Porter To Get C Series

[internet]

Jon Ostrower of the Wall Street Journal is tweeting:

Breaking: Toronto-based Porter Airlines is set to buy up to 30 Bombardier CSeries. Dec. order attributed earlier to an "Americas" customer.

The deal for 12 CS100s +18 options is set to be announced by Porter as early as Wednesday morning, say two people familiar with the deal.

[rudder]

This 'rumour' has been out there for some time now, in particular amongst the Porter employees. If true, watch for Porter to also announce a future YOW hub for the C-series fleet.

[airt]

http://business.financialpost.com/2013/04/08/porter-reportedly-planning-to-announce-order-for-bombardier-planes/

[Super 80]

If you thought the war over YTZ was bloody up to this point, stay tuned...

[J.O.]

They won't be flying the C Series out of YTZ. That is a total non-starter.

[rudder]

This article quotes an unnamed Porter source:

“Right now we're rinky-dink ... we can go from our departure point to a 1,500 kilometre radius,” the source told HuffPost. “In the CSeries we could go over 5,000 kilometres, so you can see how it can open brand new markets.”

http://www.huffingtonpost.ca/2013/04/08/porter-airlines-expansion-bombardier-cseries_n_3041694.html

[Thebean]

It's one thing to order new airframes, it's another to take delivery of them. Wardair ordered a dozen MD88's in 1989 but they never saw the light of day.

An order is useful to both parties for a number of reasons.

BBD needs to generate an order book for the, thus far, slow selling C Series. Who better than to have Porter, a current Bombardier customer who, conveniently, are privately held, to pump up the order book. I doubt Airbus or Boeing would be as willing to come to the party under these circumstances. There are soft orders, then there are marshmallow orders.

Porter's investors want out and there are no takers at the price being bandied around. Porter, which, to date, has yet to report any meaningful, verifiable profit over it's history, likely feels the need to raise the stakes now that Encore is about to launch and will have at least 40, and I suspect closer to 65 Q400's within about 7 years. As it stands, Porter is in a stagnant phase, with l/f's shrinking and capacity flat. When it comes to airlines, these two scenarios, combined with a history of negligible or worse profitability, are the kiss of death.

I suspect their thinking is that by threatening to go bigger, one of the two obvious dance partners will come to the table. The problem is, unless one of the potential dance partners decides to go with the C Series themselves, no one is going to want to acquire Porter with a fleet of orphan aircraft, (the same issue Wardair faced in 1989 with the MD88's). Even if, lets say, either AC or WJ went with C Series as a narrowbody replacement, Porter's negotiating position would be pretty weak. It's always best to have two boys chasing the pretty girl.

Knowing both WJ's affinity for NG's and AC's need to replace the current Airbus fleet together with the exponentially larger market for said airframe should they not be required, if Porter were serious, they'd have been far smarter to do a deal with Boeing, were Boeing willing to play along with the charade. I suspect the two larger airframers weren't and Porter figured the ruse wasn't going to be effective with an order of SSJ's.

The C series might achieve lower trip costs, but its the unit costs that really matter and they won't come anywhere close to those of the 737NG family, let alone the MAX or the NEO. If Porter wants to come to the party, they better have the lowest cost bananas at Safeway, or uncover a ton of markets where there is no competition so that the fares necessary to create sustainable profits at their cost structure can be achieved. I can't think of a single, meaningful market that has these characteristics, and lets face it, there is no way the C Series is going to be operating out of YTZ.

Both AC and WJA have had a strong run in the public financial markets over the past 8 months as have most US carriers. Granted, AC remains a fraction of its issue price about 8 years ago, but WJA is trading at all time highs these days.

This clearly indicates that investors currently have a strong appetite for investment in airline ventures, provided there is both a history of profitability and a very strong liklihood of said trend continuing on for the foreseeable future. If Porter were profitable, I can think of no better time over the past 6 years to do an IPO and raise $300-$500m of fresh capital.

That has not occurred and the spring 2013 IPO season is well underway. That speaks volumes, especially given that Porter's shareholders have shown a willingness to go the IPO route in the past in order to cash out. BBD is going to be looking for pre-delivery payments pretty soon and that cash has to come from somewhere.

I'm from Missouri. Show me.

[Guest ACSideStick]

Deluce reminds me of Mr Rorke. "Smiles everyone, smiles, welcome to fantasy ( Toronto) Island. Just as planes start delivery, bankruptcy declared, govt protects Bombardier, free planes all around. Rinse, repeat.

[Super 80]

Knowing both WJ's affinity for NG's and AC's need to replace the current Airbus fleet together with the exponentially larger market for said airframe should they not be required, if Porter were serious, they'd have been far smarter to do a deal with Boeing, were Boeing willing to play along with the charade. I suspect the two larger airframers weren't and Porter figured the ruse wasn't going to be effective with an order of SSJ's.

Practically speaking, other than British Airways buying British Caledonian to secure their early A320 deliveries (Bcal ordered their A320's in 1983 and paid almost nothing for them) when have future aircraft orders seriously made a deal?

[CanadaEH]

Soooo. Nothing was announced. That was fun.

[Kip Powick]

Soooo. Nothing was announced. That was fun.

This is only Tuesday.....

