As Canada’s largest airline, Air Canada (TSX: AC) remains closely watched by investors. In early 2026, its shares are trading around CAD 19.59, still well below pre-pandemic highs. The key questions now are whether the carrier has truly emerged from the shadow of the pandemic, and whether the current price offers a compelling entry point.
On the operating side, Air Canada’s position has clearly improved heading into 2026. Travel demand has largely normalized, capacity is being managed more prudently, and management is placing greater emphasis on profitability rather than sheer scale expansion. In particular, on international routes, the airline’s long-haul and global network provide high-margin advantages that many regional carriers cannot match.
However, its substantial debt burden remains a major concern. The roughly CAD 11.8 billion in total debt accumulated during the pandemic leaves the company highly sensitive to interest-rate movements and broader macroeconomic swings. Even as operations recover, the market continues to question the sustainability of Air Canada’s earnings rebound under this leverage profile.
At the current price of about CAD 19.59, Air Canada trades at a forward price-to-earnings ratio of roughly 8.4 times and an enterprise value-to-EBITDA multiple of about 3.1 times. These levels place the stock in what could be considered a relatively reasonable valuation range for the post-pandemic period. Sell-side analysts’ average target price stands at CAD 23.23, implying potential upside of around 20% from present levels.
Earnings expectations are even more striking. Market forecasts project Air Canada’s revenue to grow by 7.2% in 2026, with EBITDA expected to jump 15.8%. Standardized earnings per share could surge by as much as 81%, with further growth still anticipated into 2027. If the company can successfully execute its recovery and profitability plans, these projections are clearly attractive.
The broader macro backdrop in 2026 appears to be turning more supportive for airlines. Inflation is stabilizing, and interest rates are expected to trend lower, giving the sector additional breathing room. At the same time, the post-pandemic industry structure is, in many markets, more disciplined: capacity expansion is more restrained, and pricing has become more rational, all of which tends to benefit dominant players such as Air Canada.
Yet the inherent fragility of the airline business has not disappeared. A smooth, disruption-free peak season can quickly lift profits, but a single unexpected shock can just as rapidly erase gains. Volatility in discretionary consumer spending, fluctuations in fuel costs, and the financial impact of labour agreements and negotiations all have the potential to disrupt the equilibrium at short notice.
For investors, Air Canada in 2026 presents a nuanced picture. The company’s operating fundamentals have improved significantly, its valuation remains relatively depressed, and growth expectations are robust. At the same time, its sizeable debt load and the cyclical, event-sensitive nature of the airline industry continue to pose meaningful risks.
The current share price appears to reflect a measure of market caution. Should Air Canada manage to control its debt while capitalizing on recovering demand and improving margins, there is clear room for share-price appreciation. However, this is not a risk-free proposition: the stock is better suited to investors who are confident in a continued recovery in the airline sector and are willing to tolerate a certain level of volatility.
Before making a decision, it may be worth asking: do you view Air Canada as a short- to medium-term value opportunity, or as a long-term transformation story in your portfolio? The answer to that question will largely determine whether Air Canada, trading below CAD 20, deserves a place in your investment strategy for 2026.
