Air Ontario Inc. was established in June 1987, when James Plaxton purchased Great Lakes Airlines prior to its bankruptcy, and Air Ontario Ltd. (formerly Great Lakes Airlines, formed in 1958) was formed.
In January 2001, a newly merged carrier called Air Canada Regional Inc. was established. A wholly owned subsidiary of Air Canada, this company combined the individual strengths of four regional airlines—Air BC, Air Nova, Air Ontario, and Canadian Regional Airlines. Consolidation of these four companies was completed in 2002 and was marked by the launch of a new name and brand—Air Canada Jazz.
On March 10, 1989, Air Ontario Flight 1363, operated by Fokker F28-1000 Fellowship C-FONF, crashed near Dryden, Ontario immediately after take-off en route from Thunder Bay to Winnipeg via Dryden. The aircraft crashed after only forty-nine seconds after liftoff because it was not able to achieve enough altitude to clear the trees beyond the end of the runway due to ice and snow on the wings, causing the death of 21 of 65 passengers and 3 of 4 crew members. Some of the survivors were able to escape from the plane on their own but the others were carried to safety. The accident happened because the APU-engine did not work, and the airline decided that one of the main engines could be on at Dryden. However, the necessary de-icing was possible only when both main engines are stopped.