Air Canada (TSX: AC) is the flag carrier and largest airline of Canada. The airline, founded in 1936, provides scheduled and charter air transport for passengers and cargo to 178 destinations worldwide. It is the world's ninth-largest passenger airline by fleet size, and the airline is a founding member of the Star Alliance. Air Canada's corporate headquarters are located in Montreal, Quebec, while its largest hub is Toronto Pearson International Airport, located in Mississauga, Ontario. Air Canada had passenger revenues of CA$12.38 billion in 2013. The airline's regional service is Air Canada Express.
Canada's national airline originated from the Canadian federal government's 1936 creation of Trans-Canada Airlines (TCA), which began operating their first transcontinental flight routes in 1938. In 1965, TCA was renamed Air Canada following government approval. After the deregulation of the Canadian airline market in the 1980s, the airline was privatized in 1988. On January 4, 2000, Air Canada acquired their largest rival, Canadian Airlines. In 2003, the airline filed for bankruptcy protection and in the following year emerged and reorganized under the holding company ACE Aviation Holdings Inc. In 2006, 34 million people flew with Air Canada as the airline celebrated their 70th anniversary. Air Canada is recognized as the Skytrax Best International Airline in North America, and was ranked as a 4 Star Airline by Skytrax in 2013.
Air Canada has a fleet of Airbus A330, Boeing 767, Boeing 777, and Boeing 787, wide-body jetliners on long-haul routes and uses the Airbus A320 family aircraft, including the A319, A320, and A321 variations, and Embraer E170/E190 family aircraft on short-haul routes. The carrier's operating divisions include Air Canada Cargo, Air Canada Express and Air Canada Rouge. Their subsidiary, Air Canada Vacations, provides vacation packages to over 90 destinations. Together with their regional partners, the airline operates on average more than 1,530 scheduled flights daily.
Lockheed Model 10A Electra "CF-TCC" in Trans-Canada Air Lines livery at the Western Canada Aviation Museum
Air Canada's predecessor, Trans-Canada Airlines (TCA), was created by federal legislation as a subsidiary of Canadian National Railway (CNR) on 11 April 1936. 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. Using $5 million in Crown seed money, two Lockheed Model 10 Electras and one Boeing Stearman biplane were purchased from Canadian Airways and experienced airline executives from United Airlines and American Airlines were brought in.
Passenger flights began on 1 September 1937, with an Electra carrying two passengers and mail from Vancouver to Seattle, a $14.20 round trip, and, on 1 July 1938, TCA hired their first flight attendants. Transcontinental routes from Montreal to Vancouver began on 1 April 1939, using 12 Lockheed Model 14 Super Electras and six Lockheed Model 18 Lodestars. By January 1940, the airline had grown to about 500 employees.
Trans-Canada Air Lines Lockheed 14H2 in 1938
Canadian Pacific Airlines (CP Air) suggested in 1942 a merger with TCA. Prime Minister William Lyon Mackenzie King rejected the proposal and introduced legislation regulating TCA as the only airline in Canada allowed to provide transcontinental flights. With the increase in air travel after World War II, CP Air was granted one coast-to-coast flight and a few international routes
Originally headquartered in Winnipeg, which was also the site of the national maintenance base, the federal government moved TCA's headquarters to Montreal in 1949; the maintenance base later also moved east. With the development of the ReserVec in 1953, TCA became the first airline in the world to use a computer reservation system with remote terminals.
By 1964, TCA had grown to become Canada's national airline and, in 1964, Jean Chrétien submitted a private member's bill to change the name of the airline from Trans-Canada Airlines to Air Canada, the English translation of the name TCA had been using in French. This bill failed but it was later resubmitted and passed, with the name change taking effect on 1 January 1965. However, Elizabeth II, the reigning Queen of Canada, flew on the first aircraft to bear the name and livery of Air Canada when she departed for the United Kingdom at the end of her 1964 tour of Prince Edward Island, Quebec, and Ontario in 1964.
1970s: early years
1 Place Ville-Marie, which previously housed Air Canada's headquarters
During the 1970s government regulations ensured Air Canada's dominance over domestic regional carriers and rival CP Air. Short-haul carriers were each restricted to one of five regions, and could not compete directly with Air Canada and CP Air. 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 the late 1970s, with reorganization at CNR, Air Canada became an independent Crown corporation. 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. The act also transferred ownership from Canadian National Railway to a subsidiary of the national government. Deregulation of the Canadian airline market, under the new National Transportation Act, 1987 officially opened the airline market in Canada to equal competition. The carrier's fleet expansion saw the acquisition of Boeing 727, Boeing 747, and Lockheed Tristar jetliners.
