Air Canada Slashes Earnings Outlook as Fuel Costs Climb $906M

Air Canada has lowered its full-year earnings forecast by hundreds of millions of dollars as soaring jet fuel prices squeeze profits, despite record third-quarter revenues and strong passenger demand.

The airline, on Thursday (Oct. 29), lowered its 2026 adjusted EBITDA forecast to between $2.4 billion and $2.7 billion, down from the $2.9 billion to $3.2 billion projected in August.

The adjustment “reflects Air Canada’s current expectation of higher fuel prices for the remainder of the year,” reads a press release.

The downgrade comes as Air Canada, like many airlines, grapple with higher fuel expenses, which increased by $906 million compared to the same quarter last year, according to a press release.

Despite the financial pressure, Air Canada reported record third-quarter operating revenues of $6.98 billion, a 21 per cent increase year-over-year, supported by strong travel demand, higher passenger yields and growth in cargo revenues.

Passenger load factors climbed 2.6 percentage points to 89 per cent, while passenger yields increased 11 per cent, reflecting the airline’s efforts to generate more revenue through pricing.

Fuel costs remain biggest challenge

Air Canada’s revised outlook highlights the growing financial strain caused by volatile energy prices, which have been affected by ongoing conflicts in the Middle East and disruptions to shipping routes through the Strait of Hormuz.

The airline now expects jet fuel to average approximately $1.72 per litre in the fourth quarter, up significantly from its previous assumption of $1.29 per litre.

Air Canada also expects to offset only about 70 per cent of the additional fuel expenses in the fourth quarter, compared to its earlier expectation of fully recovering those costs.

Strong demand offers some reassurance

While fuel prices continue to cloud the outlook, Air Canada says passenger demand remains resilient.

The carrier expects capacity to increase approximately 2.75 per cent for the full year compared to 2025, with current travel demand trends anticipated to continue through the remainder of 2026.

The airline also pointed to its global network, premium offering and diversified business model as strengths in navigating the challenging environment.

“While we expect the challenging environment to persist, our strong financial position provides us with the flexibility to respond to near-term developments,” said John Di Bert, executive vice president and chief financial officer, in a press release.

“We remain focused on executing on what we can control. Our diversified business model, broad global network and leading premium offering provide a solid foundation for navigating this environment and advancing our New Frontiers strategy.”

“Air Canada’s recent recognition as Best Airline in North America at the 2026 Skytrax World Airline Awards — the 10th time since 2010 — reinforces the strength of our offering and our commitment to customers.”

Share buyback program

Air Canada also announced Thursday that the Toronto Stock Exchange has approved a new share repurchase program allowing the carrier to buy back and cancel up to approximately 25.2 million shares.

The program, representing roughly 10 per cent of the airline’s public float, will run from November 9, 2026, to November 8, 2027.

Under its previous buyback program, the airline purchased approximately 16.3 million shares at a weighted average price of $18.41 per share.