Saturday, September 22, 2018Canada's Leading Online Business Magazine

Porter Airlines Aims to be 3rd National Airline Carrier

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Will Jets Soon Be Flying from Toronto’s Island Airport?

Everyone loves a business success story – everyone except maybe those working for the competition.

Such is the case with Porter Airlines, the small regional airline carrier founded in Toronto just seven-and-a-half years ago, and led by CEO and President Robert Deluce, the man largely credited with vaulting the company from ground zero to heights that seemed unimaginable just a few years ago. He now has a vision that would see Porter Airlines become Canada’s third national airline, joining Air Canada and WestJet. But there are more than just a few legalities in the way.

There are also lobby groups opposed to the expansion. It’s actually not the expansion itself they have a problem with, but rather where that expansion is scheduled to take place – at the small Toronto island airport.  What remains to be seen is whether those barriers can be cleared. Toronto City Council is expected to make a final decision some time this fall.

Porter Airlines has carved out an immensely successful niche market in carrying out regularly scheduled flights between Toronto and other locations in Canada as well as the United States using Canadian-built Bombardier Dash-8 Q400 turboprop aircraft. Now, the company feels it’s in a position to become Canada’s next national carrier, assuming everything works out with the federal government, the City of Toronto and the Bombardier C-series jets that it believes will take it to the next level and be able to ultimately compete with Air Canada and WestJet on longer-haul flights. The primary motivation is increasing the size of the company, which could mean another 1,000 jobs.  Porter executives also point to the island airport generating $2 billion in economic spin-off for the Toronto region.

To briefly review, being located out on the Billy Bishop Toronto City Centre Island Airport in Lake Ontario, just south of Toronto’s downtown core, Deluce and Porter Air wanted a bridge to be built from the mainland to handle all the passengers it would by flying in and out of the airport.  However, that deal was cancelled 10 years ago now, which led to a plethora of lawsuits being filed between Porter and the City of Toronto.  The bridge idea was ultimately shot down, but Porter was able to buy the island airport terminal used by Air Canada Jazz thanks to compensation awarded from the Toronto Port Authority from one of the lawsuits. Since 2006, Porter Air expanded the passenger terminal in March, 2010. Rather than a bridge a pedestrian tunnel linking the island airport to the mainland began late last year and is scheduled to be complete next spring.

The Next Level

With the immense success of its turboprop passenger plane service, Porter Airlines is now looking to move to the next level – that being the purchase of C-series jets from Bombardier, and more specifically the new CS100. It’s this desire that has put the company on the radar screens of both Air Canada and WestJet, who have already made overtures that they too want to be allowed access to the island airport if Porter is granted permission to fly conventional passenger jets from there.  The plan has also caught the attention of a number of downtown residents, who vehemently oppose Porter being allowed to fly C-series jets from Billy Bishop airport for two primary reasons: potential noise and pollution concerns. 

It’s quite evident that the required expansion of the airport landing strip has opened up a Pandora’s Box, with WestJet already announcing that it believes its larger Boeing 737s could land there based on specifications and requirements – assuming jets are ultimately approved.

The Toronto Port Authority has previously stated the CS100 series appears to comply with the aircraft noise limits at Billy Bishop. Aircraft must conform to federal aviation rules on noise restriction. It’s quite likely the newest 737s may also qualify.  But the issue now is available slots from which to fly at the airport.

Air Canada CEO Calin Rovinescu has publicly stated he’s not afraid of the added competition from Porter but is concerned that Billy Bishop airport could conceivably become the “private playground” for that one carrier.  Rovinescu wants an even playing field, meaning greater access granted to other players, such as for his company and WestJet. Air Canada does currently have limited access at Billy Bishop with its own small fleet of Q400 planes that travel back and forth to Ottawa. But Rovinescu wants the same opportunity for expansion afforded to Porter.

For Deluce’s business plan to fly, Porter Airlines needs approval from Toronto’s City Council and the Toronto Port Authority, and given the past acrimonious relationship, that seems anything but a sure thing. Porter also must build two 168-metre extensions on both sides of the main runway at Billy Bishop Airport to accommodate the take-off and landing requirements of the much bigger, more powerful C-series planes.  The extension process is already well under way.

Porter has received the backing of Toronto Mayor Rob Ford and several councillors, but there are also councillors on the opposite side who don’t like the idea one bit. Geoffrey Wilson, chief executive of the Toronto Port Authority, says his agency will wait until Ottawa and Toronto City Council decide whether to revisit their Tripartite Agreement that regulates the Island airport.

Speaking to a business crowd at the Toronto Region Board of Trade, Deluce confirmed his company is seeking to purchase up to 30 of Bombardier’s new C-series aircraft.

It’s commonly assumed a third national carrier would be a benefit to travellers as it would drive competition between the companies. The federal government appears to support the idea of Porter’s expansion, at least on the surface, because of its ability to generate more jobs.

Confidence in C100s

“There’s no question the aircraft is leaps and bounds (above) of anything else out there,” Deluce says when speaking about the CS100. “The other airplanes are effectively old airframes with new components strapped on, like engines.”

Porter is looking to purchase 30 of the planes in total, but it’s all contingent on approvals going through.  The first order would see 12 being purchased with options for another 18. The plan for Deluce is to have his company flying to further destinations such as Vancouver, Miami and Los Angeles. The current fleet does not have the range to travel such distances.

