Pacific Western was original formed in BC as a bush outfit by Russ Baker in 1953, as Central BC Air Lines (or something like that, the exact name is a little rusty in my memory). It eventually was built into a fairly large regional carrier. It operated regional routes within western Canada, as well as some arctic operations, and some charter flights as well. B737-200's were the mainstay of the fleet, it also historically had some 727's, L-100 Herc freighters, and even a 707 or two, and further back had a varied fleet of earlier aircraft from the bush era. In the '80's a pair of 767-200's were bought, but it was decided to standardize to an all-737 fleet, so they were sold off (as mentioned above, AC got them, and C-GPWA is currently sitting at YWG).
As to how Canadi>n came to be, well, it's a long story. PWA was a takeover target by Transair in the '60's, and Federal Industries Limited in the '70's, but the Alberta Government bought them (*political mess*) and relocated their headquarters from Vancouver to Calgary. Transair was subsequently purchased in 1978, PWA was privatized, and by the mid '80's was extremely profitable, had a standardized fleet of 24 737's, and was awash in cash from a leaseback transaction. After they failed to buy Air Canada, in December 1986 they instead bought CPAir (a much bigger carrier, which in turn had recently bought Nordair and Eastern Provincial), as well as acquisitions of Time Air, QuebecAir, Norcanair, and others, forming Canadian Airlines International Limited in 1987. Then, in 1989 they finished up by purchasing Wardair Canada.
...the rest is Canadi>n Airlines history, but I'll just finish up by noting that the last of the PWA name only disappeared in the mid '90's when the name of the holding company owning Canadi>n was changed from PWA Corp. to Canadian Airlines Corp.