dagger Posted August 29, 2014 Share Posted August 29, 2014 Cash raising... hmmmhttp://business.financialpost.com/2014/08/29/porter-puts-billy-bishop-airports-passenger-terminal-up-for-sale/ Link to comment Share on other sites More sharing options...
boestar Posted August 29, 2014 Share Posted August 29, 2014 Now AC will buy it then not lease space to porter. Link to comment Share on other sites More sharing options...
Maverick Posted August 29, 2014 Share Posted August 29, 2014 tick...tick...tick... Link to comment Share on other sites More sharing options...
thor Posted August 29, 2014 Share Posted August 29, 2014 Soon it will be cash for gas. Link to comment Share on other sites More sharing options...
Guest longtimer Posted August 29, 2014 Share Posted August 29, 2014 I wonder who would / will buy a terminal that has only one major customer and that customer would be the only major source of revenue for the buyer? Porter would in fact be paying the new landlord their rent with his own cash that was given to the them in payment for the terminal. Unlike aircraft / engine etc buy backs there does not appear to be any other airline that would want to rent the terminal in the event that Porter did go out of business. Link to comment Share on other sites More sharing options...
rudder Posted August 29, 2014 Share Posted August 29, 2014 WSJ suggested asking price of $500M. Revenue is 90% dependant on one customer. And that is a good investment......not. The fire sale has begun. This will probably go as well as the aborted IPO.Sooner or later CHR and PAH will figure out that they should figure out a way to consolidate on a corporate basis. Neither one has many other suitors or options. Link to comment Share on other sites More sharing options...
blues deville Posted August 29, 2014 Share Posted August 29, 2014 As a big supporter of the island airport and of course Porter, I can't imagine this was part of the long term plan. Perhaps the competition (such as it is) is having its effect on the little engine that could (or maybe couldn't). I would imagine this summer holiday season has been slow for Porter and now it's crunch time.Good luck to anyone associated. Hope things keep running. Link to comment Share on other sites More sharing options...
internet Posted August 29, 2014 Share Posted August 29, 2014 When's the tax increase on av gas in Ontario?That would give them a nice excuse when they fold up shop... Link to comment Share on other sites More sharing options...
Thebean Posted August 30, 2014 Share Posted August 30, 2014 Porter sneaks out a bomb on the Friday prior to the Labor Day long weekend. What better time to try and bury a very significant signal as to the extent of Porter's problems. If it wasn't obvious that Porter was struggling before, surely this will make it so to even the most obtuse Porter defender. Porter must officially be on the Titanic Watch list. I can't think of a more core strategic asset than ownership of the sole passenger terminal in an airport where you control, basically in perpetuity, 90% of all commercial landings. Successful businesses don't do sale/leasebacks on core strategic assets. Such an arrangement will only drive Porter's unit costs higher as the lessor is going to be looking for nice return on what is, without a doubt, a very specialized real estate asset. They'll be a pretty significant delta between what Porter pays now on debt service and what they'll be paying on a sale / leaseback basis. Apartment buildings in the GTA are achieving caps in 3.5%-5.5% territory these days. Class A downtown office towers run 5%-6.25%. Hotels are running 6.75% to 9%. An airport terminal that depends on one airline with 90% of all capacity and a dubious track record of profitability? I would think any investor would be looking for north of 10% to justify the risk. There are some pretty lofty numbers floating around as to what the building might fetch. Any investor interested in the facility is going to value the building solely on a cap rate based on sustainable annual rents and revenues achieved over the long term. It's on leased land to boot, which makes it less desirable to many investors. Given that 90% of revenues are a function of the viability of the dominant tenant in the building, any prospective buyer is going to want to have a very close look at Porter's books to see if the revenue stream supports the cap rate and ultimately the price paid for the building. NDA's will be executed, but even then, I would imagine the true story will get out very quickly and I have grave doubts it will paint a very compelling picture of Porter's situation. We all remember what happened at Canadian when they got into the sale / leaseback of core assets and started using the Visa to pay the MasterCard off. I don't know what the building cost to construct but I do know what WJA's YYC hangar cost to build a while back and even in today's dollars, it's not even a fraction of the the numbers being thrown around for what is, in essence, a pretty simple building on, presumably, leased land. The use of funds sheds even more light into the situation. Does Porter even have any more Q400's on order? Any decision on CSeries is miles away and it seems rather strange to sell a core strategic asset in order to pay for "upgrades to the airport lounge". Is this a case of shareholders finally having had enough and demanding cash back? Is cash so tight, they are burning the furniture? Suppose either AC or WJ buy the building and then freeze out the main tenant? What's Porter going to do? No terminal, no flights, no need for slots. Any landlord, even a landlord outside the airline business, is going to want to ensure he can make his bank payments. There are few landlords who would want to put their investment at risk of default as the result of relying on an overwhelmingly dominant tenant with no track record of profitability all of a sudden not being able to pay rent. The landlord would want to diversify the tenancy base to spread the risk. The first thing they'd want to do is reduce Porter's dominance and bring in other tenants, which, in this case, means other airlines. The only way that occurs is by making it impossible for Porter to use all their slots, thereby making them available to other airlines. What does that do to Porter? The spin is typical Porter, but this situation strongly suggests they face very serious financial problems. When things look like a duck, walk like a duck, talk like a duck, smell like a duck and taste like a duck, it's probably a duck. Link to comment Share on other sites More sharing options...
mo32a Posted August 30, 2014 Share Posted August 30, 2014 Wouldn't a leaseback by Porter be part of the sales agreement, at least for some years time? Link to comment Share on other sites More sharing options...
cavok Posted August 30, 2014 Share Posted August 30, 2014 Everyone is speculating that AC or WS may be interested. What about the Port Authority? Isn't that the obvious buyer? Link to comment Share on other sites More sharing options...
