In 1974, the Alberta government purchased a controlling share in
Pacific Western Airlines (PWA), because there were indications
that the NDP government in British Columbia was about to take
control of the airline. The head office of PWA was moved to
Calgary, and the maintenance works relocated to Edmonton. In
1983, the Alberta government changed its policy and sold its
controlling share in the airline.
By the 1980s the mood had changed and many wanted
deregulation, which came into being in 1987. Pacific Western
Airlines merged with other small airlines and formed Canadian
Airlines, a new competitor with Air Canada. There was a period
of rapid expansion and optimism among the large airlines in
Canada, but there were also unforeseen changes, including an
economic down turn in Asia, that affected Canadian Airlines'
profitability. At the same time, Air Canada faced new challenges
from other airlines.
By the 1990s, both airlines were facing increasing debt as
they faced a reality of rising costs and fewer passengers.
Competition from the low cost, no frills airline, West Jet, had
an impact as well. Several attempts were made to merge Canadian
Airlines and Air Canada as a result. Following changes in the
regulations by the federal government in 1999, the two airlines
merged under the Air Canada banner.
The new and larger Air Canada continued to face trouble with
increasing debt. New no frills airlines emerged, threatening Air
Canada, bringing it to seek bankruptcy protection on April 1,
2003. After considerable restructuring, Air Canada emerged from
bankruptcy protection on September 30, 2004.
Air Canada continues to face competition and a new way of
doing business with the ongoing success of discount airlines
like WestJet and Jetsgo.
Air Canada has responded by creating a series of discount air
services that included AC Jetz, Zip, Tango, and Jazz, its own
discount carriers. Some of these airlines have continued, while
others like Tango only remain as a discount ticket option on
regular Air Canada flights.