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Porter going public via IPO


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http://watch.bnn.ca/#clip308964

He is not the best spinmeister out there...

He may have made a slip when he mentions some alternate equity vehicles to "tide" them over around the 3:20 mark.

scratchchin.gifscratchchin.gif

Evasive, evasive, evasive an quite uninformative interview. These were lob ball questions thrown at Bob and he chose not to answer....even awkward in his quoting of financial stats like he was coached what to say.

Got his BELF wrong and he seemed to insinuate that the 49% was going to be a static measure going forward and the company was 2 points away from profitability in perpeuity.

He did say Porter needed cash around 3:20 mark which hints at the needed to take care of the liquidity issue at Q1 end.

Bottom line point...this all comes down to simple economics, the law of supply and demand.

1) Porter has too much supply of a product than the natural demand for this service at a slot constrained airport.

2) Porter offered too much stock to the investing public versus what both retail and institutional appetites could asorb. The valuations were too rich for any reasonable investor to justify.

The door was slammed shut on the racooon's face in this IPO...the end result is two black eyes and I'm not talking about the racoon.

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completely and utterly delusional when it comes to the airlines prospects.

He reminds me of a James Bondesque super villian, Deluce industries building a massive complex (Island Terminal) to take over the world (Canadian airline industry), all he needed on that BNN interview was a swivel chair, a cat on his lap, eye patch and a manical laugh.

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...Even better, bring in some people that are able to take a fresh look at the plan and turn the business around. Oops. I forgot. You aren't reading this.

Who might that be, a fancy analyst on the web who gives free advice?! Maybe you should submit your thesis to improve their yield! Don't get me wrong, I'm sure you're a "nice man" too as you say. It's just that you sing the praises of your beloved airline and the doom and gloom of all others too often. If not Porter, it's Skyservice, Sunwing, Transat, etc. If you say it enough times about all other airlines, at some point you are going to be correct! And here! I read the highlights of your post, happy now?! All the same, best of luck to you and your beloved airline.

mrlupin, you're right every company should stand on its own merit. But my point was that a 500 lb obese person who is confined to bed on life support should not call a 250 lb person fat and predict their heart attack. Likewise, Air Canada folks should not fault Porter on the account of their little loss which is dwarfed by the losses of their own company. We can all hope that some day Air Canada becomes profitable and returns its shareholders' and employees' investment, but for that to happen it must make a fundamental change from the pursuit of improving executive compensation at every step and all times.

Kip Powick, giving advice is great, but it appears that you need to take a "dive" in the ocean of your own words dear. Sure conspiracy theories are great to draw some attention to self, but they do not coincide with the unsolicited advice that you so persistently give. All the same, enjoy your retirement.

vikingwarrior, first of all, don't wage war on me, I come in peace! I certainly cannot speak for Michael Deluce ( I thought it was Robert, but whatever!), but if you ask me that question, I would first wonder why is community air so concerned about the financial health of a company that it has opposed since its birth. It is not their money, so why do they care?! Speaking of money, I would also ask community air how they fund their "quest" against Porter and City airport, if they take donations from individuals or organizations, and would they make such list of contributors public? Then I would probably reply that like any other business it would take time to build it, especially when there are individuals and organizations that have devoted their life to opposing this venture. At the end I would wish them well and say life is too short to be spent "against" something, but instead "for" something!

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mrlupin, you're right every company should stand on its own merit. But my point was that a 500 lb obese person who is confined to bed on life support should not call a 250 lb person fat and predict their heart attack. Likewise, Air Canada folks should not fault Porter on the account of their little loss which is dwarfed by the losses of their own company. We can all hope that some day Air Canada becomes profitable and returns its shareholders' and employees' investment, but for that to happen it must make a fundamental change from the pursuit of improving executive compensation at every step and all times.

AC may not be profitable, either, but Porter has less revenues and a worse margin than even AC. Much worse.

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AC may not be profitable, either, but Porter has less revenues and a worse margin than even AC. Much worse.

Sure, I'd be happy to let you take comfort in that elusion! However, this perception is entirely divorced from reality. Air Canada's debt equalled 20% of Argentina's national debt before the restructuring: 13 billions in as many years! Since then, its shares have plummeted, it has sold most of its assets and accumulated so much debt again that it is headed back to square one quickly, especially since its load factor is already high leaving little room for improvement there or in its yields due to strong competition; it cannot possibly turn a profit with such high cost and BELF. As they say, it is insanity doing the same thing expecting different results! Air Canada's problem is not other airlines, rather its own culture and model of business are broken.

