Porter faces tough climb.

[Kip Powick]

Porter Airlines is facing a steep climb

BRENT JANG

Globe and Mail Update

Donald Carty knows that for upstart Porter Airlines Inc. to succeed, it must make a name for itself on transborder routes to the United States from downtown Toronto.

Mr. Carty, Porter's chairman and a former chief executive officer at American Airlines Inc., believes that Toronto-based Porter will be able to achieve a breakthrough in 2007 by adding New York, Chicago and Boston to its network.

Porter launched Toronto-Ottawa service in October, then added the Toronto-Montreal route in December.

“We're selling convenience,” Mr. Carty said in an interview at a downtown Toronto hotel, near Porter's shuttle service to Toronto City Centre Airport.

With the 2005 demise of Jetsgo Corp. and the 2006 shutdown of CanJet Airlines' scheduled service, Porter has emerged as the fledgling airline to watch, analysts say.

In contrast to Porter's downtown base, Air Canada and WestJet Airlines Ltd. have key hubs at Toronto's Pearson International Airport.

“We found a unique place to operate,” said Mr. Carty, who was recently named chief financial officer at Dell Inc., the largest computer maker in the world, but will remain as Porter's chairman.

He said Porter is on track to introduce service to the New York area, first to Newark Liberty International Airport this spring, and then to LaGuardia Airport, possibly later in 2007.

Porter's list of targeted destinations is based on the popularity of major markets within 925 kilometres of Toronto. After New York, Chicago and Boston, next on the list are Philadelphia and Washington.

Mr. Carty said it isn't set in stone that Porter will fly to five U.S. cities before focusing again on Canada, but that's the plan for now.

After Ottawa and Montreal, the three Canadian destinations on tap are: Thunder Bay, Ont., Quebec City and Windsor, Ont. Rounding out Porter's list of potential destinations — which could take until 2009 or beyond to add — are Pittsburgh, Cincinnati, Cleveland, Detroit and the northern Ontario cities of Sudbury, Sault Ste. Marie and Timmins.

Porter currently runs four Bombardier Q400 planes, and has another six of the turboprops slated for delivery in 2007. If all goes smoothly, Porter may order 10 more 70-seat Q400s, boosting its fleet to 20 of the planes. Porter president Robert Deluce said there are about 220 employees on the airline's payroll now, and that the number of workers could rise to 500 in 2009.

So far, passenger loads have met expectations, he added. Load factors, or the proportion of available seats filled, have been as low as 10 per cent in off-peak hours, but often exceed 60 per cent and sometimes surpass 70 per cent during busy travel times in the morning and late afternoon, Mr. Deluce said.

Privately owned Porter is marketing itself as an upscale carrier, with leather seats on the aircraft and a business lounge at the airport.

Robert Kokonis, president of AirTrav Inc., an airline and travel management consulting firm, said Porter faces a steep climb. “History hasn't been kind to airline startups,” he said.

If Porter manages to fill an average of 20 seats a flight during 2007, or a load factor of 28.5 per cent, the airline should be able to survive into 2008, Mr. Kokonis said.

But there are wild cards, he cautioned, noting that if the economy slows considerably and if oil prices surge, then Porter will encounter trouble financially, especially if it is forced to maintain seat sales to attract travellers. As well, the Porter brand is unknown in U.S. markets, so relatively few Americans will be customers at first, Mr. Kokonis said.

Mr. Carty said Porter has a few tricks left up its sleeve, including a customer loyalty program in 2007.

A residents group called Community Air is opposed to expansion at the island airport. Toronto Mayor David Miller also has been battling Porter, but Mr. Carty said he isn't fazed by the complaints.

“If the Community Air people are right and if the Mayor is right and no one wants a downtown airport, then our airplanes will be empty and there won't be an airport down here. But if we're right and the people of Toronto really want the airport, then our business will be successful. It will be determined by the economics,” Mr. Carty said.

Porter is on the verge of overtaking Vancouver-based Harmony Airways to become Canada's third-largest scheduled carrier serving major markets.

Mr. Carty couldn't resist poking fun at Harmony, which is owned by wealthy entrepreneur David Ho. “He reminds me of the story of how do you make a small fortune in the airline business? Start with a large one,” Mr. Carty joked, to laughter from Mr. Deluce.

But even Mr. Carty admits that the bragging rights for third place don't mean much, especially considering there are larger charter operations such as Toronto-based Skyservice Airlines Inc., as well as regional airlines that oversee many more scheduled destinations, including Bearskin Airlines of Thunder Bay, Ont.

He said he's a realist, so he envisages a lengthy battle to woo passengers away from Air Canada, WestJet and various U.S. carriers.

[Thebean]

Porter will survive with 20 passengers? A l/f under 30%. With advance fares available until day of flight for $69? And expanding into profitability? Lose a little on every flight and make it up on volume?

