The Story of Air Canada
Exploring the Legacy, Growth, and Modern Operations of Canada's National Airline
In this article, we’re going over another one of the major airlines of the world, and one of the five Star Alliance founders—one of the cornerstone airlines of the Western Hemisphere and United Airlines’ northern partner, Air Canada.
Join us as we explore Air Canada’s history and background, which makes them continuously strive to be the best.
Air Canada is the flag carrier and the largest airline of Canada, by metrics of size and passengers carried.
They are, and have been, headquartered in Montreal, Quebec for their entire post-TCA history (as TCA, as I will explain below, they were headquartered in Winnipeg). Air Canada’s primary hubs are bicoastal, based in both Toronto (IATA code: YYZ) and Vancouver (YVR), Toronto being far larger.
Canada's national airline originated from the Canadian federal government's 1936 creation of Trans-Canada Air Lines (TCA), which began operating its first transcontinental flight routes in 1938 as expanded upon earlier.
In 1965, TCA was renamed Air Canada following government approval. After the deregulation of the Canadian airline market in the 1980s (two years after the U.S. did the same to its aviation industry), the airline was privatized in 1988. In the first quarter of 2000, in January, Air Canada took over its largest rival, Canadian Airlines International.
In 2003, the airline filed for bankruptcy protection and in the following year emerged and reorganized under the holding company ACE Aviation Holdings, a now-defunct holding company.
Later, in 2006, the federal government took on 6.8% ownership of Air Canada, and in 2025, that share jumped to 35% to offset the pandemic effects, with an option to go private again. The remaining stock shares are now largely owned by Cormark Securities. In April 2021, the Government of Canada acquired 6.4% of Air Canada as part of a $5.9 billion COVID-19–related assistance package and has not ruled out further investment. In 2024, the Government sold its stake in Air Canada, confirming they “...did not intend to be a long-term owner of the shares,” according to their statements in public records.
That was the brief history—now I’ll expand and dive deeper.
Air Canada's predecessor, Trans-Canada Air Lines (TCA), was created by federal legislation as a subsidiary of Canadian National Railway (CNR) in April 1937. The newly created Department of Transport under Minister C. D. Howe desired an airline under government control to link cities on the Atlantic coast to those on the Pacific coast (such as Nova Scotia to Vancouver). Using $5 million in Crown seed money, two Lockheed Model 10 Electras and one Boeing Stearman biplane were purchased from Canadian Airways, and various experienced airline executives from United Airlines and American Airlines were brought in.
The first passenger flights began on September 1, 1937, with a Lockheed Electra carrying two passengers and mail from Vancouver to Seattle, at the time a $14.20 USD round trip, and a year later TCA directly hired its first flight attendants.
Originally headquartered in Winnipeg, also the site of its national maintenance base, the federal government moved TCA's headquarters to Montreal in 1949; the maintenance base would later also move east for a unified base of operations.
With the development of ReserVec in 1953, TCA became the first airline in the world to use a computer reservation system with remote terminals. (To expand, ReserVec was the very first computerized reservation system known in our travel industry as a CRS; it is the system upon which all modern systems are built.)
By 1964, TCA had grown to become Canada's national airline. Canada Pacific, Air Canada's only real rival during the latter twentieth century, CP Air, would go into bankruptcy in 1987. For better or worse, during the 1970s CP Air was subject to capacity limits on intercontinental flights and restricted from domestic operations. Air Canada's fares were also subject to regulation by the government.
In 1976, with reorganization at CNR, Air Canada became an independent Crown corporation. A Crown corporation is a distinctly Canadian entity that enables semi-privatization, but the corporation itself is controlled wholly by the federal government. The Air Canada Act of 1978 ensured that the carrier would compete on a more equal footing with rival regional airlines and CP Air and ended the government's direct regulatory control over Air Canada's routings, fares, and services, though in name only it was still a Crown corporation.
In 1978, Judy Cameron became the very first female pilot hired to fly for any major Canadian carrier when she was hired by Air Canada.
With new fleet expenditures outpacing earnings, Air Canada officials indicated that the carrier would need additional sources of capital to fund its modernization. By late 1985, the Canadian federal government was indicating a strong willingness (even preference) to privatize both Canadian National Railways and Air Canada. In 1988, Air Canada was finally privatized, and 43% of shares were sold on the public market as an IPO. Soon the airline was completely privatized, though this was an informal status at best.
In the early 1990s, Air Canada encountered severe financial difficulties as the airline industry slumped in the aftermath of the Persian Gulf War.
By calendar year 1994, stability had been achieved and Air Canada returned to profitability. The same year also saw the carrier winning route access to fly from Canada to the new Kansai Airport in Osaka, Japan, nicknamed the floating airport as a wonder of modern engineering.
In fiscal year 1995, taking advantage of a new U.S.–Canada “open skies agreement,” Air Canada added thirty new short- and medium-haul trans-border routes and just two years later became a founding member of Star Alliance, together with Royal Thai Airways, United Airlines, Lufthansa, and Scandinavian Airlines. This alliance membership gave Air Canada codeshare access to at least 120 routes in the alliance’s network worldwide.
In January 2000, Air Canada acquired Canada's second-largest air carrier, Canadian Airlines International, merging its operations and becoming the world's twelfth-largest airline in the first decade of the 21st century, also fending off a merger and acquisition attempt by southern rival American Airlines.