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Who might that be, a fancy analyst on the web who gives free advice?! Maybe you should submit your thesis to improve their yield! Don't get me wrong, I'm sure you're a "nice man" too as you say. It's just that you sing the praises of your beloved airline and the doom and gloom of all others too often. If not Porter, it's Skyservice, Sunwing, Transat, etc. If you say it enough times about all other airlines, at some point you are going to be correct! And here! I read the highlights of your post, happy now?! All the same, best of luck to you and your beloved airline.

The bottomline is the bottomline. That's all that matters to investors.

Not frequency. Not market share. Not revenue growth. Not BELF. Not L/F. Not EBIT. Not EBITDAR. Not lots of shiny new airplanes. Not award winning service. Not the brand. Not the smell of freshly poured concrete.

Net Profit. Earnings per share. Produce it on a regular basis and the world will beat a path to your door.

The problem with the Porter IPO was they dressed it up nice and pretty but they couldn't dance around the fact that it has hemorraged cash since launch, it has only shown a very small net profit in a single quarter of its 4 year history, even though it has a monopoly at the d/t airport in Canada's largest aviation market, it operates brand new aircraft with a 4 year maintenance holiday and for a period, was buying fuel in $40bbl territory.

Porter had a terrible first quarter, even though it's high yield, business focus model should be counter cyclical to the typical pattern and thrive during the 6 winter months. They have begun to chase low fare revenue, with low fare advertising daily in Toronto papers even though its unit costs do not support a low fare strategy. This forced it's breakeven to 54%, with the second largest delta in North America between achieved l/f and belf on the continent. As the fares tumble, the BELF is going to continue to rise. L/F's will not catch the BELF. The company seems oblivious to what is going to occur the instant even low frequency service commences out of the island, quite likely by years end.

To further stretch credibility, management were presenting the story as if the airline was something of a success. Let me tell you. Operating an airline with the worst operating margins of the 18 or so publicly held airlines in North America after having lost over $44m since launch is not indicative of any kind of success I'd be bragging about.

The lack of transparency about the US foray was extremely disturbing. No one has provided a reasonable explanation as to why Porter is the only sched carrier flying into the US that unilaterally decided to stop reporting it's loads to the US DoT. We all know why this occured, given the very sad numbers reported, especially on Toronto-Chicago.

Listening to Porter's CEO on BNN the other day reminded me of Iraqi Information Minister Muhammed Saeed al-Sahaf spouting off about the glorious victories of the Iraqi army in the 2nd Gulf War even though one could quite clearly see and hear evidence of the contrary in the background of the shot. It was absurd.

As for WJ, it's pretty easy to point out the success of an airline that has been net profitable in 53 of 57 quarters and typically ranks in the top three when it comes to operating margins on the continent. There's only one other airline in North America that can match that record.

I dare say that Porter's IPO would have been widely successful and many times over subscribed had they been able to show any type of consistent profitability. I'd have bought in myself.

Alas, no one wants to invest in a chronic money loser, especially in the airline business.

BTW, who said anything about the advice being free?

B)

Edited by Thebean
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...BTW, who said anything about the advice being free?B)

You did! a few pages ago. But being the salesperson, you may have already forgotten your promise! No matter, As I said, I'm not seeking your advice. I do have two questions though, I don't remember seeing the reference in the prospectus, but do you recall if the terminal cost was also included in the loss? Also, what do you suppose are the chances of WS partnering with PD and/or using its resources in smaller markets around the country?

And good point malcolm, as much as companies, in particular Air Canada, seem to clamour to get (back) into City airport, it does present its own limitations and going forward Porter will certainly have to diversify its route structure and partnership to improve profitability.

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You did! a few pages ago. But being the salesperson, you may have already forgotten your promise! No matter, As I said, I'm not seeking your advice. I do have two questions though, I don't remember seeing the reference in the prospectus, but do you recall if the terminal cost was also included in the loss? Also, what do you suppose are the chances of WS partnering with PD and/or using its resources in smaller markets around the country?

And good point malcolm, as much as companies, in particular Air Canada, seem to clamour to get (back) into City airport, it does present its own limitations and going forward Porter will certainly have to diversify its route structure and partnership to improve profitability.

Didn't take long for you Porter folk (please don't insult us anymore with this innocent bystander crap) to start shopping it around looking for a buyer/partner.

