Air Canada (AC.TO): Updating Model

J.P. Morgan updates its Air Canada (AC.TO) model for current fuel, maintaining a Neutral rating and a Dec-2027 price target of C$36. FY26 EBITDAR falls to $2.8bn from $3.1bn, and FY26 adjusted EPS drops to C$0.64 from C$1.29 (-50.2%), with 3Q26/4Q26 EPS of C$0.64/(C$0.38). We believe AC offers exposure to North American tailwinds: growing international demand with room to expand into the Pacific as recovery continues, and premium product. AC also owns Canada's largest loyalty program, Aeroplan, a portion of which was just equitized for $2.5bn, valuing the program at $10bn (above AC's market cap), and its balance sheet remains a position of relative strength. However, since last December's CMD, fuel has proven uncooperative, the USD has strengthened further, and the political backdrop is causing Canadian consumers to rethink leisure travel to US sun destinations;