Air Canada has reduced its 2026 financial outlook following a massive spike in fuel expenses. The Montreal-based airline is offsetting these costs by increasing ticket prices and scaling back flights to the United States.
The $906 million fuel spike that slashed net income
Air Canada's Chief Financial Officer John Di Bert reported that surging kerosene prices led to a 75 per cent increase in fuel costs, totaling $906 million for the quarter ending September 30. This volatility contributed to a 47 per cent year-over-year drop in net income attributable to shareholders, which fell to $139 million. as a result,the carrier has revised its 2026 adjusted earnings before interest,taxes, depreciation, and amortization (EBITDA) forecast down to between $2.4 billion and $2 .7 billion, a significant drop from the $2.9 billion to $3.2 billion predicted just three months ago.
The financial pressure is exacerbated by geopolitical instability. According to the report, John Di Bert expects fuel prices to remain around $1.72 per litre due to Middle East conflicts that have restricted global oil exports. While Air Canada recovered less than half of its fuel expenses last quarter, the company aims to recoup roughly 70 per cent in the current period.
A 19.4 per cent fare hike for Canadian travelers
To combat rising overhead, Air Canada is leaning heavily on ticket price increases. Data from Statistics Canada shows that airfares within Canada rose 19.4 per cent year over year in September. Chief Commercial Officer Mark Galardo noted that fare adjustments are the primary mechanism for offsetting the high-fuel environment, though a lag exists between when tickets are booked and when fuel prices fluctuate.
This lag is particularly punishing for Air Canada because the carrier operates a higher ratio of long-haul flights compared to its U.S. rivals. Because long-haul trips are typically booked further in advance, Air Canada often cannot adjust prices quickly enough to reflect the real-time cost of kerosene, leaving the company to absorb the difference.
Why US flight volumes dropped 13 per cent
The Montreal-based carrier is also retreating from certain American markets amid a slump in demand. Aviation data tracker Cirium reports that Air Canada flight volumes between Canada and the U.S. fell 13 per cent.. This aligns with Statistics Canada data showing that return trips from the U.S. were 23 per cent lower in August than they were two years prior.
In resonse, Air Canada has halted or delayed twelve transborder routes across the summer and fall seasons. However, a critical question remains: is this decline a temporary dip or a structural shift in travel habits? While Mark Galardo points to the strength of the U.S. dollar and American demand for trips to Canada as "tailwinds," the company has not fully explained why the volume of Canadians returning from the U.S. has cratered so sharply.
The A321XLR's 20 per cent fuel efficiency gain
To pivot away from expensive wide-body operations, Air Canada is integrating more fuel-efficient aircraft into its fleet. Chief Financial Officer John Di Bert noted that the new Airbus A321XLRs burn 15 to 20 per cent less fuel than wide-body planes on transatlantic routes. The airline expects to receive 30 of these single-aisle jets, with six arriving this quarter.
Beyond the A321XLR, Air Canada is awaiting the delivery of two Boeing 787-10s and seven Airbus A220s by the end of the year. These aircraft are central to the company's strategy to expand its overseas network, which includes seven new routes in Asia and Europe planned for next summer. National Bank analyst Cameron Doerksen suggests that while fuel costs are weighing on the industry, potential capacity cuts by competitors could eventually benefit Air Canada's market position.
Comments 0