Edited by Cargo Agent
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Hey Mad Dog 2, I am sure that you would be better off shopping it to Greg S. rather than shopping it around on a public forum. I don't think a tie up is out of the question but after lifting up your window shades I would think that a buyout is highly unlikely at that valuation. Maybe if we take over for $1 and incur the liabilities then there might be room to discuss.

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You did! a few pages ago. But being the salesperson, you may have already forgotten your promise! No matter, As I said, I'm not seeking your advice. I do have two questions though, I don't remember seeing the reference in the prospectus, but do you recall if the terminal cost was also included in the loss? Also, what do you suppose are the chances of WS partnering with PD and/or using its resources in smaller markets around the country?

And good point malcolm, as much as companies, in particular Air Canada, seem to clamour to get (back) into City airport, it does present its own limitations and going forward Porter will certainly have to diversify its route structure and partnership to improve profitability.

Costs are costs are costs. If the venture needs terminal facilities in order to generate revenue, those costs, properly amortized, with interest expenses, have to be included in the P&L. If you want to avoid those costs, fly into airports with existing infrastructure and pay the rates charged by the LAA's.

I think WestJet has made its intentions pretty clear. If I had to guess, I'll bet Porter is working on all kinds of schemes to turn the losses around. Its common knowledge Porter was shopped around a while back, but at absurd valuations. How do you value a company with $40m+ of losses and the worst margins in the business?

I'm not sure any of the incumbents will be particularly cooperative, unless there's a strike situation.

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Costs are costs are costs. If the venture needs terminal facilities in order to generate revenue, those costs, properly amortized, with interest expenses, have to be included in the P&L. If you want to avoid those costs, fly into airports with existing infrastructure and pay the rates charged by the LAA's.

I think WestJet has made its intentions pretty clear. If I had to guess, I'll bet Porter is working on all kinds of schemes to turn the losses around. Its common knowledge Porter was shopped around a while back, but at absurd valuations. How do you value a company with $40m+ of losses and the worst margins in the business?

I'm not sure any of the incumbents will be particularly cooperative, unless there's a strike situation.

Bean,

You seem like the financial wiz on the board so I thought I'd throw this lob ball at you....

How do you value a company with $40m+ of losses, worst margins in the business with rapidly expanding ASM's in April with the addition of two new aircraft and then a subsequent 10% potential contraction of available ASM's, RASM and expansion of CASM during the month of May.

http://avherald.com/...2c5f714&opt=512

It seems to me Porter has more problems on their hand they can handle from filling seats, selling stock, shopping the firm around to AC or WJ and actually keeping their planes in the air.

Edited by vikingwarrior
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Bean,

You seem like the financial wiz on the board so I thought I'd throw this lob ball at you....

How do you value a company with $40m+ of losses, worst margins in the business with rapidly expanding ASM's in April with the addition of two new aircraft and then a subsequent 10% potential contraction of available ASM's, RASM and expansion of CASM during the month of May.

http://avherald.com/...2c5f714&opt=512

It seems to me Porter has more problems on their hand they can handle from filling seats, selling stock, shopping the firm around to AC or WJ and actually keeping their planes in the air.

The next rumour will be 'cash for gas'  

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Your search was a little one sided. Go back to the site and use the search engine to look at the incidents for AC, ACJazz, Westjet etc and you might be surprised.

Posting was not even close to being one sided....it is a serious fact and safety issue. Literally 10% of the fleet would have been wiped out in this once incident if it actually happened.

There has always been concern in Canada and the USA about regional carriers flight experience and the poor pay scale and the potential for serious catasprohes. Just look at the findings in the Buffalo crash. We don't know the cause and will have the TSB investigation play out. But having a Ministers observer involved clearly indicates this is of a serious nature.

This is a Class 3 investigation out of a 5 class system. A Class 1 investigation is a public inquiry like the Swiss Air incident at Peggys Cove

From CADORS, the issue has been esclated: "The TSB have now listed this occurrence as a Class 3. A Minister's Observer will be designated"

Class 3 Occurrences (Individual Occurrence Investigation)

Individual occurrences that do not meet the criteria of Class 2 occurrences may be investigated when:

  1. there is significant public expectation that the TSB should independently make findings as to cause(s) and contributing factors; or
  2. there is potential for better understanding the latent unsafe conditions contributing to a significant safety issue; or
  3. a government representative so requests (pursuant to Section 14(2) of the CTAISB Act); or
  4. the Board must do so to meet its obligations or commitments.

