A Look At Air Canada (TSX:AC) Valuation After Expanding The PAL Airlines Regional Partnership

Why the PAL Airlines agreement matters for Air Canada shareholders Air Canada (TSX:AC) is extending and expanding its commercial agreement with PAL Airlines, aiming to keep and grow regional service in Eastern Canada and Quebec through more Air Canada Express flights. For you as an investor, the key question is how this longer term partnership and additional Dash 8 400 aircraft could influence Air Canada’s regional reach, aircraft utilization, and overall business mix over time. See our latest analysis for Air Canada. Against this backdrop of regional expansion plans, Air Canada’s share price is at CA$19.48, with an 8.34% 90 day share price return and a 5.53% decline in 1 year total shareholder return, indicating near term momentum but weaker longer term results. If this kind of route expansion has your attention, it may be a good moment to widen your watchlist and check out aerospace and defense stocks as potential alternatives in the sector. With Air Canada shares at CA$19.48, recent 90 day gains but weaker 1 year and multi year returns, plus an annual loss on CA$22,006.0m of revenue, you have to ask: is there real value here, or is the market already pricing in future growth? Most Popular Narrative: 19.6% Undervalued With a fair value estimate of CA$24.24 against a last close of CA$19.48, the most followed narrative suggests the market is pricing Air Canada cautiously. Fleet modernization and upcoming entry of next-gen fuel-efficient aircraft (A220s, 737 MAX, and A321XLRs) are expected to drive down per-seat costs and enhance operational efficiency, supporting margin expansion and improved long-term earnings. Digital and loyalty initiatives, including Aeroplan partnership growth and enhanced member amenities (like free Wi-Fi), are increasing ancillary revenues and building a recurring, high-margin earnings stream, diversifying the revenue base and supporting more consistent free cash flow and earnings growth. Read the complete narrative. Curious what kind of future revenue path, margin profile, and earnings multiple need to line up to support that higher value? The full narrative lays out a detailed financial roadmap and shows how those moving parts connect to the CA$24.24 estimate. Result: Fair Value of $24.24 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, rising labor costs and competition on key international routes could pressure yields and margins and challenge the case for a higher earnings multiple. Find out about the key risks to this Air Canada narrative. Build Your Own Air Canada Narrative If you see the numbers differently or simply prefer to test your own assumptions, you can build a personalized Air Canada story in just a few minutes: Do it your way. A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Air Canada. Ready to scout your next idea? If Air Canada is on your radar, do not stop there. Use the Simply Wall Street Screener to quickly surface other stocks that might fit your style. Target potential deep value opportunities by running your filters across these 875 undervalued stocks based on cash flows and see which names line up with your return expectations. Spot emerging themes in machine learning and automation by checking out these 24 AI penny stocks for companies tied to real-world AI adoption. Tap into income focused ideas by reviewing these 12 dividend stocks with yields > 3% if you want yields above 3% backed by listed businesses. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.