Air Canada wins approval for low-cost carrier but now faces the challenge of defining the operation

Air Canada's plans to create a new low-cost subsidiary to better compete in leisure markets is far from a foolproof scheme to wipe away the legacy cost elements that management believes make Air Canada mainline uncompetitive on various levels. The airline faces the danger of disrupting those markets with additional capacity those routes are unlikely to absorb. In its planned slow ramp-up, the new carrier will also likely create upfront costs that might not be recovered until the low-cost carrier reaches full scale, which will further pressure Air Canada's costs in the short-term.

Other than touting the establishment of the low-cost carrier as a significant growth platform to allow Air Canada to compete in the crucial low-cost space, few details have emerged about the new airline. Air Canada has not stated if it will seek a separate operating certificate for the carrier, if there will be a separate management structure, estimated aircraft utilisation levels, seat density or how network planning and optimisation between the two carriers will be carried out.