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Air Canada Discount Carriers

New discount airlines, like WestJet and Jetsgo, were a major threat to Air Canada, as many passengers choose WestJet over Air Canada. Air Canada’s response was to create a series of discount air services that included AC JETZ, Zip, Tango, and Jazz.

In 2001, Air Canada formed a small and cost effective division called AC JETZ, which was established to offer charter service to sport teams and the business community. It began with a number of agreements in place with sports teams. Service included more seating room for athletes who tended to be taller. An early opportunity for business expansion came in the fall of 2001, when a private company called Skyhawk International, which until then was providing services to sixteen professional teams that included the Toronto Maple Leafs and Toronto Raptors, filed for bankruptcy protection. Some of the business from these teams became available to the new AC JETZ service after Skyhawk folded up its wings.

In March 2002, Air Canada united and renamed their regional airlines, which included AirBC, Air Nova, Air Ontario, and Canadian Regional, the Jazz airline. The effort was to provide an affordable discount carrier to compete in the Canadian market, but it was also considered a way of preparing all the regional carriers held by Air Canada so they could be sold.

Jazz was established with 800 flights a day and a work force of 4,000. By September 2002, the intensity of competition among the discount airlines became apparent when Jazz ended service to Yarmouth, Nova Scotia, St. Leonard, New Brunswick, and Stephenville and other locations in Newfoundland. Passenger traffic continued to drop by 30 percent, which brought about a cut in staff in January 2003. These cuts included 184 flight attendants, 136 pilots, 41 airport employees, and 30 administrative workers.

In November 2002, Air Canada launched another discount airline called Tango, modeled after the other no frills, low cost airlines, to serve eastern Canada. Tango provided long haul discount flights. In 2003, Tango no longer existed as a carrier, but remained a name for a package of discounted fares with Air Canada.

To compete directly with WestJet, Air Canada created a new discount airline named Zip in September 2002 to provide western Canadians with the same kind of service. Its headquarters was in Calgary, employing 250 workers and flying six Boeing 737-200 jets. The plan was to replace many existing flights, especially short haul flights, in western Canada by Air Canada with services by Zip. Both the number of jets and employees increased in the years that followed.

By September 2004, Zip had its twelve jets grounded and was shut down. Its 400 employees were reassigned to Air Canada, with some choosing to accept severance packages. The routes that had been offered by Zip were taken over by Air Canada.

Air Canada Jazz continues to operate with smaller aircraft, discount prices and few frills, but it has been accepted that no airline, regardless of its size, can operate large aircraft flying with empty seats, and to destinations with limited traffic. As Air Canada emerges from bankruptcy protection, it has ordered smaller CRJ700 Series 705 jets with 75 seats, and the CRJ200, 50 seat jets from Bombardier. Restructuring plans include reduced labour costs, as a result of unions agreeing to cutbacks, and more flexibility in cutting or changing routes to more profitable ones.
 

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