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Investing.com -- Air Canada (TSX:AC) shares plunged 11% Tuesday after the carrier reported second-quarter earnings Monday evening that fell short of analysts’ expectations, overshadowing a better-than-expected revenue performance. The airline’s adjusted earnings per share of C$0.60 came in materially below consensus estimates at C$0.72, raising concern among investors about cost pressures and margin resilience.
Still, revenue grew 2% year over year to C$5.63 billion, surpassing analyst projections of C$5.53 billion and highlighting continued strength in passenger demand. Operating income landed at C$418 million, translating into a margin of 7.4%, while adjusted EBITDA reached C$909 million with a margin of 16.1%.
CEO Michael Rousseau maintained an optimistic tone, emphasizing the airline’s operational progress during the period. “Air Canada’s second quarter 2025 results showcase the airline’s many strengths in the face of a challenging environment. We remained disciplined and consistent in executing on a long-term plan that is rooted in Air Canada’s proven commercial strategy, while navigating macroeconomic uncertainty and geopolitical tensions,” Rousseau said in a statement.
The airline reported strong seasonal performance, placing first among North American carriers in on-time arrivals in both May and June. Supporting its results were positive contributions from ancillary businesses, including Air Canada Cargo, Air Canada Vacations, and Aeroplan.
In a show of balance sheet strength and shareholder focus, the airline repurchased 26.6 million shares through a C$500 million substantial issuer bid and repaid its convertible notes in July. “A key pillar of our strategy is delivering value to our shareholders through effective capital allocation programs,” Rousseau noted.
Looking ahead, Air Canada reaffirmed its full-year 2025 guidance, projecting adjusted EBITDA between C$3.2 billion and C$3.6 billion and capacity growth of 1% to 3% over 2024 levels. For the third quarter, the airline expects ASM capacity to increase by 3.25% to 3.75% year over year.
The company also reaffirmed its long-term 2028 financial targets, including revenue of approximately C$30 billion and an adjusted EBITDA margin of at least 17%. With confidence in the business outlook, management highlighted ongoing investments in fleet expansion and premium offerings as key levers for future growth.
Despite strategic initiatives and record summer demand, investors appeared to focus on operating margin pressures and heightened costs, which continue to weigh on profitability. Shares of Air Canada closed at C$18.94, marking their steepest single-day decline since March.