Porter going public via IPO

[AME]

Condition Levers ?? What are those ?? I do seem to vaguely remember from a long time ago !!

Condition Levers? Puh... ptui.... Our oldest, little, round, dinosaurs had the features automated. Apparently, some pilots are too dumb to handle the specific needs of a jet engine,... Those APU driven, paddle-wheeled things are so simple our janitors could handle 'em.

Oh come on you guys half of the jet jockeys don't even know what a throttle lever is anymore all they do is hit auto throttle and the computers do the rest just wait until they name the on board computers "Hal"

[Super 80]

The TPA has put up roadblocks and thrown haybales off the back of the truck for years, even convincing the media that "Air Canada" pulled out voluntarily a few years ago, when in fact they were pushed because the TPA had basically given control of all of the TCCA facilities to REGCO, who then cancelled Jazz's lease.

Jazz didn't have a lease to cancel,

It may very well have been Air Canada's intent to remain at YTZ in some form - Jazz however did absolutely nothing to preserve their status on the island. Jazz confronted Deluce and asked if they were being kicked out of CCAL and they were told their "tenancy was temporary" and took no further action until they were evicted from CCAL. Deliberate or incompetence Jazz when informed of their looming eviction took no action and when that came they feigned shock and outrage.

A Jazz employee in Halifax even CC'd CCAL in their emails discussing the terms of their status on the island.

The conduct of the TPA towards Jazz is nothing short of charitable considering the bad faith in which Jazz and Air Canada have acted towards the TPA since 2003.

[rudder]

From another board:

RBC Direct Investing TM. would like to inform you that the following New Issue has just been announced. Porter Aviation Holdings Short Description: Initial Public Offering Common Voting (Cdn Investors)Price: $6 - $7 range Settlement: Expected Week of May 24.

[canadairguy]

By 4 o'clock TD Waterhouse had closed the issue.

[MD2]

By 4 o'clock TD Waterhouse had closed the issue.

Where's the best place to buy? Any pre-IPOs? The 15% oversell followed by a rally is very likely. Mr. Bean should have no trouble shorting this one!!

[blues deville]

Condition Levers ?? What are those ?? I do seem to vaguely remember from a long time ago !!

I think these new Q400s would surprize all of us with their quiet cabins and service provided by Porter. I recall being one the first qualified Dash 8 pilots in Canada in the early 80's (that's what the TC inspector told us) and having the opportunity to fly a modern aircraft for the first time in my career. Prior to that, some of my previous aircraft had dropped brave soldiers on the coast of France and other wonderful places in Europe. Another prior DHC model was serial # 7.

I felt pretty fortunate selecting those 'condition levers' when required.....and every one of them were brand new.

bd

[rudder]

Mr. Deluce is now taking that optimism to new levels, as Porter is seeking an equity valuation in the $400-million range in its initial public offering, according to sources who have seen the marketing documents distributed to investors Tuesday.

The company is seeking to raise about $120 million selling shares representing about 30 per cent of the company. The shares will be priced at $6 to $7 apiece.

The airline posted earnings before interest, taxes, depreciation and amortization of $7.9-million for the 12 months ended Dec. 31, 2009, which translates to a trailing earnings multiple well north of 40 times EBITDA.

Add the airline's not insignificant debt of $325-million as of year-end and the valuation based on a total enterprise value of around $700-million becomes "astronomical," said one person familiar with the numbers.

http://www.theglobeandmail.com/globe-investor/markets/streetwise/porter-seeks-very-lofty-valuation/article1556689/

[rudder]

Porter Aviation Holdings Inc. is betting that it will be able to raise $120-million in an initial public offering by persuading investors that its business model for a regional airline stands out in the crowded skies.

Toronto-based Porter kicked off its road show Wednesday, detailing its “better airline, better aircraft, better airport” strategy to investment brokers at a downtown Montreal hotel.