Air Canada Vickers Viscount turboprop being prepared for departure from Toronto in 1971
Air Canada Boeing 747-100 in 1965-1988 livery
With new fleet expenditures outpacing earnings, Air Canada officials indicated that the carrier would need additional sources of capital to fund their modernisation. By 1985 the Canadian government was indicating a willingness to privatise both Canadian National Railways and Air Canada. In 1988 Air Canada was privatised, and 43% of shares are sold on the public market, with the initial public offering completed in October of that year. By this time, long-haul rival CP Air had become Canadian Airlines International following their acquisition by Pacific Western Airlines.
On 7 December 1987, Air Canada became the first airline in the world with a fleet-wide non-smoking policy, and in 1989 became completely privatised. The successful privatisation effort was aided by a public relations effort led by company president Claude I. Taylor and chief executive officer Pierre J. Jeanniot.
1990s: strategic changes
1993-2004 livery on a Boeing 767-300ER
In the early 1990s, Air Canada encountered financial difficulties as the airline industry slumped in the aftermath of the Persian Gulf War. In response, the airline restructured management, hiring former Delta Air Lines executive Hollis L. Harris as its CEO. Harris restructured the airline's operations, reduced management positions, moved the corporate headquarters to Dorval Airport, and sold the enRoute card business to Diners Club in 1992. By 1994, Air Canada had 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.
In 1995, taking advantage of a new U.S.-Canada open skies agreement, Air Canada added 30 new trans-border routes. In May 1997, Air Canada became a founding member of the Star Alliance, with the airline launching codeshares with several of the alliance's members. The second half of the 1990s saw the airline earn consistent profits, totaling $1 billion for the 1997 to 1999 period.
On 2 September 1998, pilots for Air Canada launched the company's first pilots' strike, demanding higher wages. At the end of 1999, the Canadian government relaxed some of the aviation regulations, aimed at creating a consolidation of the Canadian airline industry. That year, American Airlines in conjunction with Canadian financial company Onex Corp, launched a takeover bid of ailing rival Canadian Airlines and Air Canada, spurring Air Canada to submit a competing offer for their largest rival.
Boeing 747-400M landing at Frankfurt am Main Airport in 2003.
2000s: merger and reorganization
A former Canadian Airlines Boeing 747-400 in hybrid livery at Hong Kong International Airport in 2001
In January 2001, Air Canada acquired Canada's second largest air carrier, Canadian Airlines, merging the latter's operations, becoming the world's twelfth-largest airline in the first decade of the 21st century. As Air Canada gained access to their former rival's financial statements, officials learned that the carrier was in worse financial shape than was previously believed. An expedited merger strategy was pursued, but in summer 2000 integration efforts led to flight delays, luggage problems and other frustrations. However, service improved following Air Canada officials' pledge to do so by January 2001. The airline was confronted by the global aviation market downturn and increased competition, posting back-to-back losses in 2001 and 2002.
Bankruptcy and restructuring
As Air Canada had employed a scorched earth policy to prevent the Onex proposed acquisition as one of its lines of defence, they had burdened themselves with onerous contracts with virtually all of their suppliers. As a result, on 1 April 2003, Air Canada filed for protection under the Companies' Creditors Arrangement Act; they emerged from this protection on 30 September 2004, 18 months later. During the period of bankruptcy protection, the company was subject to two competing bids from Cerberus Capital Management and Victor Li. The Cerberus bid would have seen former Prime Minister Brian Mulroney installed as chairman, being recruited by Cerberus' international advisory board chair Dan Quayle, the former Vice President of the United States. Cerberus was rejected because they had a reputation of changing existing employee pension agreements, a move strongly opposed by the CAW. At first, Air Canada selected Victor Li's Trinity Time Investments, which initially asked for a board veto and the chairmanship in return for investing $650 million in the airline. Li, who holds dual citizenship from Canada and Hong Kong, later demanded changes to the pension plan (which was not in his original takeover bid), but since the unions refused to budge, the bid was withdrawn.
Airbus A330-300 landing at London Heathrow Airport with the new paint scheme
Finally, Deutsche Bank unveiled an $850 million financing package for Air Canada, if they would cut $200 million in annual cost cutting in addition to the $1.1 billion that the unions agreed on in 2003. It was accepted after last-minute talks between CEO Robert Milton and CAW president Buzz Hargrove got the union concessions needed to let the bid go through.
ACE Aviation Holdings became the new parent company under which the reorganized Air Canada was held. In October 2004, Canadian singer Celine Dion became the face of Air Canada, hoping to relaunch the airline and draw in a more international market after an 18 month period of bankruptcy protection. She recorded her single, You and I, which subsequently appeared in several Air Canada commercials
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