AIR Canada on Tuesday restored its annual core profit target but at a lower level from its previously suspended outlook, as it expects oil supply disruptions stemming from the US-Israeli war against Iran to keep jet fuel prices elevated.
Canada’s largest carrier had suspended its outlook in April after Iran blocked access to the Strait of Hormuz, a waterway that handles a fifth of global oil shipments, causing uncertainty over jet fuel supply and prices.The company expects to post 2026 adjusted core profit in the range of CA$2.9 billion ($2.08 billion) to CA$3.2 billion. Prior to the suspension, it had projected CA$3.35 billion to CA$3.75 billion.Aircraft jet fuel typically accounts for about a quarter of operating costs for airlines, making them vulnerable to sudden spikes or swings.The pressure on jet fuel has been further exacerbated by significant disruption to international shipping trade routes, Air Canada said. Fuel expenses in the second quarter surged 49 percent over the year earlier.The Montreal-based airline expects jet fuel price to average at CA$1.38 per liter in the third quarter and CA$1.29 per liter in the fourth quarter. It previously assumed an average of CA$0.90 per liter for the full year.These jet fuel estimates also reflect Air Canada’s capacity plans, it said.Air Canada expects to generate CA$200 million to CA$500 million in free cash flow in 2026, down from its earlier projection of CA$400 million to CA$800 million.However, strength in premium and corporate travel, fare hikes and cost control measures led to a better-than-expected adjusted profit of CA$0.40 per share in the second quarter.Earlier in the day, Air Canada had said funds managed by Blackstone and three Canadian asset managers were making a CA$2.5-billion minority equity investment in the carrier’s travel loyalty program Aeroplan.The investor group, led by Blackstone and Quebec’s La Caisse, along with PSP Investments and British Columbia Investment Management Corp., are taking a 25-percent noncontrolling equity interest in Aeroplan, which values the program at CA$10 billion.Proceeds from the investment will be used to repay a $1.2-billion bond maturity and strengthen the carrier’s balance sheet. Air Canada said most of the balance would be applied to “accelerate share repurchases contemplated in its long-term strategic plan.”
