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Porter Airlines Ltd. sees a manifestly underserved and increasingly lucrative Canadian airline sector, and wants a bigger piece of it. But if it can pull off its grandiose growth strategy, the small-alternative charm on which its success has been built will have to be checked at the gate.
Porter, which has specialized in flying modest-sized turboprop planes on short regional routes, has unveiled plans to take its act across North America. To do so, it has ordered up to 30 Bombardier CS100 jets at a total price of up to $2.3-billion.
Recent data from Porter's two bigger Canadian competitors certainly suggest that there's room in the skies for a third nationwide carrier. Both Air Canada and WestJet reported record passenger loads last year, and the tight capacity has pushed up ticket prices and drastically improved their profits. Porter, too, has swung to profitability in the past two years, after losing money in its first five years of operation.
Still, those profits aren't nearly enough to pay for $2.3-billion of jets. The company attempted to raise a comparatively modest $120-million through an initial public offering in 2010 and flirted with the idea again in 2011, but backed away both times amid a lukewarm response from a struggling market.
Despite an improved IPO market since then, Porter evidently doesn't like the look of a third kick at the can right now, reading between the lines of CEO Robert Deluce's comments on the matter. Porter is going to have to borrow, and/or get an injection from its institutional investors, if it's going to make this plan happen.
A bigger issue, though, may be how much of its soul it will have to sell if it wants to become a full-fledged third Canadian option.
A big part of Porter's attraction for its core customer base in the heart of Toronto is that it flies in and out of Billy Bishop Airport, on an island in Lake Ontario literally a stone's throw from downtown. But commercial jets are banned from the tiny airport, and in any event, its runways are too short for the jets Porter has ordered. At some point – perhaps soon, if Porter can't convince authorities to change the rules and lengthen the runways – it will have to decide whether it wants to remain a relatively small carrier serving a very convenient airport for a devoted core of customers, or pursue a wider market with aircraft that the island airport could never accommodate.
WestJet went through the same thing more than a decade ago – seizing on an opening in the marketplace following Air Canada's takeover of Canadian Airlines to expand nationwide and fill the role as the nation's second airline. In doing so, it became a formidable competitor to Air Canada but largely shed its quirky, folksy ways in the process. The flying experience on WestJet, once one of its most charming selling points, is today not much different than flying Air Canada. And a competitive edge was lost on the way.
If Porter's plan takes off, it will face that same choice. There's no such thing as a charming little big airline.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights , and follow David on Twitter at @ParkinsonGlobe .
David Parkinson