Guest longtimer Posted August 30, 2014 Share Posted August 30, 2014 Everyone is speculating that AC or WS may be interested. What about the Port Authority? Isn't that the obvious buyer?Why would they want to purchase something that is worthless without Porter and also of course presently, or so I imagine, pays fees to them? Take a look at page 40 of their 2013 financial report: http://www.torontoport.com/getattachment/About-TPA/Media-Room/Reports-and-Publications/TORONTO-PORT-AUTHORITY-ANNUAL-REPORT-2013.pdf.aspx Link to comment Share on other sites More sharing options...
blues deville Posted August 30, 2014 Share Posted August 30, 2014 Could this potential sale of real estate be part of a strategy to have an outside party become a player with a big bat in the never ending island airport game?Porter doesn't need to be in the airline terminal business. I don't think slot times are connected to the ownership of the buildings. And!......(as Robin Williams used to say in his standup)......Porter isn't selling the FBO which just happens to fuel anything that lands at YTZ. Do AC or WS own any airport terminals or gates? Link to comment Share on other sites More sharing options...
blues deville Posted August 30, 2014 Share Posted August 30, 2014 Porter sneaks out a bomb on the Friday prior to the Labor Day long weekend. What better time to try and bury a very significant signal as to the extent of Porter's problems. When things look like a duck, walk like a duck, talk like a duck, smell like a duck and taste like a duck, it's probably a duck. Link to comment Share on other sites More sharing options...
Fido Posted August 30, 2014 Share Posted August 30, 2014 Do AC or WS own any airport terminals or gates?Air Canada used to own gates in a number of airports, but airport authorities do not like that arrangement.I suspect that they have relinquished all of them. Link to comment Share on other sites More sharing options...
blues deville Posted August 30, 2014 Share Posted August 30, 2014 Air Canada used to own gates in a number of airports, but airport authorities do not like that arrangement.I suspect that they have relinquished all of them.Yes so the accepted practice is to lease/rent them from the airport operators. So it appears Porter will try to do the same at YTZ. So with the exception of the "hundreds" of dollars invested once upon a time by WS at Abbotsford, it's safe to say airlines in Canada today do not own terminals. Link to comment Share on other sites More sharing options...
rudder Posted August 30, 2014 Share Posted August 30, 2014 There is a rumour of a hiring "freeze" at Porter as well. Can anybody who would know comment? Link to comment Share on other sites More sharing options...
DEFCON Posted August 30, 2014 Share Posted August 30, 2014 A hiring freeze may equate to a sale / merger. Encore anyone? Link to comment Share on other sites More sharing options...
Guest longtimer Posted August 30, 2014 Share Posted August 30, 2014 Quite the sale, just got this via email from Porter Unadvertised sale ends tonight! up to 55% off You can only take advantage of this offer with our promo code before midnight! Travel by Dec 14, 2014 https://www.flyporter.com/Special-Offers/Save-This-Weekend?culture=en-CA&promocode=BAPX7T Link to comment Share on other sites More sharing options...
cavok Posted August 30, 2014 Share Posted August 30, 2014 Why would they want to purchase something that is worthless without Porter and also of course presently, or so I imagine, pays fees to them?My thinking is just that the airport accounts now for 1/3 of the Port Authority's revenue. They should be understandably nervous that the ownership of what is probably the most important strategic asset on the island (after the runways) could fall in to the hands of someone that isn't as committed to the business of commercial aviation on the island. Link to comment Share on other sites More sharing options...
inchman Posted August 30, 2014 Share Posted August 30, 2014 The TPA would be the best customer as they have historically been squarely in Porter's court. It's also quite possible that this is a done deal, the press release is just a formality and this is a way for the TPA to provide their preferred client with some needed cash.It's pretty normal for airport authorities to own the terminals so it would be easy for both parties to deflect any criticism or inference of a backroom deal. Link to comment Share on other sites More sharing options...
J.O. Posted August 30, 2014 Share Posted August 30, 2014 Where is the TPA going to get those funds? Link to comment Share on other sites More sharing options...
j.k. Posted August 30, 2014 Share Posted August 30, 2014 Where is the TPA going to get those funds?From the runway project that will not be approved. Link to comment Share on other sites More sharing options...
inchman Posted August 30, 2014 Share Posted August 30, 2014 Where is the TPA going to get those funds?The same way most of us get funds for our homes... a mortgage. In theory, at least, if they pay the right amount and charge the right fees, they should be able to cover the payments with income. I'm not sure what the rules are, but because it isn't actually building anything else, they might not even need city council's approval to get a mortgage. Of course, if one of the major tenants reduces service, that would affect income and their ability to pay, but being a quasi-governmental operation, they have other sources of money. Link to comment Share on other sites More sharing options...
inchman Posted August 30, 2014 Share Posted August 30, 2014 I just realized, though, that this is being positioned as a sale/leaseback, which implies that it would leave Porter in control as the lessor of the whole building, as opposed to just a customer renting space. Link to comment Share on other sites More sharing options...
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