Air Canada (TSE:AC) executives said the carrier delivered a “strong 2025 with an exceptional Q4,” pointing to record fourth-quarter profitability, resilient international demand, and continued progress on capital returns and balance sheet targets, while flagging 2026 as a “transitional year” marked by cost pressures and heavy aircraft deliveries later in the year.
Fourth-quarter performance and full-year results
President and CEO Michael Rousseau said fourth-quarter revenue reached CAD 5.8 billion, up nearly 7% year-over-year, supported by “industry-leading passenger unit revenue performance” and “strong premium demand.” Air Canada posted record Q4 Adjusted EBITDA of CAD 867 million, up 25% from the prior year.
For the full year, management reported total revenue of CAD 22.4 billion, up 1% versus 2024, and Adjusted EBITDA of more than CAD 3.1 billion, which CFO John Di Bert said exceeded the company’s guidance range and “market expectations.” Di Bert noted the result came despite the direct financial impact of a summer labor disruption, geopolitical challenges, and late-stage inflationary pressures on some costs.
Network strategy and demand trends
Executives repeatedly highlighted the company’s network and revenue diversity as key drivers, including the scale of its hubs, strength in international flying, and continued “Sixth Freedom” growth. Rousseau said those elements helped mitigate softness in transborder markets, which he characterized as relatively steady in trend over the past year.
Galardo said the airline pivoted capacity in 2025 toward areas of strength, including Canada and the Atlantic during the summer, “fully mitigating the impact of reduced Canada-U.S. demand.” He said the Atlantic and Latin America both expanded load factors from 2024 and together produced 4% traffic growth year-over-year, which he attributed largely to Air Canada’s “commercial playbook.”
On current conditions, management described a constructive environment into early 2026. In response to an analyst question, the company said it is seeing gains in both load factors and yields primarily in international markets, “particularly the Atlantic.” For the Pacific, executives described load factor growth with stable yields through the first half of the year. On transborder, management said it expects “status quo” market conditions in 2026—neither better nor worse—while noting the supply-demand balance has improved following competitive capacity moves.
For capacity, the company guided to 3.5% to 5.5% growth in 2026. Galardo also cited multiple network actions, including suspending service to Cuba following government advisories and reallocating that capacity to other sun markets, with minimal financial impact expected. Air Canada also said it will begin transborder flying from Billy Bishop Airport in downtown Toronto in the spring to major North American business centers, and it outlined additional network plans, including seven destinations to be added in the summer and the reintroduction of nonstop flights to China from Toronto. The airline also said it will extend year-round flights to Bangkok, described as the only nonstop service from North America.
Premium, loyalty, cargo, and other revenue contributors
Management emphasized continued strength in premium and ancillary businesses. Galardo said premium revenues rose 2% year-over-year in 2025, outpacing the economy cabin by three points and representing about 30% of total passenger revenues. He also pointed to an acceleration in corporate revenues late in the year, with corporate revenue up 8% in the fourth quarter versus a year ago.
On non-ticket sources, Galardo said “other revenues” increased 15% in 2025, while cargo revenues rose 4%. He added that Air Canada Cargo exceeded CAD 1 billion in revenue for the first time since 2022.
Aeroplan President Craig Landry said Aeroplan had a “very strong year” and reported more than 10 million active members, compared with about 4 million when the program was brought in-house. He cited high single-digit growth indicators, including roughly 7% growth in gross billings and 8% growth in card spend. Landry said early metrics under the new revenue-based accrual model were “very strong,” with more members qualifying for status year-over-year and increased customer activity, average fare, and purchase volumes.
Costs, cash flow, capital returns, and balance sheet
Di Bert said 2025 adjusted CASM ended at CAD 0.147, the upper end of the company’s guidance range, representing a 6.7% year-over-year increase. He attributed that increase to several factors, including approximately 270 basis points from labor, about 140 basis points from depreciation tied partly to fleet investments, and about 150 basis points of non-recurring impact from August port stoppages.
Management said it implemented CAD 150 million in cost-reduction programs in 2025 and expects those savings to be recurring. For 2026, Di Bert guided to adjusted unit costs (CASM) of CAD 0.1505 to CAD 0.1535 and said that range includes CAD 150 million in new proactive cost reduction initiatives, including strategic procurement savings and workforce productivity efforts.
Air Canada reported CAD 747 million in free cash flow for 2025 and CAD 3.7 billion in cash from operations, which management said represented conversion of more than 100% of adjusted EBITDA. Di Bert said Q4 cash generation benefited from strong earnings, working capital tailwinds from advanced ticket sales, Aeroplan growth (including a 7% increase in third-party gross billings), and roughly CAD 150 million of favorable timing items.
Rousseau said the airline ended 2025 with CAD 7.5 billion in liquidity and net leverage of 1.7x. The company deployed CAD 2.9 billion in capital investments during the year and returned more than CAD 850 million to shareholders through share repurchases. Di Bert added that since 2024 the airline has generated more than $2 billion in cumulative free cash flow, repurchased and retired over 64 million shares, and returned more than $1.3 billion to investors. He said fully diluted shares stood at approximately 307 million at the end of 2025, and management reiterated its aspiration to reduce the count below 300 million by 2028 and pursue $2 billion in share buybacks by that time.
Looking ahead, Di Bert guided to 2026 Adjusted EBITDA of CAD 3.35 billion to CAD 3.75 billion and 2026 free cash flow of CAD 400 million to CAD 800 million. Planning assumptions included average jet fuel of CAD 0.90 per liter and an exchange rate of CAD 1.36 per U.S. dollar; management said about 17% of expected first-half fuel needs were hedged at CAD 0.69 per liter (before certain adders). The company also said it expects 2026 net CapEx to be around 12% of revenue and has signed non-binding letters of intent for up to CAD 2 billion in sale-leasebacks over the next 24 months, with about CAD 1 billion anticipated in 2026 and CAD 1 billion in 2027.
Fleet plans and the A350 order
Management said 2026 will include significant fleet activity, with plans to receive up to 35 aircraft, including the first Airbus A321XLR and Boeing 787-10 deliveries. Galardo said the A321XLR will be used to “unlock” new destinations such as Berlin and enhance service to markets like Toulouse and Manchester, and he said the company plans to unveil a set of routes where it will offer a consistent year-round A321XLR product in North America. He also said initial XLR bookings are performing well.
Air Canada also announced an order for eight Airbus A350-1000 aircraft with purchase rights for an additional eight. Di Bert said the firm aircraft are scheduled for delivery between 2030 and 2032 and are intended to replace the oldest eight A330s. In the Q&A, management emphasized the A350’s range capability and flexibility for both passenger and cargo missions, citing potential growth options including the Indian subcontinent, Southeast Asia, and Australia, as well as improved economics on existing routes.
For Air Canada Rouge, Galardo said the carrier is upgrading the customer experience and, subject to approvals, plans to have the 737 MAX fleet at Rouge by the end of 2026. Executives said the transition will pressure 2026 results due to temporary aircraft downtime, but should support margin expansion over time due to improved economics, efficiency, and density.
About Air Canada (TSE:AC)
Air Canada is Canada’s largest airline, generally serving nearly 50 million passengers each year together with its regional partners. Air Canada is a sixth freedom airline, similar to Gulf carriers, which flies many U.S. nationals on long-haul trips with a layover in Canada. In 2019, the company generated CAD 19 billion in total revenue.
