It's an Airline; It's an FBO

On the edge of the Toronto Islands just off the mainland in downtown Toronto lies the Toronto City Centre Airport, which has the triangle runway configuration of another era — none longer than 4,000 feet. At times many have questioned the validity of keeping the property as an airfield, and it was an easy target of political opportunity. In three years, Porter Airlines has brought about a sea change in attitude, evidenced by a recent poll conducted by the Toronto Port Authority in which 58 percent opposed the city taking over responsibility for the airport, a potential precursor to the airfield’s elimination. Opposition grew larger if the move meant the departure of Porter. The plan is to invest heavily in the facilities at City Centre and to gradually add to the airline’s route structure.

Comments Robert J. Deluce, chief executive officer for Porter Aviation Holdings, Inc., “At one point in time there were questions raised as to whether it might be better suited for better purposes. I think a lot of that had to do with the fact that the usage of the airport had declined considerably over the years. No one was providing much of a service from this airport.

“Now in the few years we’ve been operating from here, we’ve changed that considerably. It’s now viewed as an important piece of transportation infrastructure, with many passengers now depending on the City Centre Airport for their short-haul travel requirements.”

Passengers reach the airport by a very brief ferry, which runs every 12 to 15 minutes. “That works out exceedingly well,” says Deluce. There is a discussion to build a moving walkway under the channel.

Porter Airlines Inc. is a wholly-owned subsidiary of privately held Porter Aviation Holdings Inc. Institutional investors in Porter Aviation Holdings Inc. include EdgeStone Capital Partners; Borealis Infrastructure; GE Asset Management Incorporated; and Dancap Private Equity Inc.

Deluce, says the company, brings to the industry over 50 years of family experience in successfully owning, financing, restructuring, operating, and managing a number of regional airlines in Canada. These included White River Air Services, Austin Airways, Air Creebec, Air Ontario, Air Manitoba, Air Alliance, and Canada 3000 Airlines.

The Porter CEO characterizes Porter Airlines as a low-cost carrier, not low fare, despite the fact that its entry into a market has had the effect of bringing down fares from established airlines. The carrier provides complimentary beer and wine and snacks, and has no other ‘hidden fees’ such as baggage handling.

Says Deluce, “Porter strives to provide a different experience than perhaps is available on the other airlines. We see competition as a positive thing. Fares on routes we fly have dropped some 50 percent than they were prior to our entry.

“We’re a low-cost airline in the way we structured ourself with one type of aircraft; we enjoy a slightly higher yield in the markets we serve.”

Porter utilizes Bombardier Q400 regional turboprops, which provide significant fuel efficiency. Comments Deluce, “It’s Toronto built. It incorporates Bombardier’s state of the art technology and it burns 30 to 40 percent less fuel.”

The airline recently added St. John’s, Newfoundland to its route structure, and will begin serving Boston in September. It currently serves New York and Chicago in the U.S. market and is studying moves into Washington, D.C. and Philadelphia.

“We’ve been studying the St. John’s market for over two years,” says Deluce. “If that one is anywhere near as good as we think it is, it will probably exceed Halifax in terms of load factors and passenger response.”

“We have identified some 17 or more destinations, all within a short distance of Toronto City Centre Airport. They’re generally in locations that are within a 500-nautical mile range; there are a few exceptions. Largely, we’re concentrating on those shorter haul, regional routes, with a few places just a bit further out.”

When asked if the growing presence at Toronto’s downtown airport could lead to Porter having an exclusive on airline service there, Deluce again stresses an attitude of promoting competition.

“We occupy a good chunk of the space,” he says, “but other airlines have requested space in the past and have been granted slot allocations. We offer to handle the other carriers and to provide space. At present we’re the only one here.”

Regarding the state of the global economy and of airline industry itself, Deluce is fairly optimistic. “I think we consider ourselves a bit fortunate in that regard in that we’re able to expand when others are retrenching,” he comments. “We did turn a profit in our first nine months, which is quite an accomplishment, and we continue to offer profit sharing to our employees.

“We did see a softening on our U.S. routes, particularly New York, last fall, but that started moving in a positive direction by the first of the year.” Today, he says that enplanements to the U.S. are up some 10 percent over last year, while the domestic Canadian market has been steady throughout the economic downturn.

Regarding what airports can do to attract Porter Airlines to serve their communities, Deluce says there is no pro forma on what it takes to get the carrier’s attention. “Marketing assistance in the early stages is always helpful,” he says. “Every airport has its own stimulus package.”

Investments
Last year Porter completed a total renovation of its FBO facilities, which includes four hangars and a lease which runs through 2033. “The FBO is a nice little chunk of our revenues,” comments Deluce. “We have operated FBOs in the past; it’s an important part of our revenue.” He adds that FBO revenues this year are up some 55 percent.

This year the focus has turned to the construction of a $45 million, 150,000-square foot passenger terminal which is being designed to accommodate one million passengers annually, a number Deluce expects Porter Airlines to reach by next summer.

According to the company, phase one of the terminal will open this November, offering passenger facilities, aircraft gates, and office space. Full build-out is expected by spring 2010, with ten gates and U.S. and Canadian Customs.

“The terminal is under construction and it’s progressing very nicely,” relates Deluce. “It will incorporate space for U.S. Customs pre-clearance; we’re working on that approval right now. It will include a bit of retail and food services, and offer a Wi-Fi environment.”

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