Air canada Shares Plummet Over 10% After Q2 Earnings Miss
Air Canada‘s stock experienced a notable drop of over 10% on Tuesday, following the release of its second-quarter financial results, which failed to meet analyst expectations. The airline cited a confluence of economic and geopolitical factors for the disappointing performance.Mark Galardo, executive vice-president and chief commercial officer, described the second quarter as “not business as usual,” attributing the challenges to “significant economic and geopolitical uncertainty.” He specifically pointed to an “evolving geopolitical landscape affecting the Middle east and india,” increased competition in China, currency fluctuations, and a weakening demand for transborder travel.President and CEO Michael Rousseau highlighted a continued decline in demand for trips to the U.S., with revenue in this sector falling by 11% despite an 8% reduction in capacity. Data from Statistics Canada corroborates this trend, showing a decline in Canadian return air trips from the U.S.throughout the first five months of 2025. April saw a 14% year-over-year drop, followed by a more substantial 24.2% decrease in May.
On an adjusted basis, Air Canada reported a net income of $207 million for the second quarter, a decrease from $369 million in the same period last year. Adjusted earnings per diluted share also fell to 60 cents, down from 98 cents in the prior year.The airline’s shares closed at $19.34 on the Toronto Stock Exchange, marking a decline of $2.70 or 12.25%.
Despite the near-term headwinds, RBC dominion Securities analyst james McGarragle maintained a neutral outlook, suggesting that the broader narrative of demand recovery remains intact. Galardo noted that Air Canada has been expanding its international network, with transatlantic and latin American markets showing revenue growth of 5% and 11%, respectively. Demand is also reportedly growing during off-peak seasons in Southern Europe, as travelers seek milder weather and fewer crowds.
However, National Bank analyst Cameron Doerksen expressed caution regarding potential near-term risks, specifically a possible strike in mid-to-late August.As of July 28, Air Canada flight attendants, represented by the canadian union of Public Employees (CUPE), began voting on a strike mandate. The vote, which involves over 10,000 flight attendants, is scheduled to conclude on August 5.Rousseau emphasized that such a vote is a standard procedural step in negotiations and does not guarantee a disruption, stating the company remains focused on controllable aspects like cost management and supply and demand.