Air Canada: Buy, Sell, or Hold in 2026?

Air Canada (TSX:AC) has a reputation as the stock that tests your patience. It can soar when travel demand feels unstoppable, then drop fast when the world throws a surprise. Many Canadians saw it thrive in the years leading up to 2020, then watched the pandemic erase that confidence almost overnight.

That memory still sits in the share price today. It also explains why people talk about Air Canada stock like a lesson, not just a ticker. You can love flying and still get burned as a shareholder. So, is it now worth the risk, or is it still buyer beware?

Looking back

Air Canada runs the country’s biggest airline, with routes across Canada, the United States, and major international hubs. It also leans on Aeroplan, cargo, and vacation packages to diversify revenue. Even so, the stock trades more like a recovery story than a finished blue chip. In late 2025, it hovered around the high teens to low twenties, while the shares traded above $50 in early 2020. That gap shapes expectations and keeps investors demanding proof.

Since right before the pandemic, performance has been frustrating for long-term holders. Travel volumes recovered, but Air Canada’s stock never reclaimed its old peak. The market keeps discounting airlines because costs can jump without warning. Over the past year, the shares moved through a wide range, roughly $12.69 to $23.72. That volatility can feel exhausting, but it also reflects operating leverage. A smooth season can lift profits quickly, and a messy season can wipe out momentum just as fast.

The numbers

Recent earnings show earning power and the fragility of the model. In the third quarter (Q3) of 2025, Air Canada stock reported operating revenue of $5.774 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $961 million. It also generated free cash flow of $211 million. Q2 2025 looked solid too, with revenue of $5.632 billion and net income of $186 million, or $0.51 per diluted share. Aeroplan and premium cabins help, as these add stickier revenue, but the airline still lives and dies by execution.

The valuation keeps Air Canada stock on watchlists, but leverage keeps it off some core portfolios. On sales-based measures, Air Canada stock can look cheap compared with the broader market, which invites bargain hunters. The balance sheet tells the other half of the story. Total debt sits around $11.8 billion, so interest costs matter. Refinancing risk matters too if rates stay higher for longer. High debt can amplify returns when cash flow stays strong, but it can also magnify pain if demand softens or costs spike. This is why investors price it with caution.

Considerations

So, is Air Canada stock a buy, hold, or sell in 2026? For most investors, it fits best as a hold. If you already own it, you can justify holding if you see steady demand, improving operational reliability, and gradual debt reduction. Many analysts still see upside, with targets near the mid $20s, and that helps sentiment. But you should treat it as a monitored position, not a set-it-and-forget-it holding. Watch free cash flow, net debt trends, and labour headlines closely.

If you do not own it, 2026 looks like a selective buy only for investors who can handle turbulence. The company faces higher labour costs and a tougher leisure backdrop at times, so the margin for error stays thin. Air Canada stock also pays no dividend, so you rely on execution and a re-rating for returns. If you want a reliable monthly income, this is not the tool. If you want a higher-risk recovery play, a small position can make sense, especially if you average in over time.

Bottom line

Air Canada stock can reward the right investor, but it demands realism. Treat it like a cyclical business with sharp edges, not a guaranteed comeback. If management delivers steadier operations and keeps chipping away at debt, the stock can grind higher from here. If shocks return, the shares can drop quickly again. In 2026, discipline matters more than prediction, and position size matters more than conviction. Keep your expectations grounded, and let the numbers guide you.

The post Air Canada: Buy, Sell, or Hold in 2026? appeared first on The Motley Fool Canada.

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More reading

• My 3 Best TSX Value Stock Ideas Going Into 2026
• These Canadian Stocks Are Some of the Best Value in the World Right Now
• Grab These TSX Stocks Before the Holiday Rally

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Air Canada. The Motley Fool has a disclosure policy.