Just five years after emerging from a similar restructuring, mounting debt and pension obligations have once again raised the spectre of bankruptcy for Air Canada , if an analyst's report is to be believed.

According to UBS analyst Fadi Chamoun, if the country's biggest airline, Air Canada (ACa. TO) is unable to secure additional financing and fails in re-negotiating covenants in credit card agreements, it could be forced to file for bankruptcy protection.

In a note dated 13th February, Chamoun says despite lower fuel costs, operations will not provide sufficient cash to meet rising pension funding obligations, including over C$1-billion ($800-million) in debt repayment over the next two years. This even while, covenants in credit card agreements tighten, resulting in the airline being required to maintain higher cash deposits.

Air Canada shares have been down-graded to 'sell' from 'neutral', selling for C$1 from C$1.50.

Angela Mah, Air Canada spokeswoman declined to comment on the UBS report.

Even though, the economic crisis has seen the traffic of international carriers drop, forcing route cuts, capacity restraints and employee lay-off, most analysts, expect Air Canada to be able to weather the economic down-turn and make it through 2009.