Air Canada (TSX: AC) shares finished Thursday at C$24.20, a 4.6% gain that placed the stock just one cent below its 52-week high of C$24.21. The rally came as falling oil prices provided a tailwind for the airline sector, even as the company itself has withdrawn its 2026 financial guidance, citing the difficulty of forecasting volatile fuel costs.
Market Context and Peer Activity
Thursday's trading occurred on the Toronto Stock Exchange while U.S. markets were closed for the Juneteenth holiday. This meant that major U.S. airline peers such as Delta Air Lines and American Airlines did not trade, leaving Air Canada as one of the few publicly traded airline stocks available for investors tracking the fuel-and-travel narrative. Canadian index futures edged lower in early Friday trading, with the S&P/TSX Composite dropping 0.4% on Thursday, pressured by weaker oil and gold prices that weighed on resource stocks.
Fuel Costs and Guidance Withdrawal
Jet fuel remains a critical and highly volatile expense for airlines. Air Canada has pulled its 2026 outlook, stating that fuel costs are too unpredictable to guide on. CEO Michael Rousseau noted that demand remains "strong across the network," and the company plans to offset 50% to 60% of its estimated additional fuel expenses in the second quarter through commercial and cost-saving measures. However, fuel continues to be the dominant factor in the airline's equity story.
Geopolitical Risks Resurface
Renewed tensions in the Middle East have added a layer of uncertainty. U.S.-Iran talks aimed at de-escalating the conflict were scrapped, and Brent crude oil remained near $80 per barrel. If the conflict worsens, jet fuel prices could climb, directly impacting Air Canada's margins, pricing power, and operational capacity. The company has already warned that ongoing or escalating conflict could disrupt energy markets and increase its fuel costs.
Valuation and Analyst Targets
Following Thursday's surge, Air Canada's stock price of C$24.20 sits above the average 12-month analyst target of C$22.53, according to Investing.com data. While this suggests the stock may be trading at a premium relative to analyst expectations, price targets are estimates and not guarantees of future performance. The stock's valuation appears stretched, particularly given the uncertainties surrounding fuel costs and geopolitical developments.
Financial Performance
For the first quarter, Air Canada reported operating revenue of C$5.8 billion, operating income of C$117 million, and adjusted EBITDA of C$623 million. Adjusted EBITDA, a standard measure of operating profitability, reflects the company's underlying performance but does not account for all costs. The company's ability to manage fuel expenses will be crucial in the coming quarters.
Outlook
Air Canada's stock is increasingly trading as a fuel-and-demand story, with management refraining from reinstating annual guidance. The shares are hovering near their 52-week highs, but the foundation is not as solid as the price suggests. Any movement after Friday's open may depend more on oil price trends than on company-specific updates. Investors face heightened risk if Middle East tensions push jet fuel higher, making the stock a high-stakes bet on both travel demand and energy markets.
