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Air Canada Pressured by High Leverage

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On November 24, 2020, Moody's Investors Service downgraded its corporate family rating on Air Canada to Ba3 from Ba2, its probability of default rating to Ba3-PD from Ba2-PD and its senior unsecured notes rating to B2 from Ba3. "Today's downgrade of Air Canada's ratings reflects our expectation of high leverage and that the return to 2019 air travel volume is likely to extend through 2023" says Jamie Koutsoukis, Moody's Vice President, Senior Analyst. Also, the Company is constrained by 1) the continued severe drop in passenger demand due to the coronavirus pandemic and related significant cash flow consumption, 2) elevated adjusted debt (about C$14 billion) in part due to recent borrowings to support liquidity and 3) uncertainty regarding the timing of a recovery in demand for air passenger travel, especially on international routes, which is an important portion of Air Canada's business.

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