TORONTO -- Air Canada is jumping into the low-cost leisure travel market with the launch of its new Rouge airline, which will begin flying on Canada Day to destinations in Europe and the Caribbean.
The airline will start with flights from Toronto to Venice, Italy and Edinburgh, Scotland -- two destinations Air Canada currently doesn't serve, and will serve Athens, Greece from Toronto and Montreal.
Air Canada's existing flights to Cuba, the Dominican Republican, Jamaica and Costa Rica will be flown by the discount carrier from Toronto.
The destinations are areas where demand for leisure travel has been growing, said Ben Smith, Air Canada's chief commercial officer. But many are routes that didn't generate adequate profits under Air Canada's existing cost structure.
For now, most of the flights will depart from Toronto, but the airline plans to add more Canadian gateways, along with more getaway destinations throughout 2013. It is also examining the potential of flights to Asia.
Smith said the carrier will be a vehicle to reclaim market share it has lost to domestic and international competitors.
It plans to hire 200 flight attendants and pilots for the new low-cost carrier.
The airline says flights to Venice, Edinburgh and Athens start at "special introductory fares" of $949 round-trip, including all taxes, fees, charges and surcharges.
Flights to the Dominican Republic and Jamaica will start at $269, one-way, while Cuba is offered starting at $538 round-trip.
All the introductory fares, which are available until Dec. 25, are based on Toronto departures.
Details about fares going forward were not immediately available, but the company said it will provide more details about pricing and its premium economy seats in January.
The new low-cost airline will begin operations with two Boeing 767-300ER and two Airbus A319 aircraft that will be released from Air Canada's mainline fleet. Additional planes will be added as Air Canada (TSX:AC.B) starts to take delivery of new Boeing 787 Dreamliner aircraft in 2014, ramping up to 50 planes.
Air Canada has said about half of incremental profits from its low-cost carrier will be derived from cramming more seats into a fleet of 20 Boeing 767s and 30 Airbus A319s. The rest comes from lower employee wages and more flexible work rules.
The wide-body planes, for example, will be fitted with 20 per cent more seats, raising the number of passengers to 275 per aircraft.
Airline analyst Jacques Kavafian at Toll Cross Securities said that could turn some customers off, adding he doesn't believe Rouge will be the financial success the company hopes it will be.
"The A319s seat pitch is similar to competitors in Canada but the 767s seat pitch is almost unique in the world and will likely reflect poorly on its image," he said.
Smith refuted those claims, saying many of its competitors have a similar number of seats per aircraft.
"I can clearly state that the product offering for all seats will either be competitive or superior to what's being offered in all the markets that we serve," he said.
-- The Canadian Press