Air Canada (TSX:AC) began a new normal course issuer bid on November 9, 2026. The bid allows the airline to buy back up to 25,197,886 shares, about 10% of its public float, through November 8, 2027. It follows an $800 million substantial issuer bid completed in late September. Together, the two programs show Air Canada is using proceeds from selling part of Aeroplan to reduce its share count, even as high jet fuel prices have cut its 2026 Earnings and free Cash Flow outlook. The question for investors is how much the airline can buy back while keeping its Balance Sheet strong in a period of volatile fuel costs.

What the New Buyback Allows

Air Canada disclosed the new NCIB in its third-quarter release on October 29. It runs from November 9, 2026, to November 8, 2027, and covers up to 25,197,886 Class A variable voting and Class B voting shares. Under its previous NCIB, the airline repurchased 16,295,815 shares at a weighted average price of $18.41.

The new bid follows the substantial issuer bid completed on September 28. In that offer, Air Canada bought 27,586,206 shares at $29.00 each, about 9.8% of the shares outstanding before the offer. The offer was heavily oversubscribed. About 66.8 million shares were tendered, so the airline took up roughly 41% of the shares tendered, excluding odd lots. After settlement, about 252.7 million shares were outstanding.

An NCIB sets a maximum, not a commitment. Air Canada may buy fewer shares, or none, depending on market conditions, cash needs and its Capital priorities.

Where the Money Came From

Both programs are funded mainly by the Aeroplan transaction announced on August 11, 2026. Under that deal, a group led by Blackstone and La Caisse, along with PSP Investments and British Columbia Investment Management Corporation, invested $2.5 billion for a 25% non-controlling stake in Aeroplan Inc. The deal valued the loyalty program at $10 billion. Air Canada kept 75% and control of Aeroplan's operations and strategy.

The proceeds were mainly intended to repay a US$1.2 billion bond maturity, roughly $1.7 billion, with most of the rest going to share buybacks. Air Canada's third-quarter release confirmed $1.7 billion of Debt repayment funded by the Aeroplan proceeds. Net debt fell to $4.219 billion from $4.830 billion a year earlier, and the airline's Leverage Ratio improved to 1.3 times from 1.6 times. Total Liquidity was $8.018 billion at September 30.

How Fuel Has Changed the Cash Flow Picture

The buyback comes as fuel costs are putting pressure on the airline's operations. Third-quarter Operating Revenue was a record $6.984 billion, up 21%, helped by an 11% gain in Yield and a load Factor of 89.1%. However, fuel expense jumped by $906 million to $2.118 billion as the cost per litre rose to 148.3 cents from 88.3 cents. Operating Income fell to $261 million, a 3.7% margin, from $284 million. Adjusted EPS was flat at $0.75. Free cash flow was negative $440 million, compared with positive $211 million a year earlier.

Air Canada cut its 2026 adjusted EBITDA guidance to $2.4 billion to $2.7 billion from $2.9 billion to $3.2 billion. It now expects free cash flow of break-even, plus or minus $150 million, down from $200 million to $500 million. The updated outlook assumes fourth-quarter jet fuel at $1.72 per litre, up from $1.29. It also assumes Air Canada can offset only about 70% of the higher fuel cost in the fourth quarter, compared with 100% previously.

With near-zero free cash flow expected for 2026, NCIB purchases would effectively be funded by the Aeroplan proceeds and existing liquidity rather than by current operations.

Why Management Is Prioritizing Buybacks

Several reasons stand out. Reducing the share count increases each remaining share's portion of future earnings. The sale of a minority stake in Aeroplan at a $10 billion valuation turned part of the loyalty program's value into cash without giving up control, and a portion of that cash is now being returned to shareholders while the rest has already reduced debt. The heavy oversubscription of the September offer showed strong Shareholder Demand to sell at $29.00.

Market coverage after the results reported that several analysts lowered their price targets following the guidance cut, citing jet fuel costs and the softer profit outlook. Readers should check current consensus figures, since targets have moved since the third-quarter report.

What Risks Remain

The main risk is fuel. A further rise in jet fuel prices, or a weaker ability to pass costs on through fares, would cut cash flow further and could make large Buybacks harder to justify. A softer Canadian dollar would raise U.S.-dollar costs, and the outlook assumes an Exchange Rate of 1.39 Canadian dollars per U.S. dollar. Demand risks also remain, including weaker transborder travel amid Canada–U.S. trade tensions. Labour costs and fleet renewal spending are longer-term cost pressures. Air Canada ended the quarter with 358 aircraft, compared with 366 a year earlier.

There is also a trade-off in capital allocation. Cash spent on buybacks cannot be used for further debt reduction, so leverage could rise again if earnings weaken.

Conclusion

Air Canada's new NCIB, which began on November 9, allows it to buy back up to roughly another 10% of its float after already retiring about 9.8% of its shares through the $800 million substantial issuer bid. The money comes mainly from the $2.5 billion Aeroplan stake sale, which also funded $1.7 billion of debt repayment and lowered leverage to 1.3 times. Fuel costs, however, have pushed expected 2026 free cash flow down to around break-even. How actively Air Canada uses the new bid will likely depend on jet fuel prices and fourth-quarter cash flow. Investors following TSX:AC can track the pace of repurchases in the airline's fourth-quarter report.