Air Canada (TSX:AC) inventory presents a traditional high-risk, high-reward dilemma. Whereas buying and selling at a big low cost to friends and backed by a essentially robust model and community, the Canadian airline inventory has been a big underperformer. AC inventory is down 12.4% over the previous 5 years. A significant factor anchoring its efficiency in 2026 is a pair of unresolved and complicated labor negotiations that threaten each its near-term stability and its long-term value construction. Readability on these fronts is crucial earlier than contemplating a brand new place this 12 months.
Air Canada faces rising labour prices
The primary and most fast problem on AC inventory is resolving the wage dispute with over 10,000 flight attendants, represented by the Canadian Union of Public Staff (CUPE). After a rejected tentative settlement and a government-intervened dispute, the matter of hourly wage charges has entered a binding arbitration. Whereas this course of prevents a repeat of the expensive August 2025 strike, which led to over 3,200 canceled flights and a $375 million monetary hit, it introduces a brand new threat.
The union, emboldened by a 99% rejection vote of the airline’s ultimate provide and up to date arbitration successes in different issues, is pushing arduous. Air Canada’s final public provide already included a big 40% improve in complete compensation over 4 years and a brand new, industry-leading construction for “floor pay.” The ultimate arbitrated wage end result may push labour prices even greater, embedding a considerable fastened expense for years to come back.
Extra precarious is the second problem: the upcoming negotiation with the Worldwide Affiliation of Machinists and Aerospace Employees (IAMAW), representing mechanics, baggage handlers, and cargo brokers. Their contract expires on March 31, 2026. Not like the CUPE state of affairs, which is contained in arbitration, this negotiation carries the direct threat of a full-scale strike.
A piece stoppage by these technically expert, difficult-to-replace staff would successfully floor Air Canada’s fleet through the vital spring and summer time journey season. Latest IAMAW victories in grievance arbitrations defending member work underscore the union’s efficient advocacy and set a tense stage for talks.
Abstract of AC’s labour challenges in 2026
The vital distinction between these two labor challenges is summarized under:
| Threat Issue | CUPE (Flight Attendants) | IAMAW (Mechanics & Floor Crew) |
| Present Standing | Binding arbitration on wages solely. | Lively bargaining for a brand new contract, with an expiry of March 31, 2026. |
| Main Threat | Monetary: An arbitrated wage award that exceeds the corporate’s budgeted improve, pressuring margins. | Operational & Monetary: Excessive threat of a strike that halts operations, adopted by a expensive settlement. |
| Impression Timeline | Imminent (Arbitrator’s resolution anticipated by March 2026). | Mid-2026 (Peak journey season threat if negotiations stall). |
Monetary influence: Squeezing Air Canada inventory’s already skinny margins
The monetary fallout from these labour pressures isn’t theoretical. Air Canada operates on notoriously skinny margins; its working margin within the third quarter of 2025 was simply 4.9%. A brand new, dearer labour contract with both union will immediately compress this already low determine. The typical airline {industry} working margin is way greater at 7.4%.
Moreover, Air Canada has restricted room to soak up these prices with out affecting its restoration targets. The corporate has already lowered its full-year 2025 adjusted earnings earlier than curiosity, taxes, depreciation and amortization (adjusted EBITDA) steering, citing the prior labor disruption. Free money move steering is now simply $0 to $200 million, leaving a minimal buffer. A major wage award or a strike would jeopardize AC’s monetary efficiency in 2026 and push again the timeline for attaining its long-term 2028 monetary targets.
Crucially, the corporate’s capacity to move these elevated labour prices onto prospects by means of greater fares is unsure.
Investor takeaway
Air Canada inventory has its truthful strengths. It maintains a powerful liquidity place, a worthwhile loyalty program, and a refreshed long-haul fleet. Administration’s dedication to a share-buyback program additionally indicators confidence within the underlying enterprise. At its present depressed valuation, a profitable navigation of those labor woes may set off a significant re-rating.
Nonetheless, traders are presently requested to underwrite a inventory with two main labour value occasions that will shrink it’s under common working margins.
The prudent funding technique on AC inventory proper now could be to stay affected person, whereas watching on the sidelines. The inventory could very effectively characterize a compelling alternative, however solely after the arbitration ruling is public and the trail with IAMAW turns into clear.
