AC didn't say anything about A318s; we did. They said they were looking at CRJs, which are cheaper to operate than 737s.
There are a few routes that could use an aircraft with less than 120 seats and more than 50. Several routes out of Ottawa would work: YOW-YWG, YOW-YHZ, YOW-YYC (if a CRJ could make it and people could be convinced to fly on one). They are still flying 737s on some routes out of YYZ (YQT, YQM, YQB); these would probably also work well. And they will need smaller planes for Zip if they want to maintain the frequency and increase the load factor beyond 50%.
Also, if they go all Y on many domestic routes, which I think is quite likely, then the A319 will seat somewhere around 134 pax.