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Adjusted EBITDA: $719 million, at the upper end of guidance, with an adjusted EBITDA margin of 11.5%.
Operating Revenues: Record $6.3 billion, up 11% year over year.
Passenger Revenues: $5.6 billion, up 11% year over year.
PRASM: Improved 11% year over year.
Yield: Increased 7% year over year.
Load Factor: Industry-leading 87.5% system-wide.
Capacity (ASMs): Up 0.3% year over year.
Adjusted CASM: Increased 7% year over year.
Fuel Expense: Increased 49% or $565 million year over year, net of $205 million in hedging gains; average fuel price was CAD1.33 per liter.
Operating Cash Flow: $651 million generated in the quarter.
Free Cash Flow: $174 million generated in the quarter.
Total Liquidity: $8.9 billion, representing 38% of trailing 12-month revenues.
Net Leverage Ratio: 1.7 times.
Share Repurchases: 14.5 million shares repurchased year-to-date; $1.6 billion deployed since November 2024.
Outstanding Share Count: Reduced to 280 million units, a 22% reduction.
Cargo Revenues: Rose 29% year over year.
Premium and Corporate Revenues: Increased 11% and 19% year over year, respectively.
Sixth Freedom Franchise Revenues: Grew 9% year over year.
Full-Year 2026 Adjusted EBITDA Guidance: $2.9 billion to $3.2 billion.
Full-Year 2026 Free Cash Flow Guidance: $200 million to $500 million.
Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Record Q2 operating revenues of $6.3 billion, up 11% year-over-year, with strong PRASM growth of 11%.
Adjusted EBITDA of $719 million came in at the upper end of guidance despite higher fuel prices.
Aeroplan minority investment valued at $10 billion, strengthening the balance sheet and accelerating the path to investment-grade rating.
Strong demand across premium and corporate segments, with corporate revenues up 19% year-over-year.
Cargo revenues surged 29% year-over-year, driven by strong yield growth and Sixth Freedom volume.
Negative Points
Fuel costs increased 49% year-over-year, with only about 50% of the incremental expense recovered in Q2.
Adjusted CASM rose 7% year-over-year, impacted by labor agreements and lower capacity growth.
Capacity growth was below guidance at 0.3% due to weather disruptions and a measured approach.
Full-year 2026 EBITDA guidance was reduced to $2.9-$3.2 billion from the original $3.35-$3.75 billion range.
Free cash flow guidance was lowered to $200-$500 million, reflecting fuel headwinds and adjusted CapEx.
Q & A Highlights
Q: Can you quantify the bridge between the initial EBITDA guidance and the reinstated guidance, and what would need to go right or wrong to hit the top or bottom of the range? A: John Di Bert (CFO) explained that the new guidance reflects the original plan less the headwind from fares booked before the fuel conflict began. He quantified this as a $500 million to $600 million non-recoverable headwind from fuel purchased at higher prices against pre-sold tickets. The new range of $2.9 billion to $3.2 billion reflects this, with a $100 million cushion at the bottom end to protect against potential Q4 fuel price variability.
Q: What are the puts and takes around the back-half CASM expectations, and will the headwinds persist into 2027? A: John Di Bert (CFO) stated that the second half will see adjusted CASM in the 4% to 5% range, bringing the full year to 5% to 6%. The pressure comes from lower capacity expectations, higher sales commissions due to elevated fares, and a weaker Canadian dollar. He expects cost pressure to abate in 2027 as new aircraft arrive and capacity mix improves, with a focus on keeping adjusted CASM below inflation.
Q: How should investors think about the Aeroplan distribution policy, the impact of the non-controlling interest on EPS, and the mechanics of the 6.5% IRR call option? A: John Di Bert (CFO) detailed that distributions will be proportional (25% to minority, 75% to Air Canada) at the Board’s discretion. The minority interest impact on EPS is roughly offset by interest cost savings from paying down debt, but the share buyback (reducing share count by 8% to 10%) makes the transaction accretive. The call option between years five and eight ensures investors receive a 6.5% total IRR, with any excess cash flows benefiting Air Canada shareholders.
Q: What is the trailing 12-month EBITDA for Aeroplan, and what drove the timing of the minority investment transaction? A: John Di Bert (CFO) confirmed the valuation implies EBITDA of approximately $475 million (based on the $10 billion valuation at a 21 times multiple). He stated the transaction accelerates the path to restoring pre-pandemic share counts by two years, improves the balance sheet to potentially achieve investment-grade rating, and highlights the underappreciated value of the Aeroplan asset while supporting the “New Frontiers” growth plan.
Q: Do you expect Q4 TRASM to be above Q2, and what are the trends in corporate and premium demand? A: Mark Galardo (CCO) confirmed Q4 TRASM will be higher year-over-year than Q2, as the airline has fully caught up on pricing relative to jet fuel costs, with fuel recovery expected to be 100% or above. On corporate demand, he noted July and August are weaker months, but expects double-digit corporate revenue growth from September through December, driven equally by domestic, transborder, and transatlantic segments.
Q: What are the credit rating agencies’ views on the Aeroplan transaction, and what else is needed for an investment-grade rating? A: John Di Bert (CFO) stated that one agency improved its outlook to positive, while the other two viewed the transaction positively. To achieve investment grade, he highlighted the need to reduce gross leverage from 3.7 times to below 3 times, continue margin expansion, and maintain high-quality cash conversion. He believes a path to investment grade is possible within the next two years.
Q: Can you provide details on the Aeroplan breakage rate and the impact of AI tools on member behavior and profitability? A: Craig Landry (President of Aeroplan) declined to disclose the current breakage rate but noted it was around 10% historically. He highlighted strong membership growth from 4-5 million in 2018 to over 10 million now, driven by expanded partnerships (e.g., Hertz, World of Hyatt). The program uses technology to optimize unit costs and balance revenue quality, managing profitability through diverse redemption options.
Q: What are you seeing in the shoulder season booking curves, and does this provide an opportunity to offset fuel costs? A: Mark Galardo (CCO) noted that premium and corporate customers are increasingly traveling in shoulder periods rather than summer peaks, benefiting Air Canada’s seasonality. International and premium demand for September and October is booked significantly higher year-over-year, creating a constructive setup for the fall. He expects the airline to take more capacity risk in shoulder seasons in 2027 and 2028.
Q: How feasible is the 2028 target of 130 billion ASMs given OEM delays and the fuel environment? A: John Di Bert (CFO) acknowledged that the 130 billion ASM target is a stretch, with 2027 expected to be around 112-115 billion ASMs. However, he remains confident in the overall economics and margin expansion goals for 2028, citing tailwinds from mix, scale, and cost improvements, with the most challenging labor cost negotiations now behind them.
Q: Can you parse out the unit revenue contribution from premium versus main cabin, and are you seeing the gap narrow? A: Mark Galardo (CCO) stated that premium cabin PRASM is outpacing economy by about 3 points, with premium growing at roughly 12-13% versus slightly lower in economy. He expects this gap to potentially grow in Q3 and Q4, and noted the spread is likely similar to US peers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.