Air Canada said it transferred all 15 of its Embraer 175 jets, which were the smallest aircraft in Air Canada's fleet.
Brazilian manufacturer Embraer's E-Jet family has been a runaway success worldwide and the company is said to be struggling to keep up with orders.
The E-Jet family, in which 175 is a key performer, was announced at the Paris Air Show in 1999, and entered production in 2002.
Air Canada's transfer of the fleet was seen by industry as a response to Sky Regional's impressive performance since it became a partner of the national carrier in 2011.
The deal also opens the way for expanded collaboration or wider capacity purchase arrangements between Air Canada and other smaller partners. Air Canada has capacity purchase agreements with Air Georgian, EVAS and Jazz that operate Air Canada Express regional flights on behalf of Air Canada.
Air Canada President and Chief Executive Officer Calin Rovinescu said he was "very pleased with the progress made in introducing more cost-competitive operations in a number of our key domestic and transborder regional markets."
Air Canada, founded in 1936, is the world's ninth-largest passenger airline by number of destinations, a founding member of Star Alliance, with a fleet of Airbus A330, Boeing 767 and Boeing 777 wide-body jetliners on long-haul routes, and Airbus A320 family aircraft on short-haul routes.
Rovinescu said, "With the successful transfer of all of our 15 Embraer 175 jets, Sky Regional has demonstrated its proven ability as an Air Canada Express partner to maintain a seamless operation and customer experience on behalf of Air Canada."
Sky Regional now operates 20 aircraft on behalf of Air Canada.
"This is an important step both in Air Canada's regional carrier diversification strategy and our ongoing cost transformation program, given that Sky Regional's cost structure is more in keeping with that of the U.S. regional carriers," Rovinescu said.
"It allows Air Canada to reduce the cost of its regional lift and thereby to better compete in the rapidly evolving North American regional markets as low cost operators continue to grow, both in Canada and the United States."
Sky Regional has been an Air Canada Express partner since May 2011, operating service between Billy Bishop Toronto City Airport and Montreal Trudeau Airport with a fleet of Bombardier Dash 8 Q400 turboprop aircraft.
Since March 2013, Sky Regional has been phasing in the operation of a fleet of Embraer 175 regional jet aircraft on existing Air Canada short-haul regional routes, primarily from Toronto and Montreal to destinations in the northeast United States including La Guardia, Newark, Boston, Philadelphia, Chicago and Dallas/Fort Worth.
Sky Regional currently employs approximately 550 people and is the sole Air Canada Express operator serving Billy Bishop Toronto City, Philadelphia, Chicago and Dallas/Fort Worth airports.
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