I can hear the laughs in Calgary and Dorval. They are deafening.

And how long will Carty want to attach his name to the Porter Train Wreck when he is CFO of Dell?

[Super 80]

When are you a Dagger going to can it with the day one load factors?

I hear TCA's inaugural flight carried only one passenger and it was a reporter. I bet Air Canada is going to fold any day now with such a load factor.

The routes are both performing well, especially Ottawa that carries alot of contract traffic, which while discounted isn't discounted anywhere near $69.

I really have to hand it to you, I have encountered alot of people over the years, including Mark Hill and I have never seen anyone who gets so much personally invested in wishing failure upon others.

[Mitch Cronin]

Super80... Day 1?... At least a few weeks after day one I heard from a fella who rode to YOW as one of 6... *six* lonely folks aboard a Porter weed whacker... Performing well you say?

BTW... if they hadn't entered an already well serviced market, they wouldn't be in a position to fail. Some of us wished for them not to even start up!... please remember that.

[Super 80]

my last rapidair flight on an A319 had five lonely souls on it and two of them were flight attendents going home for the night. And I was not a paying passenger either.

Air Canada is doomed, better start shopping the fleet around to other airlines huh?

[Kip Powick]

Super 80....

It is a "given" that you support Porter, probably work for them, and may I suggest that you just sit back and watch the posted hand-grenades fall where they may. Nothing you say will change the opinions of those that advocate Porter will fail.

Just sit in the weeds and keep your powder dry and, in your case, hope you have the last laugh

No stress - no less

[Mitch Cronin]

Well Air Canada might be doomed... who can tell?... (09 sure doesn't look good!)but I reckon AC might have a few more flights with a decent load goin' someplace that could offset that one you experienced.... How 'bout Porter? Hmmm?

[Guest rattler]

Super80... Day 1?... At least a few weeks after day one I heard from a fella who rode to YOW as one of 6... *six* lonely folks aboard a Porter weed whacker... Performing well you say?

BTW... if they hadn't entered an already well serviced market, they wouldn't be in a position to fail. Some of us wished for them not to even start up!... please remember that.

Starting up in an already well serviced market. Sounds kind of like Westjet who started up in a market well serviced by AC and CP, yet look at them today????

I hope Porter does well, they will not be of a size (in the near future) to hurt either Westjet or Air Canada and will in the meanwhile provide some jobs

http://www.flyporter.com/en/careers.aspx?#amengineer

How does their pay compare with Jazz or Westjet????

[Super 80]

Pearson is probably second only to LAX in my personal experience in terms of being unfriendly for short-haul travel. Porter isn't saying "me too" on the Golden Triangle and leading a race to the bottom. Porter is addressing the factors that have made short-haul flying to tedious in recent years, all the while providing a superiour level of service to that found out of Pearson.

In addition Porter has an ideal aircraft for the role, a 70 seat airliner with costs similar to those of the 37 seat airliner being flown by their theoretical competition and a very low break-even load factor.

Their break even load-factor is about 30% to 40% depending on the fare blend on a given flight.

If they were say filling their planes with $69 fares - which they are not the break even load factor only barely reaches 50%.

And the Q400 is not where their low costs end either. Most of the costs on the island are passed on to the pax by way of the TPA AIF.

They have alot going for them.

I am really not bothered by the Air Canada buffers who fawn failure upon all others - but I do believe their charges need to be answered.

[Thebean]

When are you a Dagger going to can it with the day one load factors?

I hear TCA's inaugural flight carried only one passenger and it was a reporter. I bet Air Canada is going to fold any day now with such a load factor.

The routes are both performing well, especially Ottawa that carries alot of contract traffic, which while discounted isn't discounted anywhere near $69.

I really have to hand it to you, I have encountered alot of people over the years, including Mark Hill and I have never seen anyone who gets so much personally invested in wishing failure upon others.

I love start ups. I guess it's fair to say I've done reasonably well off them.

What I can't stand are stupid start ups. The ones that are so poorly thought out, the ones that conned money off investors, the ones that build dreams amongst there staff when all it is is a pipe dream. I can't stand those ones.

And Porter, my friend, will be proven to be one of those.

Once Deluce has to start paying the bills with his own money, and not someone elses, its done. You tell me how much they are prepared to lose and I'll tell you how long they'll last, within 30 days.

[Super 80]

I don't see what is stupid about it, they have the ability to deliver a significant number of the visitors to Toronto to within walking distance of their destination while maintaining low costs by way of their fleet and facility, all the while avoiding what is probably the worst run airport outside of the developing world and the obscene costs associated with opperating from there.

Also allowing the pax to avoid the freakshow of check-in and security at Pearson - all the while providing a customer experience unlike anything offered elsewhere in Canada.