Porter eyes a new flight path to growth
Airline optimistic about future as it marks 10th anniversary
Porter Airlines CEO Robert Deluce is still holding on to the idea of flying CSeries jets one day, but knows it’s probably a far-off dream.
“We’ve kept our CSeries conditional order in place, leaving those deposits with Bombardier. Don’t read too much into that,” said Deluce, during an interview at his office at Billy Bishop Toronto City Airport as his airline marks 10 years in business today.
“On our part, we’re keeping all of our options open,” he said, though he quickly adds there are no discussions underway to get jets at the island airport.
“We’ll wait until there is a better climate to talk about CSeries in the future, if that opportunity presents itself,” he said.
That’s a reference to whether there might some day be the political will — either at city hall or Ottawa — to allow jets and extend the runway at Toronto’s island airport.
In April 2013, Porter announced it wanted to move beyond regional flying by buying Bombardier’s new CSeries jets, which would allow much longer ranges, as far as Vancouver or Los Angeles, from the downtown Toronto airport.
But after a series of public consultations and studies, stretching over years, the idea was quickly nixed by Prime Minister Justin Trudeau’s government when it took office a year ago.
Within weeks, Transport Minister Marc Garneau made it clear, with an unusual nighttime tweet, that the Liberals would not reopen the tripartite agreement, which governs the airport’s operations. That meant Porter’s dream of jets was over.
Now, almost a year later, Deluce said the airline is focused on a different growth plan, centred on its Q400 turboprops.
It already owns 26 planes, outright, thanks to cash garnered in the sale of the terminal building last year. And it is buying three more planes, with two due to arrive in December and one in February.
But the airline won’t be announcing new routes. Rather, using those planes will help improve frequency of some routes, during peak morning and afternoon flights, and offer flexibility for maintenance schedules or in the event of mechanical problems or weather woes.
“Our growth now is in a different form, and it will work well,” Deluce said. “It’s slower growth. But it’s good growth.”
As a privately held company, Porter doesn’t disclose its financials or how full its planes are, but Deluce said its load factors are higher this year than a year ago, crediting it in part to the pedestrian tunnel that opened in July 2015.
PortsToronto, which operates the island airport, said the chapter on jets is firmly closed, with attention now focused on other issues. Spokesperson Deborah Wilson pointed to the resurfacing of the main runway, which was done at night during the summer, so commercial flights could still operate during the day.
“Inch for inch it is exactly the same,” Wilson said, adding work is getting underway for a new ground run-up enclosure facility.
PortsToronto has also just announced it has approved a 27,000square-foot expansion of the passenger terminal, now owned by Nieuport Aviation Infrastructure Partners. That will include bigger lounges and room for more retail, including food and beverage, as well as one extra gate, which will be used when there are weather delays.
“The lounges are bursting at the seams, especially on days when there are delays,” Wilson said. “You have passengers sitting on the floor.”
Brian Iler, a spokesperson for CommunityAir, a citizen’s group, said PortsToronto did not inform area residents about the terminal’s expansion plans.
“It’s 27,000 square feet. That’s massive,” he said. “What’s shocking to me is that they give these consents to Porter without consideration to the public interest,” Iler said.
The terminal renovations will also set aside room for U.S. customs, as the airport expects to get the goahead for preclearance in Canada, where passengers clear customs before departure, allowing planes to land at U.S. domestic airports.
Although the move was announced with much fanfare by both the previous Conservative government as well as during Trudeau’s first trip to Washington earlier this year, implementation requires legislation by both governments.
Continued logjams at the U.S. Con- gress have not helped, and it is unclear whether this would be a top priority for lawmakers after the Nov. 8 general election.
“If there was preclearance, it would open up a number of U.S. airports and Porter could continue to expand to some degree,” said Bill Morrison, associate professor of economics at Wilfrid Laurier University.
“They could fly into U.S. domestic airports that don’t have customs operations, such as Washington’s Reagan airport,” he said.
Although Porter flies to Washington’s Dulles airport, it is in the suburbs of Virginia. Similarly, Porter flies to Newark airport in New Jersey, but it would like to fly into New York’s LaGuardia Airport, where both Air Canada and WestJet operate.
Flying into domestic airports could give Porter some additional routes, but Morrison said the airline is still limited by the range of the Q400.
Porter has begun flying into the Orlando Melbourne airport near Port Canaveral, Fla., but it has had to cap passengers at about 60, though the plane has room for 74 passengers.
Originally, Porter capped passengers at 50, but it has determined it can carry about 60 to Florida and 62 back to Toronto.
While that has worked with the Florida flights, and it might work in some markets, Deluce said it’s not the expansion answer.
“When you have an airplane that is designed to carry 74 passengers, you should be attempting to carrying as close to the 74 passengers as possible,” he said. “That’s where your best economics are.”
Rick Erickson, managing director of RP Erickson and Associates, admitted that a decade ago he — like other aviation analysts — was skeptical that Porter could succeed.
“But the Toronto island airport is the one key variable in why it works. That model, you couldn’t pick it up and make it work elsewhere,” Erickson said. “It’s a very pronounced presence in the heart of the country’s largest city.”
Robert Kokonis, president of aviation consultancy AirTrav Inc., said at Porter’s launch, its strength was the island airport. “Now it’s their weakness, they have boxed themselves into a corner,” he said.
While Porter could still take its CSeries jet order and operate a separate hub at Pearson airport or another city, it would face direct competition from Air Canada and WestJet.
“It would not be pretty and they wouldn’t have the network or deep pockets to go head to head,” Morrison said.
By contrast, Billy Bishop airport has limited slots, with the bulk going to Porter. Air Canada only holds 30 slots, flying only to Montreal.
Other analysts said if Porter does an initial public offering, as it tried previously and then abandoned, it could raise the necessary equity for a fight.
Deluce said he is still considering an IPO, but no work is under way, arguing the timing has to be right.
“That’s something we’ll try to achieve at some point over the next while,” he said, adding “next while could be a year or longer.”
While the jet dream may be on hold, analysts say the door could always be opened at some point if politicians could be swayed.
“I’m sure Porter will continue to press for it, to open that line of communication,” said Wilfrid Laurier’s Morrison, noting that the agreement that governs the airport is due to expire in 2033.
“Conversations will open up again,” he said, adding there would be lots of lobbying, especially from the airport, which is spending millions on renovations, to ensure it remains open.
CommunityAir’s Iler argues PortsToronto should already be looking at other uses for the airport lands.
“A public agency, steward of very significant public assets, that has the public interest in mind would surely be required to assess the alternatives and do the planning,” he said.
“Our growth now is in a different form. . . . It’s slower growth. But it’s good growth.” ROBERT DELUCE PORTER AIRLINES CEO