While I agree with TBES's insightful observations, I'd suggest a few different issues that are more marketing related.
The first big problem Air Canada has is the huge gulf between the expectations they have created and what they deliver. It's true that WestJet, for example, delivers far less than Air Canada. The difference is that WestJet never promised (or appeared to promise) anything more than they delivered. Air Canada on the other hand, through frequent flyer programs, partnerships, or even direct advertising often implies something more than they are prepared or able to deliver. If you look at all the complaints in this forum you'll see that most of them revolve around a customer feeling that they didn't get what they expected from the airline. And just saying "welll, if you read the fine print..." is not an acceptable response.
Secondly is Air Canada's attitude towards those who feel they have a complaint. They make it difficult to actually progress a complaint (for many years you could only send a complaint by postal mail or fax - not sure what the options are now), they are slow to respond, the response if and when it comes is often "it's not our fault" (with an implied "so piss off"), and if the finally do acknowledge their responsibility for a problem the response if often seen as an insult (i.e. 5% off the base fare (only) on your next ticket, Several years ago British Airways revealed that they had a staff of hundreds to deal with hundreds of thousands of complaints every year, and they saw every one of those complaints as an opportunity to improve their service. In response to the same query Air Canada's response was along the lines of "none of your damn business" -- though they did aggree to at least acknowledge receipt of complaints with 7 days.
Finally, that which zorn already noted briefly -- consistency. It's often been stated that Air Canada is consistently inconsistent. That's as true today as it ever was. Over my many years flying Air Canada the service ranged from satisfactory to very good, and occaisionally exceptional. They problem was/is that sometimes, infrequenly but still all too often, the service was stunningly bad. And that was as a Super Elite. (And my first Air Canada trip as a lowly Elite yesterday didn't inspire any confidence.) That inconsistency, in performance, in enforcement of rules and standard, and in response to problems also contribute to #1 above - the difference between expectations and reality.
Recently someone started a thread called something like "Great day on Air Canada" describing a day where they didn't encounter any serious problems, and the airline also did a small favour for them. But that's not a great day to me -- that's what everyday should be.
When a business doing what it is supposed to do is considered newsworthy, you know there must be problems.