revenue climbed 11% to C$5.9 billion. Analysts polled by Refinitiv had expected adjusted earnings of C$700 million on revenue of C$5.7 billion.

The company attributed the beat to strong demand for both domestic and international travel, disciplined cost management, and higher ancillary revenue from services such as baggage fees and seat selection. Operating expenses were contained despite higher fuel costs, with the airline noting efficiency gains in its fleet and operational restructuring.

Air Canada also revised its full-year adjusted net income guidance to a range of C$2.2 billion to C$2.4 billion, up from its prior forecast of C$1.9 billion to C$2.1 billion. The upward revision reflects confidence in sustained travel demand, particularly in North America and Europe, as well as continued pricing power in its core markets.

The airline’s chief executive, Michael Rousseau, said the results demonstrated the company’s resilience amid economic uncertainty and highlighted its ability to navigate volatile fuel prices. "We are seeing strong demand across all our networks, and our cost discipline is paying off," Rousseau said in a statement.

Shares of Air Canada were up 8.5% in Toronto trading by midday, outpacing broader market gains. The stock has climbed roughly 25% year-to-date, outperforming the S&P/TSX Composite Index.

Analysts at TD Securities maintained a "buy" rating on the stock, citing the improved outlook and operational improvements. "The upward guidance signals a positive inflection point for Air Canada, and we see further upside potential," the firm wrote in a note to clients.

The airline’s performance contrasts with some peers in the global aviation sector, which have faced margin pressures from rising fuel costs and softer demand in certain regions. Air Canada’s ability to offset higher jet fuel prices through hedging and operational efficiencies has been a key differentiator.

Investors will be watching closely for updates on the airline’s long-term fleet renewal plans and potential capacity expansions as travel demand continues to normalize post-pandemic.