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
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
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.