Porter Airline’s free ride at Toronto Island Airport may soon be over, according to the prospectus filed by the airline last week to take the company public.
But Porter’s fading is not necessarily good news for waterfront residents pushing to shut the Island Airport down over health and noise concerns.
Soon there may be not one, but three (maybe more) airlines flying out of Toronto Island Airpport aka Billy Bishop Toronto City Airport (BBTCA).
Porter’s prospectus considers that scenario more than just a possibility, which is part of the reason why it’s looking for investors – the company is steeling itself for a fight.
Nothing like a little competition to clip the wings of Porter execs. So what of all that blue-skying that pushed expansion plans over the years? Curious.
In fact, Porter’s offering no assurances in its prospectus that the company will be able to follow through on plans to expand its fleet by the end of 2010.
Porter says it “expects” to find the money to finance the purchase of nine new planes slated for delivery from Brombardier in the coming months, but the company’s not banking on it.
“Although management believes that debt financing should be available for these aircraft, there can be no assurance that it will be able to secure such financing on terms attractive to it or at all. Porter cannot secure such financing on acceptable terms or at all, it may be required to modify its acquisition or growth plans or incur higher than anticipated financing costs.”
That’s because Porter can’t say for sure how many of the 200-odd take off and landing “slots” up for grabs at Toronto Island Airport it will get now that the Port Authority has sought expressions of interest from other airlines interested in flying out of the airport.
Porter “expects” to control 157 of the slots, but Air Canada is seeking a judicial review of the process used by the Port Authority to arrive at the 157 number.
A swank new terminal is in place and plans for a pedestrian tunnel to carry the 2 million passengers per year Porter’s projecting in its best case business scenario, are well under way.
But the Air Canada legal proceedings, scheduled to be heard in July, have thrown a monkey wrench in Porter’s plans.
“Additional commercial carriers operating at BBTCA,” says Porter’s prospectus, “may negatively affect Porter’s growth strategy, result in an increase in the amount of traffic at BBTCA and associated congestion or delays, a reduction in Porter’s customer traffic and downward pressure on Porter’s fares and passenger levels.”
There go those plans to add additional destinations in Eastern Canada and the U.S. – maybe.
Will Porter passengers soon be saying goodbye to that premium service featuring free beer and wine on every flight, comfy leather seats and espresso in the passenger’s lounge? What will differentiate the airline, then, from its competitors?
Porter has been flying high since it jetted into business with two planes in 2006, quickly expanding to nine aircraft in 2009.
One of the main reasons for its success is the monopoly the company’s held on flights out of the conveniently located Toronto Island Airport.
Being a smaller airline has also allowed Porter to offer sweet deals on seats – its break-even point, the number of seats it has to fill to cover operating costs, is significantly lower than its competition. Perhaps because of its relationship with the local media.
Porter has enjoyed the added advantage of employeeing a non-unionized workforce (847 people in all), a luxury its competition don’t have and Porter can’t afford to lose if it’s to maintain its competitive advantage.
The company also owns it’s own refuelling facilities at the Island Airport.
Porter’s future growth strategy is relying heavily on the much-talked-about pedestrian tunnel, which won’t be a given if Joe Pantalone becomes mayor (he’s against the idea), or George Smitherman for that matter. He’s non-commital.
Porter’s also banking on seat-sharing arrangements with other carriers and pre-flight border clearance for passengers flying U.S. destinations to provide extra incentives for passengers. Both, if they come to pass, will require expensive computer upgrades and added administative costs.
Moreover, the airline’s financial position is susceptible to changes in the market place with longterm debt load hovering around $323 million.
So far, Porter’s been able to sell enough tickets to get by, but it looks like some turbulence ahead. [rssbreak]
