Air Canada Restores 2026 Profit Forecast as Fuel Price Risks Persist

Post by : Saif

Air Canada has restored its 2026 adjusted core profit forecast after suspending its outlook earlier this year, but the airline lowered its expectations because of continued uncertainty over jet fuel prices and global oil supplies.

Canada’s largest airline now expects adjusted core profit between C$2.9 billion and C$3.2 billion in 2026. Its earlier forecast had projected a range of C$3.35 billion to C$3.75 billion.

The airline had suspended its annual outlook in April after Iran blocked access to the Strait of Hormuz, a major global oil shipping route. Disruptions in the region created uncertainty over crude oil supplies and pushed up concerns about aviation fuel costs.

Fuel Costs Remain Major Risk

Jet fuel generally represents about one-quarter of operating expenses for airlines, making carriers particularly vulnerable to sudden changes in energy prices.

Air Canada said pressure on fuel costs has also increased because of major disruptions to international shipping routes.

Fuel expenses rose 49% in the second quarter compared with the same period a year earlier, adding significant pressure to the airline’s operating costs.

Air Canada expects jet fuel prices to average around C$1.38 per litre during the third quarter and C$1.29 per litre during the fourth quarter. Its earlier full-year assumption had been C$0.90 per litre.

The airline said its latest fuel estimates also take into account its planned flight capacity.

Free Cash Flow Forecast Cut

Air Canada also reduced its 2026 free cash flow forecast.

The airline now expects to generate between C$200 million and C$500 million in free cash flow, compared with its previous projection of C$400 million to C$800 million.

Despite the pressure from higher fuel costs, stronger premium and corporate travel, higher fares and cost-control measures helped Air Canada deliver a better-than-expected adjusted profit in the second quarter.

The airline reported adjusted earnings of C$0.40 per share for the quarter.

Read more: Qantas to Exit Jetstar Japan as Airline Shifts Focus Back to Australian Market

Aeroplan Gets Major Investment

Air Canada also announced a major investment in its Aeroplan travel loyalty programme.

Investment funds managed by Blackstone and three Canadian asset managers are making a C$2.5 billion minority equity investment in Aeroplan.

The investor group includes Blackstone, Quebec-based La Caisse, PSP Investments and British Columbia Investment Management Corporation.

Together, the investors will hold a 25% non-controlling equity interest in Aeroplan, valuing the loyalty programme at approximately C$10 billion.

Funds to Strengthen Air Canada’s Balance Sheet

Air Canada plans to use proceeds from the Aeroplan investment to repay a C$1.2 billion bond maturity and strengthen its financial position.

The airline said most of the remaining funds will be used to accelerate share repurchases included in its long-term strategic plan.

The latest financial outlook highlights the challenge facing airlines as geopolitical tensions, oil supply disruptions and changes in global shipping routes continue to influence fuel prices.

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