Air Canada suspends 2026 forecast on Iran war uncertainty despite sturdy travel demand

By Shivansh Tiwary and Allison Lampert

April 30 (Reuters) - Air Canada AC.TO suspended its 2026 forecast on Thursday, as higher jet fuel prices due to the war in Iran created uncertainty over costs, even as travel demand remained robust.

The carrier beat first-quarter revenue estimates and reported a smaller-than-expected adjusted loss, helped by resilient demand, particularly from premium customers with the ability to absorb higher fares.

Canada's largest carrier will also pause share buybacks in the near term and review the decision in the second half of the year.

Fuel, which typically accounts for about a quarter of operating costs, has almost doubled in price since the conflict started in late February, leading carriers to trim capacity, raise fares and charge higher fees for services like checked baggage.

Air Canada, which joined Alaska Airlines ALK.N in suspending its full-year guidance, said it has implemented multiple rounds of fare increases along with a hike in ancillary services fee. It is also trimming less profitable routes and reducing the number of flights where demand is weaker.

"Supported by solid demand, our second quarter 2026 guidance reflects our expectation to offset between 50% and 60% of the estimated incremental fuel expense through various commercial and cost actions," Air Canada CEO Michael Rousseau said on Thursday.

"Despite fuel-driven fare increases, we continue to see strong demand across the network and throughout the booking curve."

The carrier introduced a second-quarter core profit forecast, projecting adjusted EBITDA in the range of C$575 million ($423.35 million) to C$725 million.

It expects to pay an average of about C$1.28 per liter for jet fuel in the second quarter, including gains from hedging.

Montreal-based Air Canada reported operating revenue of C$5.785 billion for the quarter ended March 31. Analysts on average had expected revenue of C$5.393 billion, according to LSEG data.

It also reported an adjusted loss of C$0.05 per share, compared with analysts' expectation of C$0.45.

($1 = 1.3582 Canadian dollars)