Air Canada (AC) Investor Day 2024 summary

Strategic vision and growth targets

• Aims to reach over CAD 30 billion in revenue by 2028, with 7%-8% annual growth and adjusted EBITDA margin above 17% by 2028, rising to 18%-20% by 2030.

• Plans to generate CAD 20 billion in cumulative cash from operations (90% EBITDA conversion), maintain CapEx at or below 12% of revenue, and achieve a 5% structural cash flow margin.

• Targets a 20% reduction in share count, returning fully diluted shares to below 300 million by 2028, and deploying over CAD 2 billion for buybacks and shareholder returns.

• Maintains disciplined capital allocation, strong balance sheet, sub-2x net leverage ratio, and minimum liquidity at 15% of revenues, with a focus on investment-grade credit quality.

• Performance culture, disciplined management, and a superior balance sheet underpin the risk/reward proposition.

Network, fleet, and operational strategy

• Focuses on expanding international network, leveraging three major Canadian hubs, increasing U.S. Sixth Freedom market share, and capitalizing on Canadian demographic diversity.

• Plans to add about 90 new aircraft by 2028, including 787-10s, A321XLRs, A220s, and 737 MAXs, with a shift to a more fuel-efficient, modern fleet.

• 25% of new capacity will go to new routes, 75% to upgauging and frequency increases on existing routes.

• Fleet strategy includes sales-leasebacks to optimize owned vs. leased mix, targeting 65% ownership.

• Flexibility in fleet and CapEx allows capacity to be adjusted between 115-140 billion ASMs depending on demand.

Revenue, margin, and cost drivers

• Revenue growth outpaces capacity, driven by premium product expansion, loyalty program (Aeroplan), and yield management, with RASM expected to grow ~2% annually.

• Margin expansion of 300 basis points by 2028 comes from network scale, fleet modernization, and labor productivity, with margin pressure in 2025 from labor and airport costs but recovery expected thereafter.

• Free cash flow margin target is 5%, with CAD 4-5 billion available for debt reduction and shareholder returns from 2024-2028.

• Adjusted EPS targeted to grow at a 15% CAGR, with FCF per share exceeding $5 by 2028.

• Shareholder return strategy includes buybacks, disciplined debt management, and a focus on ROIC ≥12%.