Ready for take off: Porter Airlines CEO outlines plans for massive expansion and new destinations

Michael Deluce, CEO of Porter Airlines and master of the understatement, has a word to describe his experience managing an airline during the most disruptive event in the 100-year-old history of commercial aviation:

“Different.”

Within months, the Toronto-based airline grounded its flights, laid off nearly all of its employees, lost millions of dollars in revenue for its customers, received millions in government aid, and battled its airport owner in front of the courts for $ 45 million in unpaid rental fees.

It is certainly different. A more lively CEO might have used another term – “stressful,” perhaps. “A real puzzle”, perhaps.

But Deluce sticks to “different”. And there may be good reasons for his composure.

In recent months, the airline has been quietly preparing for an expansion that could disrupt the Canadian airline industry.

Porter doubled the size of its fleet over the summer and launched plans to fly to and from Pearson Airport, as well as international airports in Ottawa, Montreal and Halifax. He paid $ 5.82 billion for no less than 80 Embraer E195-E2 jets – a significant discount, experts say – which will expand the company’s catalog of routes to include solar destinations like Mexico and the Caribbean. , from 2022.

Services associated with Porter’s space at Billy Bishop Airport – the comfortable lounge, snacks, coffee and alcohol – will accompany the airline to its new locations, Deluce told The Star in an interview describing its plans for the business.

“It’s an investment in our future. Some of our biggest competitors have lost billions in ways that will permanently harm their businesses in the future, and that leaves us an opening, ”he said.

“We will deliver a top quality product. “

Industry experts say the airline had to grow to survive the pandemic. When closures hit, Porter, along with smaller airlines like Sunwing and Air Transat, suspended services and laid off most of the employees. The country’s two largest airlines, Air Canada and WestJet, have been downsized significantly, laying off thousands of workers while canceling flight routes almost every month.

Porter’s flights from Billy Bishop Airport to the Toronto Islands did not resume until September, after an 18-month suspension.

Consumption habits have also changed. Business travel capsized as demand for leisure flights increased.

Throughout the lockdowns, the federal government distributed over $ 7.3 billion in bailout funds to Canadian airlines. Porter, one of the first to receive financial assistance, received a $ 135 million loan from Export Development Canada in May 2020. She received another $ 270.5 million in repayable loans in July. .

In the first months of 2021, as other airlines negotiated bailout terms with the Department of Finance, Porter purchased 30 Embraer passenger jets with the option of purchasing another 50.

The price the company paid for these jets was a “good-hearted deal” given the product, said John Gradek, a former Air Canada executive who now works as a lecturer in aviation leadership at McGill University. .

Aviation prices fell during the pandemic as air travel plummeted, allowing airlines with capital to get a discount on new assets.

“So now they have these brand new, wonderfully equipped jets that they got at a great price. It puts them in a good position, ”Gradek said.

Whether Porter will be able to compete with the mega-airlines that dominate airports like Pearson remains to be seen. But Deluce says his airline can offer competitive prices and better service.

“We have deep pockets to make sure we can grow in a competitive environment,” he told The Star.

While Deluce insists the company will not be leaving Billy Bishop Airport, Porter’s expansion to new airports comes as she battles the airport owner – Nieuport Aviation – in court in about fees associated with aircraft parking.

The conflicting companies have launched a series of lawsuits during the pandemic, each alleging that the other violated their contractual obligations. Nieuport alleges Porter owes up to $ 45 million in unpaid fees for their aircraft parking spaces. Porter argues that the fees should have been waived during the most severe lockdowns in the pandemic, when the business could not operate profitably.

Details of the lawsuit reveal how Porter once threatened to quit Billy Bishop entirely in 2018 over his terminal fees, predicting a $ 35 million loss in profit if he stayed at the airport.

Deluce says the company has resolved these issues with Nieuport and made Billy Bishop a “long-term part of our network.”

But the legal feud between the companies continues; their dispute is judged in November.

Gradek believes the lawsuit is one of the many ways the company is cutting expenses while funding expansion – a relentless move by a company struggling to stay profitable.

“It’s an interesting business strategy, more than anything else,” Gradek told The Star. “Airport owners need to be careful because Porter is their main source of income, and now Porter has money in the bank after not paying the rent to Billy Bishop.”

The lawsuit has already worked to Porter’s advantage. Deluce co-founded the company with his father, Robert Deluce, in 2006, amid a bitter fight for the island’s airport.

A few years earlier, in 2002, the Toronto Port Authority announced a plan to improve access to what was then known as the Downtown Toronto Airport – a smaller property that only houses than Air Canada’s Jazz flights to Ottawa – including a $ 15 million bridge from downtown to the airport.

When the bridge was abruptly canceled due to political opposition, Robert Deluce – who was supposed to operate an airline at the renovated airport – launched a $ 505 million lawsuit against the city and the federal government. He received an unspecified settlement in 2006 and purchased the airport building soon after, quickly canceling Jazz’s lease.

Porter moved into the airport during the year, although restrictions on the size of the plane prevented him from flying on routes outside of North America.

“Michael is building on this great vision from his father,” said Robert Kokonis, founder of Toronto-based aviation consulting firm AirTrav.

“To grow he must now look around other airports in this country and beyond.”

Kokonis says expanding the business is a way to hedge against the decline in business travel, one of Porter’s main offerings at Billy Bishop.

“The impact of virtual calls and remote working will have a hangover effect on business travel,” Kokonis said. “By moving flights to Pearson, they have the opportunity to reach a larger segment of leisure consumers. “

Deluce knows it. New planes and new airport locations give the company flexibility, allowing it to steer away from business travel if necessary. “Business travel will be one of the last segments of the market to recover, and it is not clear whether they will ever recover fully or not,” he said.

Things will be different, he says.

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