If you are looking for a long lasting bargain on the TSX, Air Canada (TSX:AC) may be one of the most intriguing comeback stories on the market. This is not a Canadian stock for someone looking for a quick win. Still, it’s an opportunity for patient investors to buy into one of Canada’s most strategic companies. And this while the price is still trading below pre-pandemic highs. Air Canada dominates domestic air travel, has a strong international network and benefits from brand loyalty that few competitors can match. Canada’s stock was devastated during COVID. Yet the recovery since then has been remarkable and the recovery process is only halfway through.
The recent past
Air Canada was hit hard by the COVID-19 pandemic as travel essentially came to a standstill. Like many airlines, the country faced massive revenue losses, fleet downtime, layoffs and government bailouts. Since then, Canadian equities have clawed their way back by ramping up capacity, restoring international routes and reducing debt. Historically, the airline industry has been cyclical and vulnerable to external shocks, and Air Canada was no exception. Before the pandemic, it had a strong domestic position in Canada and was expanding globally, so the decline left a void that management was trying to fill.
Currently, Air Canada is showing signs of stabilizing and moderate recovery, while also facing headwinds. During the second quarter, Canadian stocks reported operating revenues of CA$5.6 billion, up 2% from last year, shifting to operating revenues of $418 million after a loss. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose significantly to $909 million, a margin of 16%.
On an operational level, Air Canada is expanding its routes (including internationally), improving its loyalty program through Aeroplan and optimizing its fleet and activities. But the most compelling part of the current Air Canada story is how much stronger the fundamentals appear compared to market perception. The airline has returned to consistent profitability, cut billions in debt and generated positive free cash flow for several quarters. Demand remains robust in both leisure and business travel, and cost control of the Canadian share has improved dramatically. It is leaner, more efficient and operates at a scale that gives it pricing power even as competition increases.
Is it perfect?
In short, no. Air Canada and the flight attendants union reached a tentative agreement in August 2025, ending a strike that had disrupted operations. The airline announced several new international routes for 2026 (e.g. Montreal to Palma de Mallorca) and expanded its regional network, underlining its growth ambition. While all this costs money. Meanwhile, labor negotiations remain unresolved in certain segments. The flight attendants union rejected a provisional wage agreement in early September 2025 (99% were against), although no strike is expected thanks to mediation.
So there are certainly items that investors should keep an eye on if they plan to get involved in the long term. A positive trend in earnings and cash flow will reduce risk and unlock value, and new routes offer growth, although the price per seat must remain stable. If competitiveness declines, profits may come under pressure.
In addition, labor disruptions and negotiations are important, with high labor costs potentially eroding margins or forcing cutbacks. Fuel prices and costs may increase, and that has been passed on to Air Canada and consumers. Debt must also continue to decline, while macro trends in air travel demand must continue to develop. So there’s a lot to consider for prospective investors.
In short
That said, at the current share price, investors are paying a fraction of what the stock traded at before 2020, even though the airline is now financially stronger. Analysts have noted that Air Canada’s valuation is still well below that of U.S. competitors. That decoupling creates opportunities, so there is room for both profit growth and multiple expansion. For long-term investors, that’s a recipe for compounding profits.
In short, Air Canada looks like a classic value play wrapped in a recovery story. It is Canada’s flagship carrier, trading at a discount despite rising profits, record travel demand and improving fundamentals. For investors who can tolerate some turbulence and think in years rather than months, this could be one of the best long-term buys on the TSX.
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