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Air Canada Rogue: Will the low-cost carrier fly?

Jennifer Kwan

World travelers take heart: Air Canada is flying into the low-cost leisure vacation market with its new "Rouge" airline, stopping off at destinations in Europe and the Caribbean next summer.

The company hopes the carrier will be a vehicle to reclaim market share and bolster its bottom line.

"Air Canada enters today's growing leisure travel market on a truly competitive basis," said Ben Smith, the company's chief commercial officer, in unveiling Rouge on Tuesday.

Starting in July, Rouge will offer cheap flights to new routes in the Caribbean and Europe. On Tuesday, special introductory fares went on sale for flights to Venice, Italy, Edinburgh, Scotland, Athens, Greece, Cuba, the Dominican Republic, Jamaica and Costa Rica, Air Canada said.

The carrier will launch with two Boeing 767s and two Airbus 319s, but Rouge plans to expand to more than 50 aircraft in the next three to five years.

Air Canada plans to hire 200 people for Rouge. Cost savings are expected to come from paying lower wages and putting more seats in planes in a so-called new "multi-tier seating" structure.

The Montreal-based company will compete with the likes of Transat, WestJet Vacations and Sunwing Travel Group.

Chris Murray, an analyst at PI Financial Corp, sees Rouge more as a defensive strategy against further encroachment by those competitors, according to a report in the Financial Post.

“Management indicated they expected the new operation to be profitable from inception, however we expect given its small scale that the operation is likely not material in [2013 or 2014],” he said in a note to clients.