Government will not let a foreign airline fly domestic routes directly. They will need to set up a separate airlines here first...

We have quite a few new budget airlines lately. Other than AC, these are available: Air Transat, Canada 3000, Royal, WestJet, CanJet, RootsAir (pending). I wonder if there is any room left for more...

I think a merger among these will happen one day. I will bet it's WestJet and CanJet since one flies dominatly west coast and the other east.