Porter plans to raise $120-million, with an over-allotment option of up to 15 per cent, for a possible total of $138-million. The offering price targeted will be $6 to $7 for each common voting and variable voting share. Pricing for the shares, to be listed on the Toronto Stock Exchange, is expected on or about May 20, with the closing on or about May 28.

If demand is brisk, there could be 17.1 million shares issued at $7 apiece for $119.7-million, amounting to 28 per cent of Porter’s total equity valuation of potentially $427-million. Or if there is resistance to the $7 target, Porter could still raise $120-million by issuing 20 million shares at $6 apiece, representing 32.8 per cent of the company’s $366-million total value at the lower end of the forecasted range. Proceeds from the IPO are earmarked for “working capital and general corporate purposes,” notably acquiring new turboprops.

http://www.theglobeandmail.com/globe-investor/porter-claims-airport-advantage/article1558244/

[rudder]

Porter Airlines Inc. is touting a dominant position at the Billy Bishop Toronto City Airport "until at least 2033" as a key selling point for its initial public offering.

The airline's management says it expects to claim half of the 90 additional slots that will be doled out by the Toronto Port Authority this year under the guidelines set by the International Air Transport Association (IATA). During an online presentation to investors ahead of the airline's planned share sale, management said these new slots may only be the start.

http://www.financialpost.com/todays-paper/story.html?id=2992162

[Briler]

Porter’s Preliminary Prospectus, released recently for its intended Initial Public Offering, omits any reference to its pending application to the U.S. Government for a right to fly into the U.S.

At page 90-91, under the heading Legal Proceedings and Regulatory Actions, the only matter disclosed is its ongoing battle with Air Canada. It then states:

Except as disclosed above, Porter is not the subject to any material legal proceedings...

Similarly, the discussion, under Regulatory Environment, on page 37, omits any reference to that pending application.

Porter Air requires a foreign air carrier permit from the United States Department of Transportation to fly to U.S. destinations, or an exemption from that requirement.

In the absence of this permit or exemption, Porter may not fly into the U.S.

Porter’s temporary exemption expires on July 10, 2011.

Porter applied for a Foreign Air Carrier Permit on March 14, 2007. That decision has yet to be made final.

Porter’s current exemption was granted in part on the strength of a May 10, 2007 letter from (then) Toronto Port Authority CEO Lisa Raitt, enclosing her correspondence with U.S. Airways agreeing to permit it to fly between the Toronto Island Airport and Philadelphia. These letters are attached.

That correspondence was the sole evidence of compliance with the US requirement that the rights sought by Porter to fly into the U.S. must be reciprocated, which was evidently relied upon by the Department of Transportation in granting the original permission.

This is from its decision of June 20, 2007:

On May 10, the Department received a letter from the TPA stating that it has never denied a U.S. carrier access to TCCA. It states that the most recent application by a U.S. carrier to operate from TCCA was filed by US Airways in December 2006 and that this request was promptly granted. The TPA states that no other requests have been made by any other U.S. carrier for access to TCCA.

But, as reported by Bloomberg News on October 20, 2009,

Porter’s agreement with the [TPA] barred regional carriers, including Jazz Air, from flying between the airport and New York, Chicago, Boston, Washington, Philadelphia [our emphasis], Cincinnati, Detroit and Cleveland.

Porter’s agreement with the TPA was entered into in 2005 (Preliminary Prospectus page 32).

The U.S. Air offer could not have been consummated, as it contravened the exclusivity already held by Porter.

These facts are now being considered by the United States Department of Transportation.

CommunityAIR has suggested to the U.S. Department of Transportation that it would be worth inquiring of both the TPA and U.S. Air as to the circumstances of their correspondence, in light of that (now public) exclusivity:

• Was U.S. Air aware of Porter’s 2005 agreement with the TPA?
• If not, why did the TPA not advise U.S. Air of it?
• If it did, why were these letters prepared?
• And why did the TPA not advise the Department of Transportation of this prohibition, instead of submitting documents which misled the Department as to the true situation?

These questions remain unanswered.

