Key Morningstar Metrics for Air Canada
- : C$22.70Fair Value Estimate
- : ★★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
We lowered our forecast for long-term air-travel growth, based on the observed relationships among global economic growth, demand for air travel, and North America’s share of global travel, which decreased our 2030 forecast of Canadian airline capacity by 2.5%.
Why it matters: Economic growth goes hand in hand with demand for air travel. We lowered our global assumption for the elasticity of that demand to GDP growth from 2.1 to 1.8 in the medium term, but we still think the relationship will settle down to about 1.4 in the long term.
- Our forecast for 2030 worldwide available seat miles went from 8.93 billion to 8.89 billion, only dropping half a percentage point, compared with just over 7.00 billion flown in 2025, and our expectation for global GDP growth hasn’t changed from around 3.1% annually.
- We held our assumption steady for the share of global air traffic that Canadian carriers will provide. This measure has held fairly steady at around 2.5% of global capacity, while it shrank for US carriers from over 40% in the 1990s to just under 20% in 2025. We now see the US ASM share below 15% by 2033.
The bottom line: Our new forecast has the general effect of shrinking US airlines’ addressable market beyond the 2027-28 timeframe and increasing future intensiveness of competition among North American airlines in the mature and crowded air travel market.
- As a result, we’ve decreased our fair value estimate for no-moat Air Canada AC to C$22.70 per share from C$26.00, leaving the stock some 20% undervalued relative to our revised fair value estimate. With its High Uncertainty Rating, we wouldn’t consider the stock compelling above C$13.60.