[MD2]

It's one thing to order new airframes, it's another to take delivery of them. Wardair ordered a dozen MD88's in 1989 but they never saw the light of day.:

The same was said about Westjet's initial order of 10s of NGs, that it was too optimistic, that it will not happen, they, as you might recall, actually bought more. Or looking at Porter's own history, the same was said about its Q400, that props were for boats and so on, but now Westjet and Air Canada both can't get enough of them! The same way that Porter set the trend for the Q400, it might do the same for the C series, that is if the rumours were true, you, like everyone else, have to wait for the news conference tomorrow Wednesday April 10th!

[Mitch Cronin]

Porter set the trend for the Q400,

Hmmm .... I suppose all those other Dash 8's flying all over the country, long before Porter was a twinkle in anyone's eye, don't count?

[deicer]

Hmmm .... I suppose all those other Dash 8's flying all over the country, long before Porter was a twinkle in anyone's eye, don't count?

Some of us even remember when they used to be Convairs

[Specs]

One for the flagpole

Bombardier have a good working relationship with Deluce.

Bombardier owns Downsview airport. Rwy 15/33 is 7000 ft

Downsview park is owned by a crown corporation and is currently undergoing a transformation as parcels are being sold off for development.

Subway access is great.

Highway access is great.

The connection to YTZ is even reasonably workable.

Could Porter be looking at an C series operation out of Downsview?

They'd probably get exclusive airport rights again from the crown corporation.

Given the stakes, they'd probably get a sweetheart deal from Bombardier on the Jets in exchange for being a showcase operation.

Just speculating (- don't know enough to make an insightful suggestion)

[Guest rozar s'macco]

Well it flies in the face of every known bit of cost control wisdom in the airline business today- single type, single base...bla bla bla. So it's probably a lock!

[Maverick]

The same was said about Westjet's initial order of 10s of NGs, that it was too optimistic, that it will not happen, they, as you might recall, actually bought more. Or looking at Porter's own history, the same was said about its Q400, that props were for boats and so on, but now Westjet and Air Canada both can't get enough of them! The same way that Porter set the trend for the Q400, it might do the same for the C series, that is if the rumours were true, you, like everyone else, have to wait for the news conference tomorrow Wednesday April 10th!

The same was not said about WJ's order for NG's. I know, I was there. It was the obvious choice Robert.

Porter pulling off a completely different operation from a completely different airport is well? A stretch...

[Thebean]

The same was not said about WJ's order for NG's. I know, I was there. It was the obvious choice Robert.

Porter pulling off a completely different operation from a completely different airport is well? A stretch...

I was there too. WJ had a solid track record at the time and had recently completed a very successful IPO. It was clear to all the model worked and the company could easily handle the acquistion of the first 25 of so NG's on a lease / financed / outright purchase basis.

Porter is in a very different boat.

I'm not saying Porter won't order the aircraft. That's the easy bit. It's paying for them, taking delivery, putting them into revenue service and making money with them that's the tough part. The unit costs on the C Series aren't even close to the 737NG's and that's what matters when it comes to competing in the wider, unrestricted marketplace.

Porter has been backed in the corner with basically zero to negative growth, load factors declining and, from what I understand, an exodus of pilots.

They have two choices. Fold up like a cheap lawn chair or go down swinging, hoping that someone will finally belly up to the bar and buy them out just to make them go away.

Frankly, given the personalties involved, I'd have been surprised to see them take the former path, so this move doesn't come as a particularly big surprise to me.

If I had to bet who will survive, it's be any easy choice. It's far less risky for WJ, with close to $1.5b burning a hole in it's pocket and the stock at all time record highs, meaning easy and near immediate access to more capital at any time, to go down the Encore path than it is for Porter to go down the national carrier path whilst trying to mesh together a feed network given it's current focus at YTZ. If YTZ had another 2,000 feet and allowed "jet" service, I might think differently about it, but were that the case, WJ and others would have picked off YTZ long before Porter was even a twinkle in RD's eye.

Lastly, anyone who thinks this sort of move is going to cause WJ's Chairman to cower in his rocket boots has seriously underestimated their competition. This is precisely the sort of thing that energizes and stirs his juices.

Let the fun begin!

[MD2]

The same was not said about WJ's order for NG's. I know, I was there. It was the obvious choice Robert....

Maybe not to you, but it did to outsiders, I was there too. All things is a matter of perspective ... Greg, by your reasoning and in your "perspective" anyone who writes remotely in favour of a corporation must be the CEO himself, right?!

[MD2]

Hmmm .... I suppose all those other Dash 8's flying all over the country, long before Porter was a twinkle in anyone's eye, don't count?

You and I both know the 400 is a totally different beast than the classics....and before Porter no airline in Canada gave it a chance, especially a certain group of people out West who thought props (400 or otherwise) were for boats, now apparently they want to buy as many as 65 of them...

[boestar]

City News this morning was saying that plans are in the works to gain approval to EXTEND THE ISLAND RUNWAY to accomodate the C-Series. Bring on the NIMBY crowd....That will be a tough battle. Jets at the island only a few hundred yards from some of the most expensive condos in the country. Nice.

[MD2]

...and lets face it, there is no way the C Series is going to be operating out of YTZ...:

Hmmmm....

[Specs]

Somebody help poor Miller back up.

Hilarious. He was the left leaning predecessor to Mayor Ford and fought any development of YTZ tooth and nail. Much slicker than Ford obviously but some would judge him a disaster for anybody living outside of the downtown core and his rants against YTZ are about the closest he ever came to publicly looking silly.

[Bryon Mask]

Last summer was chatting with Porter Check pilot at Halifax airport and he told me that the C Series was in the works with a YOW base. It would appear that this has been in the plan for awhile.

[airt]

Press conference on BNN live right now

Lots of if's...