Sadly, as Air Canada gained access to its former rival's financial statements, officials soon discovered that the carrier was in worse financial shape than previously believed. Deutsche Bank unveiled an $850 million financing package for Air Canada if it would cut $200 million in annual costs in addition to the $1.1 billion that the unions agreed on in 2003. The offer was accepted after last-minute talks between CEO Robert Milton and CAW (Canadian Auto Workers) union president Buzz Hargrove resulted in union concessions.
In October 2004, Canadian superstar singer Céline Dion became the face of Air Canada, hoping to relaunch the airline and draw in a more international market after 18 months of bankruptcy protection. She recorded her single, “You and I,” which subsequently appeared in several Air Canada commercials, earning a sizable net profit for the airline.
Also in October 2004, the last Air Canada Boeing 747 flight landed in Toronto from Frankfurt as AC873 (FRA–YYZ), ending 33 years of 747 service with the airline—a true end of an era. The Boeing 747-400 fleet was replaced by the Airbus A340 fleet.
In the mid-2000s, Air Canada underwent a vast fleet modernization program that would last roughly ten years.
Started in July 2006 and since completed, Project XM: Extreme Makeover was a $300 million aircraft interior replacement project to install new cabins on all aircraft. New aircraft such as the Boeing 777 were delivered with the new cabins factory installed. New cabin features included, in Executive First (eventually replaced by AC Signature Class), new fully flat Executive First Suites (on all Boeing 767s, Boeing 777s, and Airbus A330s).
This makeover also included new seats in all classes on all aircraft, with new in-flight entertainment and power outlet options.
Entering the modern era, a combination of high fuel prices and the Great Recession of 2008–2009 caused Air Canada significant financial difficulties going into the 2010s. In June 2008, the airline announced it would lay off over 2,000 employees and cut its flight capacity by 7 percent by the first quarter of FY 2009. Conditions worsened in 2009. Air Canada's contracts with four unions also expired around this time. The airline stated that its $2.85 billion pension shortfall (which grew from $1.2 billion in 2007) was a “liquidity risk” in its publicly available first-quarter report, and it required new financing and pension “relief” to conserve cash for 2010 operations.
In July of that year, Air Canada requested and received CA$1 billion in financial aid from a consortium of entities, including the Canadian government, ACE (before they sold off their stock and went bankrupt), and associate company Aeroplan. The Centre for Aviation reported that only CA$600 million was actually loaned to Air Canada; the rest of the money was from sale-leaseback accounting and “aggregating an array of biscuit-tin savings,” as the CfA reported.
On February 9, 2017, a new retro red and black aircraft livery was launched to coincide with Air Canada's 80th anniversary and Canada’s 150th anniversary of Confederation. The update includes design aspects from the logo used between 1964 and 1992, with an overall white colour scheme, a black underside, a tail fin with a red maple leaf rondelle, black “Air Canada” lettering with a red maple leaf rondelle underneath, and a black “raccoon mask” surrounding the cockpit windows.
Another acquisition attempt was made by Air Canada on May 16, 2019, when it announced it was in exclusive talks to buy Transat A.T., the parent company of Air Transat, for CA$520 million. On June 27, 2019, Transat A.T. agreed to be purchased for CA$13 per share. In August, Air Canada raised the purchase price to CA$18 per share, bringing the total value to $720 million. On August 23, 2019, 95% of shareholders approved the acquisition.
The agreement was revised downward in October 2020 to CA$5 per share due to the COVID-19 pandemic. The plan was expected to face intense scrutiny from the Competition Bureau and European regulators. While the Government of Canada approved the takeover in February 2021, it was dropped in April 2021 after failing to secure European Commission approval.
In the aftermath of the pandemic, service began to return to normal on May 22, 2020, after many route suspensions during COVID lockdowns. In its first quarterly financial report, Air Canada announced a loss of CA$1.05 billion compared to a profit of CA$345 million in Q1 2019. The airline similarly suffered in the third quarter, reporting a loss of CA$685 million.
In June 2022, Air Canada announced it was cancelling over 150 daily flights due to unprecedented pressure in the aviation industry. In September 2022, the airline welcomed the Government of Canada’s decision to lift remaining COVID-19 restrictions, including mask mandates and the ArriveCAN app requirement.
Air Canada has launched several short-haul subsidiaries over time. On November 1, 2001, Air Canada launched Air Canada Tango, designed to offer no-frills service under the parent brand.
Air Canada once called its lowest fare class “Tango” as nostalgia for that era. As of 2018, the Tango fare class was renamed Standard Fare.
In 2001, Air Canada consolidated its regional carriers into Air Canada Regional Incorporated. In 2002, this became Air Canada Jazz. In 2011, the Jazz brand was replaced by Air Canada Express.
Entering the 2020s, Air Canada began a new fleet modernization and expansion program. In March 2022, it ordered twenty-six Airbus A321XLR aircraft.
Air Canada currently offers three classes of service: AC Signature Class, Premium Economy, and Economy. Air Canada Express operates Business Class on some aircraft and Economy on others.
Starting in 2025, Air Canada, in partnership with Bell Canada, rolled out fast and free Wi-Fi for Aeroplan members on flights within North America, Mexico, and the Caribbean, covering about 85% of its fleet, with international rollout planned for 2026.
Air Canada operates Airbus A330, Boeing 777, and Boeing 787 Dreamliner aircraft for long-haul routes, and Airbus A320 family, Boeing 737 MAX 8, and Airbus A220-300 aircraft for short-haul routes.
Its divisions include Air Canada Cargo, Air Canada Express, Air Canada Jetz, and Air Canada Rouge. Its subsidiary Air Canada Vacations provides vacation packages to over 90 destinations worldwide.
Together with its regional partners, the airline operates on average more than 1,613 scheduled flights daily.
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