Key insights
- RBC Capital Markets' Q1/26 Flight Deck report shows mixed results for Canadian aerospace. Elevated fuel costs are a key risk. Air Canada's target lowered due to fuel costs. Bombardier is a high-conviction pick. CAE Inc's target lowered due to geopolitical issues. Chorus Aviation is a top idea. Exchange Income Corporation has potential upside in defense manufacturing. Limited direct impact on US equities, but rising fuel costs could pressure US airline profitability.
Investing.com -- RBC Capital Markets analyst James McGarragle released the firm's Q1/26 Flight Deck report on Monday, providing updated estimates for the Canadian aviation and aerospace sectors. While the report highlights robust consumer demand, it notes that "sustained elevated fuel costs remain a key risk" to the industry’s 2026 outlook.
The firm maintains an Outperform rating on Air Canada (TSX:AC) but lowered its price target to $22 from $25. McGarragle moved EBITDA estimates below management’s guidance, noting he anticipates the carrier will "implement fare increases in Q2 to recover elevated fuel costs."
Bombardier Inc (TSX:BBDb) remains a high-conviction pick with an Outperform rating and a price target raised to $298 from $287. The analyst observed that "bizjet activity was a bright spot" in the first quarter, noting the segment is well-insulated from supply chain pressures.
RBC maintains a Sector Perform rating on CAE Inc. (TSX: CAE) while lowering the price target to $42 from $46 to reflect delivery headwinds. McGarragle cited "geopolitical disruptions in the Middle East impacting near-term demand for CAE's civil training solutions" as the primary driver for the lower valuation.
Chorus Aviation Inc (TSX: CHR) is identified as the firm’s top idea, carrying an Outperform rating and a price target unchanged at $35. McGarragle emphasized that "Chorus remains our top idea, representing a compelling value opportunity" with management targeting $525 million in free cash flow through 2029.
Exchange Income Corporation (TSX:EIF) rounds out the coverage with an Outperform rating and a maintained price target of $133. The analyst pointed to potential upside in the manufacturing segment, specifically noting "defense-aligned capabilities" as a key factor for the company's expected double-digit growth.
Despite varied revisions across the sector, McGarragle remains constructive on the long-term fundamental strengths of Canadian aerospace. He concludes that "travel indexes hit highs signalling robust consumer travel demand," which should underpin results as companies navigate a transitory 2026.