Comprehensive studies are still being carried out in Toronto regarding whether the new jet will meet noise specifications.  A number of industry insiders believe the jet will qualify, but others are not so sure, including outspoken opponent Brian Iler of Community Air, who was on-hand to voice his objections directly to Deluce. Also on hand to question Porter’s agenda was Anshul Kapoor, spokesperson for a coalition group known as NoJetsTO. CBJ asked Kapoor as to what specifically is his biggest concern about bringing CS100 jets to the island airport.

“It’s more along the lines of a tripartite agreement, flawed as it may be,” he replies. “It created a balance between the citizens of Toronto as well as the corporate need for growth. Not all growth is positive. From our perspective, this is negative growth, which will have a detrimental, generational, irreversible impact on our city. NoJetsTO is looking forward to contributing to the studies done by city council through detailed input and community testimonies.”

“We’re working our way through the process,” Deluce says. “In the meantime we’re doing our best to ensure all the information needed so that when councillors do make a decision, they do it based on all the merits of the plan and the benefits to the city.”

Much of the final decision will be based on the feasibility of having jets fly out of the much more tranquil setting of the island airport, as opposed to Pearson. Deluce says he’s happy with the progress being made till now on the various studies.

“There seems to be full cooperation and engagement on everybody’s part to try and at least get a handle on the data, on the performance, the sound on things like buoys and aircraft, so at the end of the day I think we’ll have a good idea of whether the benefits that we propose to bring are such that the tripartite ought to be opened in order to accommodate the CS100 and with the modest runway extension that’s required.”

With the plans for having Porter fly jets out of the airport, there will be considerably more activity at Billy Bishop with the airline heading out to various longer-haul destinations.

“The CS100 with it’s mission being more like a Calgary, L.A., Florida or the Caribbean, it might go out in the morning and come back in at the end of the day having only one departure and one arrival, so we’re talking potentially something in the neighbourhood of 44 arrivals and takeoffs which would give us the capacity we would need in order to be able to accommodate those aircraft.”

Deluce and Porter must approach the Toronto Port Authority, with that body being the ultimate decision maker in determining whether those additional slots can be accommodated and still stay within the very strict limitations of the NEF 25 noise contour.

If, ultimately the CS100 jets are not given approval to fly out of the island airport, Deluce says his company will forge ahead as it has done for the past seven years.

“We’re going to continue operating from there,” he says. “We’ve been profitable there the past couple of years and have some really good destinations. Our passengers like what we’re doing. They’re really just asking us if we could go a little further without changing the level of service and adding other destinations at affordable pricing. Our plan is predicated on being able to operate those aircraft from Billy Bishop Toronto City Airport.”

The purchase agreement with Bombardier calls for the first deliveries of the CS100 jets in the early part of 2016. These jets will be flying in and out of London City Airport and Stockholm Bromma, two very environmentally sensitive airports in Europe, by some time next year.

If Deluce has any concerns about the viability of the new CS100 he’s certainly not showing it outwardly despite the fact purchase orders for it have been very slow coming in to Bombardier.  When asked if he thinks the jet will ever gain traction, he referred back to the Q400 series, the mainstay of his current airline fleet.

“I look back at how the Q400 was doing prior to us starting to upgrade that aircraft. Once we started to operate it and showed its full potential, orders went up. It’s now the most successful turboprop that Bombardier has produced to date.”

The CS100 now has a number of firm and option orders and considering the fact it’s not yet flying commercially.

“An aircraft that’s already flying has an advantage in terms of orders so if an airbus appeared to get more out of an airshow that’s no surprise to me. Once the aircraft flies I suspect there’ll be a whole bunch of potential users of that aircraft and will want to in fact have their foot in the door and secure their place in the delivery queue as well. This plane is going to be a game changer.”

WestJet recently purchased its first Q400 planes, which means they will look to provide a direct rivalry for Porter on some of the shorter-haul flights.

“It comes a full seven years after we first started flying our Q400s, so it took them a while to warm up to the value of that aircraft but I think they understand it and appreciate it now,” Deluce replies. “We’re likely to be flying into Calgary with our CS100s on the assumption (and we don’t take anything for granted here – don’t misread me) but on the assumption we do get the required approvals, we’ll probably be flying in to Calgary with those CS100s before they’re (WestJet) flying into Toronto City Airport with their Q400s.”

Deluce was also asked to provide an opinion as to what it will potentially mean for consumer airfare costs. As example, how would Porter’s pricing on the CS100 compare flying from the island airport to Calgary versus Air Canada flying from Pearson International to Calgary?

“The only thing I can relate to there is the fact that on every single destination we’ve gone in to until now, our airfares have dropped by up to 60 per cent,” Deluce reveals. “At the same time the actual size of the market has grown so we would expect that will also be the case with some of the additional destinations that we take on without us necessarily being the price leader. Once we’re in the market seems to bring about a certain competitiveness that hasn’t existed before.

The CS100 is also trumpeted as burning 20 per cent less fuel than any other jet in its class and fuel of course is a major component of cost, so it stands to reason there would be room to translate that into savings for the consumer when they are purchasing tickets.

There has often been speculation about takeover plans and that the premise behind building the fleet at Porter is about making the company more attractive for a potential suitor.  It’s a notion that Deluce shrugs off.

“There’s been speculation of takeover offers from other companies since we began flying,” he responds. “There was also lots of speculation about how long we’d last, so we don’t pay a lot of attention to that. We have no discussions going on with WestJet or any other carrier. This is an expansion plan on our part that is supported by all 1,400 team members.”

By Angus Gillespie

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