In addition to driving up operating costs for Air Canada, the weak Canadian dollar also saw the company’s net debt jump close to 27 percent over the last year.

As the loans are in U.S. dollars, the unfavourable exchange saw the debt grow and continue a trend that’s been manifest since 2012. Since then, the net debt of the airline has almost doubled, from $1.9B to $3.7B. A visualization of the five-year trend can be seen below.

But the debt shouldn’t worry stockholders too much. At least not with the interest rate the way it is.

“Borrowing is a really good thing as long as the interest rate stays cheap. Problem is when you get caught,” says Barry Prentice, transportation economist at the University of Manitoba. “When the economy turns on you, or the interest rates suddenly go up and you have a lot of debt.”

The lower the interest rate, the smaller the earnings required to cover the interest.

In 2015, Air Canada reported another year of income growth, continuing a five-year period of overall growth.

But despite a steadily growing bottom line, the airline could still be in trouble, should their earnings not keep up.

“If you start losing money, you can lose all your equity pretty fast. So that’s why people look and watch these numbers with some care, because they present a risk for the company,” says Prentice. The problems that the weak exchange rate causes for Air Canada’s bottom line is discussed at length in their 2015 Annual Report.

A prudent investment

The willingness to take on debt should also be seen in conjunction with Air Canada’s decision to renew their fleet. From a strict business perspective, borrowing money could be the right move.

“That would be not an unreasonable thing to do, because they’re refreshing the fleet, which makes it a more attractive product,” says Karl Moore,  professor at McGill University. “That would be something they’re looking at, how do we remain competitive. So it might be seen as a prudent, reasonable investment.”

Any decision to take on more debt should be considered in light of what the money will be going to.

“You may be taking on debt to do that, but debt’s not a bad thing depending on why you’re taking on debt, and whether the business will sustain it over time,” says Moore.

Should the winds of fortune change and repayments suddenly loom large, the nature of Air Canada’s business will also be in their favour, says Prentice.

“For most company, the crisis, if it comes, comes because of cash flow. The airlines have a huge cash flow, because the product they’re selling is four-five hundred dollars a shot – an airline ticket. As long as you can continue to cashflow your debt, you can keep going for a long time,” says Prentice.

A safety net

The necessity of Air Canada’s service will also act as a safety net, especially given the prominent place they occupy in the market.

“The nature of travel is that business travel isn’t going to drop off that much, because people will need to travel,” says Prentice. “They’re obviously in a very dominant position. Right now it’s a pretty cozy duopoly between WestJet and Air Canada.”

Air Canada’s history with the government, however, might even turn into overconfidence from lenders and investors.

“Air Canada’s a very big company and I think there’s always the feeling in the back of the mind of any investor or the bank that the government will never let them go out of business,” says Prentice. “So they can probably have more debt than an equivalent sort of business because of who they are and where they are.”