Air Canada’s sparkling earnings report showed the company is rebounding from the pandemic, but investors are still concerned that challenging times may be on the way.

On Monday, the airline reported net income reaching $1.25 billion for its third quarter, as passenger revenues climbed 22 per cent year-over-year.

Despite the positive numbers, the company reported that flight capacity and corporate business have yet to match pre-pandemic levels, while the airline blamed a smaller fleet on its weak on-time performance compared to the other North American airlines.

“Overall, we thought the print was very good, and we’re also positive on the carrier continuing to guide to the upper end of its 2023 … guidance,” Stephen Trent, managing director of Americas airlines and Latin Transports at Citi Research, told BNN Bloomberg in a television interview Monday.

Investors like Trent are still cautious when it comes to Air Canada, however, as an economic downturn, oil prices, war in the Middle East and supply chain issues are just a few of the looming issues that could hurt the airline in the short term. 

“It’s generally a tough market for investors and risky assets, the market’s been avoiding risk, so when even you’ve had a really good result like this, at least today, it’s not being reflected in the stock price,” Trent added.

John Zechner, chairman and founder of J. Zechner Associates, said he is “looking for an entry point” where it might be advantageous to invest in Air Canada.

“Kudos to Air Canada, it’s unbelievable the job they’ve done even through the pandemic in reshaping the balance sheet of the company, ensuring there was capital there and shifting the belly of the plane for more cargo and effectively increasing their capacity along the way,” he said.

“These guys are a class act and as we get back into consumer stocks, this will be at the head of my list.”  

Still, Zechner had the same concerns as Trent when it comes to the airline’s immediate future.

“I’m worried about the economy certainly in the fourth quarter and next year, and certainly what’s going on in the Middle East is not going to help the travel situation for them in the short term,” he said.

Meanwhile, Air Canada’s financials have the National Bank of Canada maintaining its “outperform” rating for Air Canada, with a stock target of $32.

“Although there are concerns around the strength of the consumer and growing domestic competition for Air Canada, demand for air travel still appears to be strong, and we expect that ongoing positive market conditions should drive earnings and cash flow improvement for Air Canada through the remainder of 2023 and into 2024,” Cameron Doerksen and Andrew Pikul with the National Bank of Canada’s financial markets team wrote in a note.

With files from The Canadian Press