I rest my case....

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Uh norsecombatant, whatever Porter's financial or management shortcomings might be, you're grasping at straws here.

Porter's pilots are well-paid compared to Colgan's, and experience is NOT an issue. While conflicts like this aren't common, they're not entirely uncommon either. I'm not familiar with Island procedures, but I'd be surprised if either aircraft was under VFR during this incident. Unless it is found that there was blatant disregard for ATC instruction, ATC is the most likely culprit here. And the safeguard for ATC shortcomings is TCAS, which fulfilled its function.

I don't understand why your post is relevant to "Porter going public via IPO."

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PAH has put tried to sell iself both publically and privately and nobody is interested (at least not at the current asking price). It is no different than when my neighbour put his house up for sale and asked a ridiculous amount that had no basis in reality. The house never sold. Now thankfully it was not a 'forced sale' so there the house sits until the market rises to his expectations or his expectations reflect the realities of the current market. In PAH's case, there is no solvency issue unless or until the private equity consortium or lenders no longer are willing to subsidise the losses.

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Costs are costs are costs. If the venture needs terminal facilities in order to generate revenue, those costs, properly amortized, with interest expenses, have to be included in the P&L. If you want to avoid those costs, fly into airports with existing infrastructure and pay the rates charged by the LAA's.

I think WestJet has made its intentions pretty clear. If I had to guess, I'll bet Porter is working on all kinds of schemes to turn the losses around. Its common knowledge Porter was shopped around a while back, but at absurd valuations. How do you value a company with $40m+ of losses and the worst margins in the business?

I'm not sure any of the incumbents will be particularly cooperative, unless there's a strike situation.

I'll look again; if the 50 million terminal is included, then the numbers are reasonable. I had read that WS had done some "tire-kicking", but it didn't seem an offer was presented and certainly not solicited by Porter. Be that as it may, time will tell. This will be an interesting summer.

On another note, it appears the children are getting so "jumpy" making "loads" of noise looking for a "war" which will not be found!

It is also amusing that community air presents its "vendetta" in different packages, as if no other airlines have had any CADORS. In fact, airlines in Canada are by far one of the safest. This is as ridiculous as their complaints in papers that Porter had landed 3 times after the curfew last year!! If only they also checked the numbers for other airports, especially Pearson, they wouldn't make fools out of themselves so badly! It is really pathetic to package a fight against an airline under the guise of safety, especially on an aviation forum where the membership is well-informed.

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Have you the Cadors number? A search of the Cadors record base is not yielding the incident.

One of the flights was on a VFR departure and the other plane was on a IFR arrival...CADORS is transparent. The fact the TSB is investigating is self explanitory in the seriousness of the incident.

http://wwwapps.tc.gc...=&evtype=0&narr

What's different than most CADORS events is:

1) Two airlines in the same fleet were involved

2) The incident happened on May 11th, smack in the middle of the capital raising exercise.

3) The operating metrics of the company were within 300ft vertically of changing the complexion of the IPO and the company.

As for how safety has any relevance to the maket valuation of a company, you have to take a look no further than SAS or Colgan on how safety can affect a companies market value or public perception on whether they wish to keep flying.

Porter has a nice product, new planes and a growing passenger base, all positives most would not disagree with. However they don't seem to understand how to run an airline financially and make it work.

A 4 year monopoly, an unprecedented marketing campaign in Q1, a doubling of passengers and the best they can do is fill 47% of the seats in the quarter while serving free beer?

BTW, there are others posters on this board as Nicholson would say "can't handle the truth"

What Bean has done is provide some transpency to the financial situation and he gets attacked....even using Porters numbers in 100% full faith and accuracy which a good analyst would never do. A good analyst comes to his own conclusion doing fair modelling not taking the financials at 100% accuracy.

Sheep followed the beholden to the corporate spin in "stuffing the channel" syndrome in the computer industry at the beginning at the last decade. It was only 1 or 2 principled analysts that weren't sheep and called a spade a spade.

They avoided the tech meltdown and made a killing for themselves and their firms.

Retail and Institutional investors did not buy into Porters spin (general market conditions)....yes that house being sold was much too expensive.

Bean is right....get Porter to pull up their socks and put 4 to 6 profitable quarters in front of the investing public and they will buy it lock stock and barrel.

Unfortunately Porters business model is broken...at least financially which is fixable. I am not confident they do know how to fix the issue.

