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Political turbulence follows Porter Airlines into its second decade

Porter Airlines has covered a lot of ground in its first ten years. But those gains may not be enough for the airline's original investors who are starting to get “antsy,” says one analyst

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Porter Airlines Inc.’s’ first flight took off 10 years ago this Sunday from Toronto’s island airport for Ottawa with 13 passengers on board. It wasn’t an auspicious start. For starters, the unlucky number of passengers had to make their way through a group of picketing protesters calling for a boycott of the brand-new airline.

Backed by then-mayor David Miller, Porter’s detractors had already secured a major victory by blocking the construction of a bridge to the airport, which is separated by 120 metres of Lake Ontario waters from the forest of condos and office buildings along Toronto’s downtown waterfront. Without the bridge, passengers were stuck using a ferry that came every 15 minutes.

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Adam Vaughan, a Liberal MP who was running for city council at the time, was utterly dismissive of Porter’s chances of survival, saying that even the protest was pointless.

“How do you protest something that no one is going to use?” he rhetorically asked the Toronto Star.

A decade later, Porter and the airport — since renamed after First World War ace Billy Bishop — have not only survived, but also thrived. Porter now flies to 23 destinations in Canada and the U.S. using Bombardier Inc.’s Q400 turboprop, and Billy Bishop Airport moves 2.5 million passengers a year, making it the ninth busiest airport in Canada.

This week, Porter was named the ninth best airline in the world and Billy Bishop was named the fourth best international airport by Condé Nast Traveler’s 2016 Readers’ Choice Awards.

“I think in some respects we’ve reinvented the short-haul regional premium economy product and others have followed suit and are now offering similar aircraft and similar levels of on-board service,” Porter chief executive Robert Deluce said in an interview at his Billy Bishop office a few days before the airline’s 10th anniversary.

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“If imitation is a form of flattery, then to some extent we’re flattered that we’ve played a part in resetting the industry in a meaningful way.”

One thing that hasn’t reset is the political opposition that Porter has faced since Day 1. Vaughan vehemently opposed the airline’s plans to begin flying Bombardier’s CSeries jetliner out of Billy Bishop during the last election campaign, and shortly after the Liberals were elected, Transport Minister Marc Garneau announced via Twitter that the federal government would maintain the existing jet ban at the airport.

“That decision kind of shut the door on future material growth at the island airport,” said Robert Kokonis, president and managing director of airline consultancy AirTrav Inc. “Porter’s in a bit of a bind right now, quite frankly.”

Porter’s near-exclusive dominance of Billy Bishop — the airline holds 85 per cent of the airport’s 202 slots, with the remainder going to Air Canada — has been a boon, making it an attractive option for business travellers who work downtown and want to avoid the lengthy drive to Pearson International Airport in Mississauga, Ont.

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Dave Thomas/Postmedia
Dave Thomas/Postmedia
“If imitation is a form of flattery, then to some extent we’re flattered that we’ve played a part in resetting the industry…”

However, the airport’s proximity to a huge and ever-growing number of condos has also made it a popular target for complaints about noise, pollution and traffic. The prospect of jets replacing some of Porter’s existing turboprops, and the longer runway that would be necessary to accommodate them, have only exacerbated such concerns.

Deluce is sanguine about the Liberals’ decision to maintain the ban on jets, referring to it as one of many “speed bumps” that Porter has faced.

“Economic conditions change, market conditions change, you have fuel prices moving around on you, there could be political or other interference — those are all things you have to take into consideration,” he said.

“It’s a business where there’s always something happening and you can have the very best business plan in place and you still need a certain amount of flexibility.”

Flexibility is something Porter’s business plan has had from the beginning. Before the airline’s launch, it raised $126 million — in the second-largest financing for a new airline after JetBlue Airways Corp., which raised US$130 million for its launch in 2000 — from investors that included GE Asset Management, Dancap Private Equity, EdgeStone Capital Partners and Borealis Infrastructure.

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And Porter’s 2015 sale of the Billy Bishop passenger terminal to Nieuport Aviation Infrastructure Partners GP for an undisclosed amount has left the airline debt-free and with significant cash on its balance sheet.

“We have a balance sheet that enables us to finance any reasonable level of modest growth and in due course we’ll move with some expansion plans,” Deluce said.

It’s unclear what those plans will be without the longer-range CSeries jets, which would have significantly expanded the range of destinations Porter could serve from Billy Bishop.

But some growth is still occurring, even without the CSeries. The recent completion of a pedestrian tunnel from the mainland to Billy Bishop has made the airport more accessible, which Deluce credits for Porter’s “very strong year-over-year growth.” (The airline is privately held so it doesn’t release its traffic numbers.)

Aaron Lynett / National Post
Aaron Lynett / National Post

And Billy Bishop is expected to get U.S. customs pre-clearance soon, which could allow Porter to add flights to New York’s La Guardia Airport and Reagan National Airport in Washington, D.C., Deluce said.

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But those gains may not be enough for Porter’s original investors, who are starting to get “antsy,” according to Kokonis.

“Any remaining initial investors would be getting increasingly anxious over growth prospects at the airline,” he said.

Porter still hasn’t cancelled its conditional order for up to 30 CSeries jets, although Deluce said people shouldn’t read too much into that, other than it is keeping all of its options open.

“There doesn’t appear to be any immediate appetite for jets from this airport, but if that changes in the future, we’ll obviously be open to having that discussion again,” he said.

Meanwhile, Deluce said he will remain vigilant.

“We’re cognizant of the fact that just because you’ve had a good flight in the morning doesn’t mean you can rest on your laurels in the afternoon.”

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