Shares of Air Canada (TSX:AC) have been down in recent days, after the company released its latest earnings numbers. For the second quarter, which went up until June 30, the Canadian airline reported revenue of $5.6 billion, which rose by 2% year over year.
However, the bad news was on the bottom line where net income of $186 million was less than half of what it was in the same period last year — $410 million.
The company experienced a decline in its operating margin, which resulted in smaller profits for the quarter. Its adjusted Cost per Available Seat Mile (CASM) rose from $0.1353 to $0.1440. CASM is a sign of efficiency for an airline, and it has been trending in the wrong direction for Air Canada as factors including exchange rates, fuel costs, and market conditions can impact it.
On top of this, news of no trade deal being reached between the U.S. and Canada is likely also weighing on the stock given the uncertainty that may mean for travel demand for U.S. destinations, plus the potential for a slowdown in the Canadian economy this year. The Canadian Federation of Independent Business expects negative growth for the economy for both the second and third quarters of 2025, which would indeed suggest that a recession may be on the horizon.
Yet another concern is the possibility of a strike by Air Canada flight attendants impacting flights in the near future, which would undoubtedly hurt the airline’s financials.
For now, investors may want to take a wait-and-see approach with Air Canada stock as it may be headed for a further decline in the weeks and months ahead.
