To quote Air Canada:

"Air Canada said today that it will implement changes to its checked baggage policy on flights within Canada, and between Canada and the U.S. including Hawaii, effective May 15, 2008 for travel on or after July 15, 2008.

Follow up:

Under the new policy, customers who purchase Tango and Tango Plus tickets may check one bag at no charge and a second bag for a $25 service fee. Tango and Tango Plus customers will continue to have the choice of customizing their fare including obtaining a discount when travelling without checked luggage.

"In an environment of record high and unrelenting fuel costs it is more critical than ever that the airline reviews its product offering to ensure it can continue to offer everyday low fares," said Duncan Dee, Executive Vice-President, Customer Experience and Chief Administrative Officer. "This policy change is part of the on-going review of our activities that allow us to keep pace with current industry standards and economic realities, while remaining competitive with our main North American competitors."

There is no change in the checked bag policy for customers purchasing Latitude and Executive Class tickets. As well, Air Canada Elite, Super Elite and Prestige members in addition to Star Alliance Gold and Silver members maintain their current baggage allowance when purchasing Tango and Tango Plus fares. Baggage allowance for travel to and from countries other than Canada and the United States will remain unchanged. This includes North American flights as part of international travel. View complete details of new Air Canada's baggage policies.

Air Canada will continue to review its policies to determine what adjustments are to be made so that, against a backdrop of record high fuel costs, it continues to provide the products and services that respond to customer demand while offering every day low fares."

So basically Air Canada is going to charge you to take a second bag of luggage. They are going to charge you a fuel surcharge. They already charge you a fake "NAV Canada" fee to cover their costs of using Canada's air space. (I call this a fake fee because Air Canada is paying per plane, not per customer and it should be part of normal business and not a separate fee charged per passenger). It seems to me that it has become normal course for Air Canada to hide their real air fares with extra charges instead of being simple and upfront about their prices.