On October 29, Air Canada released its third-quarter 2026 financial results. Although strong travel demand drove quarterly revenue up 21% year over year to C$6.984 billion, a record high, the sharp rise in aviation fuel prices caused by Middle East conflicts weighed on the company's profitability.
Third-quarter operating income fell from C$284 million in the same period last year to C$261 million, adjusted EBITDA declined from C$961 million to C$936 million, and net income attributable to shareholders dropped from C$264 million to C$139 million.
Fuel costs surge nearly 75%, full-year profit outlook cut
Air Canada's third-quarter fuel expenses rose by C$906 million year over year to C$2.118 billion, an increase of approximately 75%, with the cost per liter of fuel up 68%. Although the company took measures such as raising ticket prices to ease cost pressure, quarterly passenger yield still grew 11% and load factor improved 2.6 percentage points year over year to 89.1%, but these improvements were not enough to fully offset the impact of higher fuel prices.
Affected by this, Air Canada lowered its full-year 2026 adjusted EBITDA forecast from the previous C$2.9 billion to C$3.2 billion range to C$2.4 billion to C$2.7 billion, and also cut its full-year free cash flow forecast from the previous positive C$200 million to C$500 million range to negative C$150 million to positive C$150 million. The company's third-quarter free cash flow was negative C$440 million, compared with positive C$211 million in the same period last year.
Looking ahead to the fourth quarter, Air Canada expects the average aviation fuel price to reach C$1.72 per liter, significantly higher than the previously forecast C$1.29. The company expects to offset only about 70% of the additional fuel costs through measures such as ticket price adjustments, down from the previously estimated 100%, and revised its full-year unit cost growth forecast from 5% to 6% to 5.5% to 6%.
New share buyback program launched
Despite both profit and cash flow forecasts being lowered, Air Canada still announced the launch of a new share buyback program. The company's Chief Financial Officer John Di Bert said that the current challenging operating environment is expected to persist, but the company's solid financial position enables it to respond flexibly to short-term market changes.
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