Air Canada’s third-quarter earnings reflected the fallout from the August flight attendant strike, with revenue falling five per cent and profits declining sharply year over year. Analysts say the impact is temporary, as demand for premium and international travel continues to strengthen.
BNN Bloomberg spoke with Nicolas Owens, equity analyst, industrials at Morningstar, about the results. He said higher labour costs and delayed aircraft deliveries could weigh on margins in the near term, but the airline’s focus on efficiency and premium customers should help offset those pressures.
Key Takeaways
- Air Canada’s third-quarter revenue dropped five per cent as the August flight attendant strike disrupted service and lowered passenger volumes.
- The airline faces higher payroll costs due to new labour agreements with pilots and flight attendants, and more negotiations are upcoming.
- Air Canada plans to offset rising costs by modernizing its fleet and catering more to premium travellers to lift average fares.
- Aircraft delivery delays from Boeing and Airbus are limiting efficiency gains and pressuring profit margins.
- Analysts say Air Canada remains fairly valued, with long-term prospects supported by strong demand for premium and international routes.
Read the full transcript below:
ANDREW: Air Canada shares are pretty flat today. The carrier saw revenue decline five per cent year over year, as the flight attendant strike over the summer dragged down results. Let’s get more from Nicolas Owens, equity analyst, industrials at Morningstar. Thanks very much for joining us. Nicolas, no surprise—the strike hurt, and this could drag on as some customers are paid compensation for being stranded.
NICOLAS: Yeah, thanks for having me. I’d say all in all, the impact is potentially more muted than some might have expected. That’s because if you’re only making a few per cent margin on the flights you do operate, when you don’t fly them you also save some costs. Most of the damage was done in the third quarter, but they did mention that ongoing customer compensation for cancelled flights will drag until the end of the year. I don’t think these are huge numbers in the grand scheme.
ANDREW: And their payroll will go up, obviously, with this increase. Part of the remedy is flying more efficient aircraft.
NICOLAS: Well, the remedy—so, you know, they had a new pilots’ agreement, and then this new agreement that will eventually result from arbitration will increase their unit costs. I think they also have other ground operations, maintenance and other types of agreements coming up. That’s really an industry-wide phenomenon. Some of these are long-dated agreements, and the terms are outdated if you think about how wages have moved over the past several years after COVID. So, as an airline, there are two big things you can do to try to make up some of those costs. One is to fly more efficient aircraft. The other—something Delta and United have done a great job with, and Air Canada is using as a template—is to do more to appeal to premium flyers and raise average ticket prices.
ANDREW: Is the stock good value right now?
NICOLAS: I don’t see it that way. I think it’s fairly or fully valued. There are a handful of things moving through here—like we just said, the impact of the strike costs and the potential for new planes coming in next year—which sort of balance each other out in my view.
ANDREW: Frustrating for the entire aviation industry—both Boeing and Airbus are behind on their deliveries.
NICOLAS: Yeah, it’s certainly been a headache for everyone involved. You see it most dramatically in Boeing’s results when they have delays in a program. But every time Air Canada takes off and lands with one of these older planes, they’re paying more for fuel. They’re really looking forward to simplifying their fleet and flying more efficient aircraft.
ANDREW: When you examine Air Canada, are there any differences that jump out compared with the American carriers?
NICOLAS: Yeah, it’s interesting. Air Canada has about 65 per cent of the Canadian market in terms of miles flown. That’s very different from the U.S., where the big three—Delta, United and American—together would have that kind of market share. So, in a way, Air Canada is like those three rolled into one, when you compare the two markets. Another difference is that Air Canada also operates Rouge as part of its mainline operation, so it’s more of a blanket provider—sort of all things to all people. They also have this unique route strategy connecting North American passengers to long-distance flights through what’s called sixth-freedom traffic. That’s a unique aspect of their business.
ANDREW: And we’ve got a dollar that’s been dropping this year—the Canadian dollar. Is that good, or bad on the fuel-cost front?
NICOLAS: Well, I’d say both. Versus oil, they might be similar versus each other. Air Canada talked about a 1.4 exchange rate through the end of the year, which implies slightly less favourable fuel pricing, but fuel prices have come down. So again, that’s probably a wash.
ANDREW: Thanks very much, Nicolas. Really appreciate it.
NICOLAS: Thank you.
ANDREW: Nicolas Owens, equity analyst, industrials at Morningstar.
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This BNN Bloomberg summary and transcript of the Nov. 5, 2025 interview with Nicolas Owens are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