Regardless, the existence of this outstanding application for a permit, the facts cited above surrounding Porter’s application, the ongoing delay in receiving the necessary permit, and the very significant impact on Porter’s business from a possible adverse decision, are, in our view, all material facts that should have been included in the preliminary prospectus.

The documents related to Porter’s applications are found on the United States government’s public file, at http://www.regulations.gov/search/Regs/home.html#docketDetail?R=DOT-OST-2007-27402

[Moon The Loon]

Welcome to the Board, Brian! Nice bombshell!

[Super 80]

What a surprise, more lies from Community Air.

1. "A strategic slot reserve will be held by TCCA to accommodate additional carriers. This reserve will be allocated on a tactical basis, for example, to accommodate bi-lateral agreements." All operating agreements between airline and airport provide for the airport operators obligations per applicable air services agreements and regulatory actions. FAA vs. PANYNJ for instance.

2. In the summer of 2006 the TPA invited Jazz to resume service at YTZ, Jazz refused to enter into a new operating agreement with the TPA arguing that an expired agreement with Air Ontario was still valid. This ridiculous argument went nowhere.

3. There is no reason for Porter (or anyone) to believe that they will not receive a permanent foreign air carrier permit from the DOT. The DOT doesn't care about Air Canada and their AstroTurf campaign against Porter and they certainly don't care what you, Vaughn or the rest of the island squatters have to say about anything. There is nothing particularly interesting from the perspective of the DOT about Porter or YTZ and they didn't care about Elysair which attracted much greater sincere opposition than Porter did.

[Thebean]

Community Air had their chance years ago and they completely botched the approach.

I had a good giggle when I took a peak at the 31 slide road show presentation.

My favorite bit was the piece that inferred that even with 75% of the slots, (which would strike most rational people as anti-competitive in the first place), Porter, and by extension, their investors, had nothing to worry about if anyone else set up a competitive service.

I seem to recall a duopoly that had 100% of the capacity on Calgary-Vancouver in early 1996. They had 30x a day between the two of them, with business class, lounges, points, the works.

Along comes a little upstart with the grand total of two a day. One in the morning. One at night. No points. No lounges. No business class. Nada.

Anyone who happens to frequent this board who is familiar with what happened to yields on this, and every other route where competition arrived with, in some cases, a single flight a day, knows precisely what's going to happen when the same occurs on the Island.

It's not "if". It's a "when".

The only defence is to start with 15% margins, have dramatically lower costs and hope to heck you can stimulate a ton of new demand with the low fares to keep rasm above casm. The problem at Porter is the casm has historically always been above the rasm to start with.

Alas, knocking $10 off an average one way fare on a 350 mile sector taking it down to $157 isn't going to stimulate much new demand. $49 advance fares stimulates demand. Walk up fares to Montreal, Ottawa and New York of $99 will stimulate demand.

I'd hate to see what an on-going fare war at these levels would do to that average fare of $167, knowing that in 2009, every 1% drop, ($1.68) in the average fare at Porter would have resulted in an additional $1.5m loss on the operating line.

To support a $6.50 share price with a 12x multiple, the company has to produce an EPS of 54 cents, with about 26.5 million shares issued. That means it needs a net profit of $14.4m. They've never even come within a country mile of this number, with $40 oil a while back, a maintenance holiday and the luxury of a high fare monopoly at the downtown airport located in the country's largest aviation market.

All three of those advantages are in varying stages of going bye bye.

If you are going to play, do so with your eyes wide open. Do not risk anymore than you can afford to lose. Let the big boys lose their shirts for a change. After the opening honeymoon, it's going to be a stressful and unhappy ride for many folks.

Besides, it's a shorters dream.

[MD2]

Oh yes, more good ole memories from bean..., we get it you were somehow and at some low level involved with Westjet and now miss feeling important, but please stop comparing everything under the sunshine to it! Short if you like, it's summer and shorts are in anyway! Unless of course, you're distracting others to buy more yourself!

Moonbeam, too bad your airline went belly-up, stop thinking every company is managed like C3. Move on with life already, it's been 9 years ace!

