Air Canada’s dominance of the domestic Canadian airline market has been challenged by small regional carriers. The regionals can operate more efficiently in their smaller markets and offer sharply lower fares than Air Canada over the same routes. Air Canada has tried two policies to combat this competition. One was to meet or undercut all regional fares in order to eliminate the regionals’ price advantage. The other was to break off several regional airlines from Air Canada itself in order to compete with the regionals in their own territory. Are these Air Canada strategies permissible under marketing law? Are there other ways for Air Canada to protect its market share?