In this May 16, 2020 file photo, an Air Canada check-in area is shown at Montreal-Pierre Elliott Trudeau International Airport. Air Canada says it was bolstering its summer schedule, which nonetheless remains more than 50 per cent smaller than last year as the COVID-19 pandemic continues to pound the airline industry. (File photo by THE CANADIAN PRESS)

In this May 16, 2020 file photo, an Air Canada check-in area is shown at Montreal-Pierre Elliott Trudeau International Airport. Air Canada says it was bolstering its summer schedule, which nonetheless remains more than 50 per cent smaller than last year as the COVID-19 pandemic continues to pound the airline industry. (File photo by THE CANADIAN PRESS)

Fitch downgrades Air Canada over expected slow recovery for international travel

Heavy reliance on international traffic

CHICAGO — Fitch Ratings has downgraded Air Canada because of an expected slower recovery in demand from the COVID-19 pandemic, especially for international travel.

The Chicago-based ratings agency downgraded the airline’s long-term issuer default rating to BB negative from BB and its unsecured notes to B+/RR5 from BB/RR4.

Fitch says the country’s largest airline is in a strong liquidity position and believes it should have sufficient liquidity to manage through the crisis.

However, the agency revised its forecast to include a steeper downturn in 2020 and slower recovery in 2021.

It says Air Canada carries greater risk of a slower recovery than some airlines because of its heavy reliance on international traffic, with 30 per cent of its revenues in 2019 coming from its domestic business.

The rating is in line with United Airlines, and above American Airlines and Hawaiian Air.

“Reluctance to travel internationally and the possibility of prolonged travel restrictions may delay Air Canada’s recovery compared to more domestically focused carriers,” Fitch says in a news release.

Air Canada’s shares lost 86 cents, or 4.4 per cent, to $18.54 in Monday trading on the Toronto Stock Exchange.

This report by The Canadian Press was first published June 15, 2020.

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