Will Porter Airlines fly? That'll likely be the question on many people's minds as the Toronto-based upstart regional carrier becomes the latest entrant into Canada's turbulent airline industry, on October 23. Last month, it got the green light from Ottawa to launch its first round-trip domestic flight from Toronto to Ottawa. The airline, which will be based out of the Toronto City Centre Airport, will operate 10 daily round-trip flights, Monday to Friday, with one-way tickets starting at $120. It hopes to add at least 16 new cities including Montreal, New York and Chicago to its flight plan over the next three years.
The airline business is not an easy one, and based on the spectacular crash landing of a handful of other upstart commercial carriers including Roots Air, Canada 3000 Inc. and Jetsgo Corp. some critics may be wondering if aviation entrepreneur, company president and CEO Robert Deluce has what it takes to make his baby fly. Deluce will also have to contend with criticism from local environmental groups who say a downtown airport doesn't fit with the city's $17-billion waterfront revitalization plan. A reported $20-million payout to Deluce's company part of a larger settlement between the airline, Transport Canada, the Toronto Port Authority and others over a cancelled bridge to the island has also created controversy.
“That's behind us,” says the 56-year-old former president and CEO of Canada 3000. “None of us would be doing this if there wasn't a projected real return on investment.”
Financed by Deluce's private holding company REGCO Capital Corp. and a number of Bay Street private equity firms, Porter has already raised more than $125 million. The licenced pilot has also brought the who's who of the global design community on board to jazz up Porter's image. Of course, it'll take a lot more than pretty planes to get Porter off the ground.
Fred Lazar, a Schulich School of Business economics professor who acted as an advisor to Deluce on launching the airline, says Porter has three main competitive advantages: its “domination” of the airport (Porter will account for almost all outgoing and incoming flights); the cost advantage that comes with operating smaller, more fuel-efficient planes than its competitors (Porter's current fleet includes 10 70-seat Bombardier Q400 turboprop aircraft); and its proximity to Toronto's business community.
What about the competition? “Of course, Air Canada is not just going to sit idly by,” says Lazar. “Air Canada will watch, they'll probably try to match fares and they'll have to increase frequencies, but I don't think they're going to be overly concerned because [Deluce] simply isn't bringing that much capacity into the market.” (Air Canada's regional carrier, Jazz, suspended service to the island airport last March after its lease agreement was terminated by a Deluce-controlled subsidiary.) Given strict regulations on both the number of aircraft and number of daily flights it can operate, industry observers such as David Gillen, director of the Centre for Transportation Studies at UBC, say Porter will have to find the right balance in order to hit its efficiency sweet spot.
Deluce, however, remains unfazed. In his mind, there's nowhere to go but up.