Interesting how communist air puts obstacles in others' paths in keeping with their motto: "ends justify the means" which is very pathetic indeed. What a shame pretending to defend the proletariat by advocating elitist stances thinking they are way more important than the millions of people living around Pearson. The Island residents, who are anything but the proletariat, didn't mind much noisier airplanes as they sat on their porches watching the airshow, so what's the issue comrade! Who would have thought there could be a cause to bring bean, moonbeam and the comrade together!

[Thebean]

I'm still waiting for a coherent thesis that can be backed by quantifiable evidence that clearly illustrates how Porter is going to achieve the sorts of earnings required to support a $6.50 share price for any significant length of time.

Don't confuse having a good product and a motivated staff with the ability to generate profits on an on-going basis.

Why haven't we seen Porter's first quarter numbers?

Investors need earnings and after 4 years, Porter has not delivered.

Show us the math that illustrates how that's going to occur over the next 12 months. It's a very simple quantitative issue.

It should take you no more than 20 minutes to develop a "what if" model that takes 2009 numbers and allows for a change in such basic parameters as l/f, yield, fuel expense, maintenance and, your favorite, sales and marketing expenses.

I've never seen a pricing in a monopoly environment hold firm with the arrival of competition in a deregulated business ever, anywhere. Given the history of what happens when competition hits a market, history that has been repeated over and over again, I very much doubt it's going to be any different with the arrival of a competitor at the Island.

If you can't come up with a scenario that passes the giggle test, you are a fool to invest in the business.

[Moon The Loon]

Moonbeam, too bad your airline went belly-up, stop thinking every company is managed like C3. Move on with life already, it's been 9 years ace!

Interesting how communist air puts obstacles in others' paths in keeping with their motto: "ends justify the means" which is very pathetic indeed. What a shame pretending to defend the proletariat by advocating elitist stances thinking they are way more important than the millions of people living around Pearson. The Island residents, who are anything but the proletariat, didn't mind much noisier airplanes as they sat on their porches watching the airshow, so what's the issue comrade! Who would have thought there could be a cause to bring bean, moonbeam and the comrade together!

1. I think you have "us" confused. Mine didn't;his went through the roof. Who you talkin' to?

2.

[ILB]

MD2, I'm sitting on the sidelines here, watching you get pummeled, and you're resorting to being catty? Put up a fight, or stay on the porch! You've only used emotional arguments so far. And why are you attacking the messenger?

[roadbiker]

[vrefplus5]

Agreed ILB !!! MD2...maybe you're taking this thread a wee too personal now. I've been amused by the bantering between you and Mr. Bean. There's a ton of information to be gleaned from listening to you both, and I honestly hope Porter does ok with their plans to build an airline, etc. etc. etc (it certainly can't be easy).....but the unsavoury finacial fact's presented by Bean in this issue really shouldn't be ignored.

I'm ignorant when it comes to the financial mechanics of airlines, so when Bean dumbs the figures down for plebs like me to understand, I can appreciate the effort. Help me, and anyone else to understand (using the numbers provided) how this IPO can possibly be a LONG TERM viability.

Not picking on you....just want your FACT BASED opinion. I'm still learning.

Thanks

Ref

[Thebean]

Porter has produced at least $30m in net losses since launch.

They have not included any losses incurred from the period Sept 1 2007 thru Dec 31 2007. So much for full disclosure....

Their operating margin including interest expense in 2009 was -9.1%, calculated as follows:

Operating loss: $4,484,000

Less:

Long term interest expense: $9,217,000

Short term interest expense: $59,000

Total Operating Loss: -$13,760,000

Revenues: $151,203,000

True Operating Margin: -9.1% (-$13,760,000/ $151,203,000)

WestJet's 2009 numbers were as follows:

Operating profit: $210,566,000

Less:

Long term interest expense: $67,706,000

Short term interest expense: Included in interest expense

Total Operating Profit: $142,860,000

Revenues: $2,281,120,000

True Operating Margin: 6.3%, ($142,860,00/$2,281,120,000)

WJ's 2009 numbers are from their annual report. Porter's are from their preliminary prospectus. They are all in the public domain.