Edited by vikingwarrior
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He reminds me of a James Bondesque super villian, Deluce industries building a massive complex (Island Terminal) to take over the world (Canadian airline industry), all he needed on that BNN interview was a swivel chair, a cat on his lap, eye patch and a manical laugh.

Dr. Evil and Junior strike out against Air Canada

http://news.cheapfli...r-v-air-canada/

Absolutely preposterous for a company with $90 million in net equity and sinking quickly....why doesn't Porter just ask for $100 billion dollars from Air Canada?

Edited by vikingwarrior
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I'll look again; if the 50 million terminal is included, then the numbers are reasonable. I had read that WS had done some "tire-kicking", but it didn't seem an offer was presented and certainly not solicited by Porter. Be that as it may, time will tell. This will be an interesting summer.

Porter has been soliciting offers for at least a couple of years.

The investors want out, and do not want to pump more money in. One can hardly blame them given the losses and the metrics.

BTW, you're dreaming if you think the mountain(s) are going to pay Mohammed a visit....

:cool:

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...BTW, you're dreaming if you think the mountain(s) are going to pay Mohammed a visit....

I thought it was Moses that went to Mount Sinai and Muhammad went to the cave, maybe the cave was in the mountains?...regardless, I guess you're implying that Westjet is the mountain and will not go to Muhammad (Porter). Well, between a mountain and a human/messenger of God, I'll take the messenger! Man can move mountains, mountains cannot move mountains! Anyhow, philosophy aside, I'm not dreaming of anything, but the fact is that Westjet's market share is shrinking in the East and also it has been reluctant to expand in smaller markets due to the size of its aircraft. A partnership with another airline that has smaller aircraft and is expanding to the smaller markets from which Westjet has retreated, e.g. Sudbury, Moncton, would give it some presence. It would also allow it to expand into smaller markets nationwide, all of which would be profitable for the stakeholders of both companies and prevent extra capacity that will drive down yield further. Although admittedly given their difference in culture, it would not be without challenge, but the choice for Westjet is either to overcome those challenges, buy smaller planes itself to service smaller market, or entirely forgo them, one of the three.

Regarding the LOS CADOR, it seems that the TSB has gotten involved to investigate ATC, which is not to detract from the great and safe service they usually provide, but to assure the safety of this corridor that is getting busier every day. If other airlines were to come in, it would only add to the challenge. So the fact that TSB is investigating this simple LOS incident as opposed to some gruesome accident in itself is an indication of safe skies over Canada, and two, to take a proactive action in ensuring safety in building additional DEP/ARR routes, all of which are positive.

It is however pathetic that community air is grasping at any opportunity to discredit TPA, Porter and the City airport, somehow imagining it will result in the closure of the airport whereby they can add it to their paradise and live their elitist lives on the doorsteps of Toronto, but free from its daily challenges. Not so dears! If you choose to live in a mega city, you also inherit its challenges with its conveniences, and as such you too, like the millions of neighbours of Pearson airport have to endure these challenges and work with the system to make life easier for all and not just your own selves.

Aside from the load factor issue which another poster pointed out, it is also interesting that this complaint once again illustrates how the entire path of arrival and departure flights of Porter are over water and not a noise or safety concern, not that the Q400 has much noise to begin with, or airplane flying over the city, as they do en-route to Pearson, spontaneously fall from the skies!!

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Canadian Newswire

June 7 2010 0800edt

Newsflash

After the recent failed attempt to unload the money-losing airlines stock on an unsuspecting public, Porter Airlines (PAH) is now seeking a partnership with Westjet (WJA) of Calgary by soliciting on internet bulletin boards. :stirthepot:

:Grin-Nod:

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Guest ACSideStick

I'm finding the whole "Mohammed/mountain - WestJet/Cave" analogy very confusing. Perhaps MD2 could draw us a picture(or cartoon) to help us all out. Perhaps using a Raccoon to represent Mohammed, and a mountain for WestJet could make the whole concept a bit more clear.

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What Canadian company is now going to buy out a losing proposition, especially after this most recent money-grab? Maybe Mike The White will make an offer they can't refuse. Very similar business practices (in upper management) by the sounds of the last 11 pages of this thread. I have never, nor will ever wish ill on any Canadian airline. They all have something to offer. Their employees almost always devote huge personal loyalty to their employers, many times to the detriment of their own personal potential. But how many times do we have to witness these pathetic "build a house out of cards, then sell it for a million bucks" operations?

It's not the employees who do this, but they sure take it up the butt at the end of the day.

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