Air Canada said its low-cost carrier will begin operating in June, providing flights to holiday destinations in Europe and the Caribbean.

The new unit of Canada’s largest airline will start with four planes, the Montreal-based company said today in a statement. It will be combined with the company’s tour-operator unit, Air Canada Vacations, to form a new “integrated leisure group.”

Air Canada’s move into low-cost travel follows a July decision by a government arbitrator that allowed the airline to implement cost-saving steps in new employees’ pension plans and start the new unit. Air Canada had the highest cost to fly one seat a mile among North American airlines for the past three years, according to data compiled by Bloomberg Industries.

Air Canada said yesterday it agreed to transfer 15 Embraer 175 aircraft, the smallest aircraft in its fleet, to Canada’s Sky Regional Airlines Inc. The closely held carrier will operate the planes on short-haul routes — mostly between Toronto, Montreal and the northeast U.S. — on behalf of Air Canada under a capacity-purchase agreement.

Last month, Air Canada announced plans to hire 200 flight attendants and pilots in the next year at the new leisure carrier and more than 900 additional employees at the main airline.

Michael Friisdahl will lead the new leisure group, Air Canada said. Friisdahl, who has more than 25 years of experience in the international leisure-travel industry, previously served as chief executive officer of Thomas Cook Group Plc’s North American unit.

–Editor: James Langford