Air Canada is wooing travellers with a new low-fare airline to be launched this summer, taking on WestJet Airlines in its home territory.

ZIP Air Inc. will begin operations between Vancouver and Calgary, replacing existing Air Canada network flights without changing their frequency.

Within its first year of operations, ZIP plans to serve additional markets across Canada and into the United States.

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Former WestJet executive Steve Smith launched ZIP in Calgary last week, saying the subsidiary will answer market demands.

To be headquartered in Calgary, also home to rival WestJet, ZIP will operate primarily short-haul routes with connections to and from Air Canada’s worldwide network. Air Canada says it is withdrawing mainline operations in these short-haul markets because they are no longer financially sustainable.

“ZIP speaks to a growing number of consumers who are asking for more options in low-fare, reliable air service,” said Steve Smith, president and CEO of ZIP and a former WestJet executive.

“ZIP responds directly to fundamental changes in the airline industry, especially on short-haul routes where fewer consumers are looking for executive class and meals.”

The wholly owned subsidiary of Air Canada will announce schedules, fares and the start of ticket sales at a later date. All ZIP flights will qualify for the Aeroplan Reward Program.

Air Canada says the launch of ZIP is the answer to “new market realities,” and a critical component of its strategy to dramatically reduce its costs.

The company says it will reduce costs by offering light snack service only; making maximum use of electronic services; lowering labour costs; and benefiting from efficiencies that result from operating one type of aircraft, the Boeing 737-200.

ZIP will start with 250 employees, with plans to eventually have up to 1,000 staff. ZIP will operate with its own management team, corporate brand and identity, and operating certificate and licences.

Initially, the new airline plans to use six Boeing 737-200 aircraft in a 117-seat configuration, expanding eventually to 20 aircraft.

The ZIP fleet will be transferred from the Air Canada mainline fleet.

ZIP will contract with Air Canada and Air Canada Jazz for the provision of some services and resources, including pilots for ZIP flights and the maintenance of the ZIP fleet.

WestJet company officials could not be reached for comment by press time.

Meanwhile, a cloud is already gathering on ZIP’s horizon.

The Canadian Union of Public Employees, which represents 8,500 Air Canada cabin crew members, is seeking clarification over ZIP’s staffing.

Air Canada’s use of the 737-200 aircraft at ZIP will be “vigorously resisted” if current Air Canada staff is not employed to crew the flights, said Pamela Sachs, president of the Air Canada component of CUPE.