Air Canada Stock Falls Following Q2 Earnings Disappointment
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Airplane flies not landing over mine at sunset in summer. Landscape with a passenger plane, blurred blue sky.plane is taking off. Business trip. Commercial aircraft. Transport-Batumi?Georgia may 2022
Air Canada’s stock experienced a significant decline of 11% on Tuesday following the release of second-quarter earnings results that failed to meet analyst expectations, despite showing revenue growth.
Financial Performance Overview
The Canadian airline reported adjusted earnings per share of C$0.60 for the second quarter, falling short of the consensus estimate of C$0.72. This earnings miss raised investor concerns about rising operational costs and profit margin sustainability.
However, the company demonstrated resilience in revenue generation, with total revenue increasing 2% year-over-year to reach C$5.63 billion. This figure exceeded analyst projections of C$5.53 billion, indicating continued robust passenger demand.Impact-Site-Verification: 1638f492-761a-46c6-b261-2053f05335fd
Key financial metrics for Q2 2025:
- Operating income: C$418 million (7.4% margin)
- Adjusted EBITDA: C$909 million (16.1% margin)
- Revenue growth: 2% year-over-year
Management Commentary
CEO Michael Rousseau emphasized the airline’s operational achievements during the quarter, highlighting the company’s disciplined approach to long-term strategic execution despite facing macroeconomic challenges and geopolitical uncertainties.
The airline demonstrated operational excellence by ranking first among North American carriers for on-time arrivals in both May and June, showcasing strong seasonal performance.
Strategic Initiatives and Capital Management
Air Canada’s ancillary businesses contributed positively to results, including:
- Air Canada Cargo
- Air Canada Vacations
- Aeroplan loyalty program
The company demonstrated commitment to shareholder value through capital allocation programs, including the repurchase of 26.6 million shares via a C$500 million substantial issuer bid and the repayment of convertible notes in July.
Forward-Looking Guidance
Air Canada maintained its full-year 2025 projections:
- Adjusted EBITDA: C$3.2 billion to C$3.6 billion
- Capacity growth: 1% to 3% compared to 2024
- Q3 ASM capacity increase: 3.25% to 3.75% year-over-year
The airline also reaffirmed long-term 2028 targets:
- Revenue target: approximately C$30 billion
- Adjusted EBITDA margin: minimum 17%
Market Reaction
Despite strategic progress and strong summer travel demand, investors focused on margin pressures and increased operational costs that continue to impact profitability. The stock closed at C$18.94, representing the largest single-day decline since March.
Management remains confident in the business outlook, with ongoing investments in fleet expansion and premium service offerings positioned as key growth drivers for the future.
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