Porter aims to become Canada's 3rd national airline
Expansion of Toronto's island airport could be snag in $2B deal with Bombardier
Posted: Apr 10, 2013 10:25 AM ET
Last Updated: Apr 10, 2013 3:53 PM ET
Porter Airlines confirmed today it plans to buy up to 30 CS100 jets from Montreal-based Bombardier, which would expand the regional carrier's reach from coast to coast, and take direct aim at Air Canada and WestJet.
"We believe it is time to spread our wings," president and CEO Bob Deluce said at a news conference at Billy Bishop Toronto City Airport, where Porter is based. "And so I present to you our vision for the future of Porter Airlines — a vision with service to destinations across North America, from Calgary and Vancouver, to Los Angeles, Miami and Orlando."
The move pushes Porter into direct competition with Air Canada and WestJet as a national carrier, while setting up a potential political standoff over expansion of the island airport in downtown Toronto.
'We believe the CS100 is the perfect aircraft for the next stage of our growth for many reasons, not the least of which is that it is the quietest commercial jet in production.'—Bob Deluce, Porter CEO
The conditional deal is to buy 12 Bombardier CS100s, with options on 18 more.
The deal also includes purchase rights for six of Bombardier's Q400 turboprop aircraft, currently the mainstay of the Porter fleet.
The total purchase could reach $2.29 billion US if all the options and purchase rights are exercised.
Delivery of the first jet, which has seating for 107 passengers, is expected in 2016.
The conditional purchase agreement signed on Tuesday is a coup for Bombardier, and ushers in a change in Canadian aviation. That's because the CSeries jets can fly 5,400 km without refuelling, much farther than the current fleet of Q400 turboprop planes that Porter flies to connect 19 cities across Eastern Canada and the U.S.
The airline said the expansion could mean 1,000 new employees, which would bring the total to 2,400.
Potential price war
Joseph D'Cruz, a University of Toronto business professor and aviation expert, said the move could be good news for consumers.
"It's going to be interesting to watch how WestJet and Air Canada react once Porter starts biting into their business," he told CBC News. "They're going to retaliate, and the only way they can retaliate is lower prices."
"This may trigger a vicious price war," D'Cruz said.
Air Canada said that before it takes a position on further investment at the island airport, it wants assurance that takeoff and landing slots will become available for other airlines that have been seeking increased access.
Canada's largest airline currently has only enough landing and takeoff slots to offer service between Montreal and the airport on the Toronto waterfront.
WestJet Airlines did not directly address Porter's plans, but said it remains focused on keeping its own business.
"We expect competition to increase and are preparing accordingly," WestJet spokesman Robert Palmer said in a statement.
The announcement could lead to a political dispute over the airport, which is near residents on the island and the city's heavily populated downtown.
The airline will seek permission to fly the long-range jets out of the island airport, where the runway would need to be extended into what is now water by 168 metres at each end.
Jets are currently not allowed to fly out of the waterfront airport except under special circumstances, and any changes would need to be approved under the airport's three-way agreement between the City of Toronto, the federal government and Toronto Port Authority.
The Toronto Port Authority said it wouldn't take any position on Porter's business plans.
"The TPA will not consider any change of use to the airport until a determination is first made by the elected representatives on Toronto City Council regarding Porter's proposed changes to the 1983 Tripartite Agreement," it said in a news release.
Deluce said Porter expects to have all the needed approvals within six months.
Politicians who represent the area at the municipal and federal level were quick to say before the announcement that any plans to expand Toronto's island airport would be out of the question.
"You can't pave the lake," Toronto Coun. Adam Vaughan told CBC News on Tuesday.
Porter executives went out of their way Wednesday to underline how quiet the new Bombardier jets will be designed to be.
"We knew that operating from a downtown urban airport would require us to be responsible operators and good neighbours, said Deluce, who launched the airline in 2006. "We believe that our track record of nearly seven years has shown that Porter has delivered on the promises we made when we announced plans to operate from this airport."
"We believe the CS100 is the perfect aircraft for the next stage of our growth for many reasons, not the least of which is that it is the quietest commercial jet in production."
Robert Kokonis, co-founder of airline consulting firm AirTrav, noted to CBC News that the thrust reverser required on landing may be louder than Deluce's promise of an engine that is "whisper" quiet.
“The runway's not long enough and to get an agreement to lengthen the runway, they’re going to have to go before … three levels of government, not to mention community opposition, environmental studies, so there’s a fair degree of long shot in Bob Deluce’s plans for Porter today,” said Kokonis, who also questioned how the expansion will be financed.
In a separate interview with The Canadian Press, Kokonis noted that Porter's planes have been flying less full while load factors at WestJet and Air Canada have been improving.
"In a zero sum game where they're all sort of chasing the same passenger, it does give one pause for concern that Porter might be struggling in some areas."
Despite the expansion, Deluce said taking the privately held airline public and raising money through an initial public offering is not a priority right now.
The company had planned to issue shares on the public markets in the past, but shelved them for various reasons.
"We've not thought about an IPO in most recent times," Deluce said. "Sometime in the future it's a possibility."With files from The Canadian Press