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Porter Airlines poised for $120-million IPO

Porter Airlines may revisit plans for an IPO in the first half of 2011.

Peter Power/Peter Power/THE GLOBE AND MAIL

Porter Airlines Inc., the Toronto-based regional carrier that started with just two planes in 2006, is embarking on a $120-million initial public offering as it seeks to strengthen its core markets in Central Canada and the U.S. Northeast while expanding further afield.

The airline, through Porter Aviation Holdings Inc., submitted a preliminary prospectus Friday for the IPO in hopes of raising money from new investors.

Last year, during the recession, Porter lost $4.6-million on $151.2-million in revenue, according to the 135-page prospectus. Its load factor, or the proportion of seats filled by paying customers, reached 47 per cent in this year's first quarter, up from 41.3 per cent in the same quarter in 2009.

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Much of Porter's competitive edge rests with its monopoly on commercial flights at Billy Bishop Toronto City Airport, located on an island airport near the downtown business core.

But Porter is expected to lose its monopoly later this year, with Air Canada Jazz making plans to re-enter the island terminal, either through a favourable court ruling or reaching an agreement with the Toronto Port Authority, which oversees Billy Bishop. Air Canada is embroiled in a legal dispute with the port authority and the airline over access to the Porter-operated terminal.

Existing Porter shareholders will hold onto their own stock in the IPO, agreeing not to sell any equity stakes until at least six months after the offering's closing, the prospectus said.

The leading shareholder is Regco Capital Corp., the vehicle of a group of investors led by Porter president Robert Deluce, veteran Bay Street money manager Ira Gluskin and Donald Carty, Porter's chairman. The other key Porter shareholders are EdgeStone Capital Partners, GE Asset Management Inc., Dancap Private Equity Inc. and a unit of OMERS Administration Corp.

Porter will be adding two more Bombardier Q400 turboprops this month to boost its fleet to 20 of the planes.

"The corporation intends to use the net proceeds from the offering for working capital and other general corporate purposes, which may include potential acquisitions of aircraft," said the prospectus. The underwriting syndicate is led by RBC Capital Markets Inc.

Atlantic Canada has turned out to be a pleasant surprise for Porter, which will start flights to Moncton on June 25, adding to its other East Coast destinations of Halifax and St. John's.

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In October, 2006, backed by $125-million in equity financing from shareholders, the airline launched with two Q400s, flying between Ottawa and Toronto's island airport. Other destinations now include Thunder Bay, Sudbury, Montreal, Quebec City, Newark, Chicago and Boston.

The carrier's traffic in the first quarter of 2010 surged to 103.8 million revenue passenger miles, up 148 per cent from the same quarter in 2009. Porter lost $3.3-million on $81.7-million in revenue in the fiscal year ended Aug. 31, 2008, but had an operating profit of $801,000.

Porter is contemplating providing service between Winnipeg and Thunder Bay, though it has higher priorities such as adding Philadelphia and Washington to its network.

Mr. Deluce has devoted much of his energy over the past four years to distinguish Porter's customer service, aiming to hearken back to a time when flying meant glamour, not hassle.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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