I would say that the years of battles between Air Canada and Canadian Airlines left a few markets, namely Toronto, Calgary, and Vancouver very much saturated. Montreal, Halifax, Winnipeg, and Edmonton are major markets that have foregone alot of expansion in the last few years other than the YUL-YYZ and YYC-YEG high frequency routes, but I think that these cities (YUL, YHZ, YEG, YWG) can have some good growth happening now because they haven't expanded flights as much as to YYC, YVR, and YYZ. On a slightly smaller scale, cities like Victoria, Saskatoon, Regina, Thunder Bay, Windsor, and so on have some real potential for new players in their markets as well. There is lots of potential in the market if airlines like WestJet or CanJet grow in all of these cities, and for the larger ones there is plenty of room for AC to expand its international route network. For that matter, AC/CP can probably do a fair bit of domestic realignment that will put some more capacity on routes such as YWG-YYZ where it is needed, while cutting the waste capacity from other routes.
Regarding Great Plains which YWG777 mentioned, I'm not sure what's happening there. A group announced it was working on a WestJet styled airline out of YWG, but with CanJet and WestJet going east, I think the market Great Plains was hoping to serve is being picked up by them. I read a little while ago in the Winnipeg Free Press that Great Plains had been put aside until the regulatory and competitive environment clears up a little, but now I think it is fairly likely that CanJet and WestJet will both be operating the routes Great Plains wanted to, so I doubt at this point that Great Plains will ever get put back into gear again. FYI, one of the people who proposed Great Plains was Mr. Murray Siegler, who is currently heading Winnipeg Airports Authority. Previously Mr. Siegler was an executive at Pacific Western Airlines and later in charge of something at Canadian Airlines.
I also wanted to comment on some of the assumptions that WestJet will fly into Toronto Pearson (YYZ). I am assuming you are referring to Pearson airport and not just the Toronto area by saying YYZ. I would say that it is by no means certain that WJ will use Pearson. Pearson is congested, and expensive. WJ can get faster turnarounds, and lower costs by flying elsewhere. Hamilton appears to be in the running for WJ flying there. WJ could also try to start Windsor or London, Ontario routes, or maybe Ottawa. We should know sometime in January where they choose to fly, but I would say Pearson is less than a 50% chance. It really depends on whether they want to outdo CanJet by flying into Pearson (more convenient than Hamilton), or whether they want to offer lower fares than AC by going to Hamilton, or whether they possibly want to create new markets such as London and Windsor.
One other thing. As long as we're talking about CanJet and WestJet expanding, what about InterCanadian? I heard something about there being an offer to buy them up, and restart them in Quebec. Anyone know anything else?