Porter to buy up to 80 new planes as airline expands flight network
Porter Airlines is taking advantage of the crisis created by the COVID-19 pandemic to buy up to 80 new aircraft and vastly expand its flight network across North America and into Mexico and the Caribbean, including plans to fly into and out of Toronto's Pearson International Airport.
Michael Deluce, who took over as chief executive in April 2019, less than a year before the pandemic, said the disruption that cost large national airlines more than 90 per cent of their pre-pandemic traffic allowed Porter to make deals to acquire the new Embraer E195-E2 aircraft at a good price, hire pilots, and find room in competitive airports.
“The pandemic and the crisis that really the entire industry has gone through over the past 15 months has really opened up substantial opportunities in our view to shift the competitive landscape,” he said in an interview.
Scaling up as quickly and substantially “would have been much more challenging in a pre-pandemic world,” he said, adding that there has been “nothing comparable in this history of aviation.”
The Toronto-based regional airline grounded its fleet in March of 2020 when the global pandemic was declared and travel restrictions “made operating impossible,” Deluce said.
But this also allowed Porter to cut costs, and regional flights from Billy Bishop Toronto City Airport are now set to resume beginning Sept. 8. The expanded flights using the 120-seat to 146-seat planes with transcontinental range will begin in mid-2022.
Porter has made firm commitments to buy 30 planes, and has an option to purchase 50 additional aircraft. The total aircraft order is valued at up to US$5.82 billion at current list prices.
The purchase rights agreement includes a provision to convert to smaller E190-E2 aircraft, giving Porter the ability to introduce non-stop service in some markets where connecting flights are often the only option, and enable higher-frequency service for routes with greater demand.
In the past, the 15-year-old airline offered service to and from the northeastern United States and eastern Canadian destinations including Ottawa, Montreal and Halifax, all within about 2,500 kilometres of Toronto.
Porter, which entered the pandemic with little debt, secured additional government credit to shore up the balance sheet and offset risk as it recovers and expands, but doesn't plan to tap much of it, Deluce said.
On June 30, Porter Aviation Holdings Inc., parent company of Porter Airlines, announced it had reached an agreement with the federal government for loans of up to $270.5 million, including $20.5 million dedicated to passenger refunds for flights cancelled due to the pandemic.
Analysts have suggested it could take years for the airline industry to recover from the pandemic.
Deluce said he believes a return to pre-pandemic flights levels is achievable by 2023 or 2024, with pent-up demand for leisure travel evident as vaccination rates grow and travel restrictions decline. Business travel will take longer to recover, he said, but he predicts it will come back to previous levels.
Airline consultant Robert Kokonis said short-haul business travel, which was “in Porter's wheelhouse” before the pandemic, is likely to be slowest to bounce back because companies may find it cheaper and equally productive to continue meeting by video conferencing services such as Zoom and Skype.
“We'll get back on the road again but my feeling is … if you've got a home office in Toronto and a big branch plant in Montreal and you used to go there every two weeks, maybe that trip is only going to happen once a month. Or if you used to go once a month, it's going to be once a quarter,” said Kokonis, managing partner at Airtrav Inc.
“If that's the case, by bringing these E2 jets in it opens up different types of flying and markets for Porter that previously they couldn't have touched. So if you could launch a leisure flight to Vegas or L.A., it's good news.”
He said Porter's expansion plan is “bold” and “decisive” and also stakes a claim for the airline as the North American launch partner for Embraer's fuel-efficient E2 aircraft.
Kokonis said if things go well, he would not be surprised to see the privately held company pursue in initial public offering in the next couple of years to fund further expansion and perhaps provide an exit for some shareholders.
In 2010, Porter shelved a planned IPO when the valuation offered did not meet expectations.
A few years later, the carrier announced a plan to buy additional larger aircraft from Bombardier Inc., but hit a snag when an agreement could not be secured with federal and local authorities to extend the runway at Porter's downtown Toronto airport to accommodate the planes.