I won't include Air Canada's numbers.... but they are readily available at

http://www.aircanada.com/en/about/investor/documents/2009_ar.pdf

on page 86.

Suffice it is to say that Porter's are quite easily the worst of the three.

Porter has not provided their latest, (1Q 2009), numbers. You'd think prospective investors would want to see them before pumping their cash into the venture......

I'm still waiting for MD2's analysis. Heck. If he gives me the scenario, I'll run them for him and waive my usual consulting fee.

[Briler]

This is a press release issued by CommunityAIR a Toronto group concerned about the impact of the Island airport's dramatic expansion on the waterfront. FYI.

Porter's CEO Flatly Contradicted by IPO Document

Over the past two and a half years, Robert Deluce, CEO of Porter Air, has repeatedly made statements that Porter is a profitable venture.

Until now, there was no way to verify that statement.

Now there is.

In its Preliminary Prospectus, a very different story emerges. Porter’s financial results are nowhere near what Mr. Deluce led the media and the public to believe.

The document says Porter lost $11,486,000 in 2007, $3,317,000 in 2008, and $4,609,000 in 2009 (see page 10 of the document). Total losses over the last three years: $19,412,000. Accumulated deficit $38,533,000.

Here are some of Mr. Deluce’s statements (our emphasis):

• Mr. Deluce says Porter has been profitable since mid-2007 on a “fully allocated” basis, though he declines to give accounting details …. Globe and Mail Nov. 20, 2009

• "I can tell you that last June"-he means June, 2007-"was the first profitable month for Porter," Deluce says of the 8% net income margin the company recorded. "I can tell you that in June, 2008, we've done appreciably better than June, 2007." Airport Business Oct. 31, 2008

• Mr Deluce, a licensed pilot, says Porter has been profitable since mid-2007... Financial Times September 29, 2009

• At a time when soaring oil prices are eroding North American carriers' earnings, Porter Airlines Inc. is expecting its first full-year profit this summer, CEO Robert Deluce said. … But Deluce said the company has maintained a steady level of profitability since June 2007, when it recorded an eight-per-cent net-income margin. Montreal Gazette June 4,2008

• Because Porter is privately held, it does not report financial results. But Deluce said the airline turned a profit this year. Toronto Star Dec. 31, 2009

• Closely held Porter, which does not release financial statements, has turned a profit since June 2007 …, Chief Executive Robert Deluce said in an interview. Reuters Feb.12, 2009
• … in June, we achieved an eight per cent net income margin, which is among the strongest in the North American airline industry. To put this into perspective, Southwest Airlines took three years to achieve profitability – we did it in eight months. Board of Trade of Metropolitan Montreal October 25, 2007 Robert Deluce President and CEO, Porter Airlines Remarks

“While it is not surprising for a start-up like Porter to be suffering losses, it is of serious concern, for a business that seeks to encourage investors to place their money with it, that its CEO has consistently misled the media, and therefore the investing public, on such a basic and provable issue as its profitability. ” said Brian Iler, Chair of CommunityAIR.

“ Porter’s successful image has been very carefully crafted. One has to wonder why, with these statements, Mr. Deluce took such risks with that image” Iler added. <br clear="all">

[Kip Powick]

And.................it's gonna be one big shock to many of you when you find out who MD2 really is !!!!

[Fido]

.....Over the past two and a half years, Robert Deluce, CEO of Porter Air, has repeatedly made statements that Porter is a profitable venture.

....

There are at least 4 levels of profitability.

I would bet that Porter met at least one.

[CanadaEH]

There are at least 4 levels of profitability.

I would bet that Porter met at least one.

which one is that? the delusional kind?

[roadbiker]

And.................it's gonna be one big shock to many of you when you find out who MD2 really is !!!!

Mark me down for Robert Deluce...