Discount carrier to start with 4 jets

Air Canada subsidiary will fly to Europe and Caribbean

Air Canada’s new discount carrier will take off next June with a fleet of only four planes.

The airline announced plans Tuesday to merge its new carrier, which it calls low-cost, with its existing tour operator Air Canada Vacations.

“The creation of a leisure group that combines our new low-cost leisure carrier with Air Canada Vacations, our successful tour operator business, is a major milestone for Air Canada,” Calin Rovinescu, Air Canada’s president and CEO, said in a news release.

The carrier will fly to vacation spots in Europe and the Caribbean.

While no specific itineraries were named, the airline will serve “popular holiday destinations in Europe and the Caribbean that are either currently underserved, or that do not generate adequate profitability with Air Canada’s existing cost structure,” the news release said.

Michael Friisdahl was named president and chief executive officer of the new leisure group, a wholly-owned subsidiary of Air Canada.

Friisdahl comes from Thomas Cook North America, where he was most recently CEO.

The new airline will launch with two Boeing 767-300ER aircraft and two Airbus A319 planes. With the discount carrier model, Air Canada gains savings on labour costs.

For more than a year now, Air Canada has talked about starting a discount airline to compete with rivals like Transat, Sunwing and WestJet Airlines.

The discount model is growing around the world, especially in Asia.

But it was only in July when the airline won a critical arbitration settlement with its 3,000 pilots that it could push ahead with this venture. Under the agreement, Air Canada can use up to 50 airplanes — 20 Boeing 767s and 30 Airbus 319s for the discount airline, but company officials have insisted that they will ramp up slowly, and it will be several years before they are up to a full complement. As Air Canada upgrades its mainline fleet with Boeing 787 Dreamliners, it will transfer unused aircraft to the new carrier. The airline has 37 Dreamliners on order, with seven scheduled for delivery in 2014. Chief financial officer Michael Rousseau told an institutional in- vestors’ conference last month that the challenge will be to ensure more seats are on the discount airline’s planes to boost profitability. For example, he noted that Air Canada’s current configuration on the Boeing 767 is 225 seats, while most discount airlines can squeeze in 275 passengers. The airline has clearly made the lower cost airline a priority. This week, it hired Klaus Goersch, a former AirTran Airways executive, as chief operating officer. Goersch was most recently in charge of the merger of operations of AirTran with Southwest Airlines.

The airline has also announced plans to hire more than 900 employees over the next 12 months, including 400 flight attendants, 500 airport customer service agents and baggage handlers, and 60 call centre workers.

In addition, it anticipates hiring 150 flight attendants and 50 pilots for the discount carrier.

This comes after a year of troubled relations with the company’s unions over contract talks.

The federal government intervened on several occasions, and the airline now has contracts with all its unions.