Toronto-based Porter Airlines recently announced a plan to do a sale-leaseback of its terminal at Billy Bishop Toronto City Airport. The move will provide capital to fund the airline’s future growth. Michael Durning Photo
Eight years after the launch of Porter Airlines Inc., Robert Deluce reflects on the Toronto-based carrier’s progress and looks forward to another growth spurt.
Porter has been able to expand from just two Bombardier Q400s when it began operations on Oct. 23, 2006, to a current fleet of 26 of the turboprops.
As the dominant carrier at Billy Bishop Toronto City Airport (CYTZ), Porter has enjoyed a competitive edge because of the terminal’s location near the downtown core of Canada’s largest city.
Next on Deluce’s ambitious agenda is a plan to sell Porter subsidiary City Centre Terminal Corp. and lease back space. The parent company of the airline and the terminal is Porter Aviation Holdings Inc., which has retained RBC Capital Markets and Barclays Capital Canada to spearhead the sale-leaseback transaction.
“Porter is a successful airline. This transaction will further strengthen our business and our balance sheet and position us for continued growth,” Deluce said in an interview.
While the Toronto Port Authority oversees the broader airport site, the terminal itself is run by City Centre.
City Centre has spent nearly $60 million over the years to develop the terminal. Proceeds from its sale will go toward funding the airline’s expansion, notably plans to acquire Bombardier CSeries jets.
Deluce is proud that City Centre poured money into the terminal, helping turn the Toronto island airport into a busy site instead of one that had been under- used for years. “No one else was prepared to step up to the plate,” he said.
Delivery of the CSeries for Porter is slated to begin in 2016. But the airline first needs the blessing of Toronto City Council in 2015 in order to extend the length of the airport’s main runway.
“The CSeries is an airplane that reaches out further and it gives us the ability to cover North America. It really will be a game changer for us,” said Deluce.
Porter originally announced its deal with Bombardier last year. Subject to the airport runway being extended, the contract is for 12 firm orders of the CSeries and options for another 18 of the jets. Porter also has options to acquire another six Q400s.
Porter has 172 of Billy Bishop’s 202 takeoff and landing slots, while Air Canada’s Jazz affiliate has the remaining 30 slots.
Deluce pointed out that the CSeries would be the ideal aircraft for jet service because it is lighter than the Boeing 737s flown by WestJet Airlines Ltd.
He has learned to be patient and not get upset by delays. The Toronto island airport is expected to
get a boost by the end of March 2015, when the Port Authority’s pedestrian tunnel is slated to open between the island and the mainland, giving travellers a new option besides the existing ferry service. The tunnel originally had been set to open in August.
Today, Porter’s network map includes 14 destinations in Canada and six in the United States.
If Deluce gets his way, the introduction of the CSeries to Porter’s fleet will clear the way to add new destinations such as Vancouver, Calgary, Edmonton, Winnipeg, Los Angeles, Las Vegas, Miami and the Caribbean–all non-stop from the heart of Canada’s largest city.
Deluce said he is keeping watch on two upstarts seeking to launch in 2015 in Western Canada. Calgary-based Jet Naked and Vancouver-based Canada Jetlines Ltd. are touting themselves as ultra low-cost carriers.
“We always keep an eye open for any new competition, but I don’t think those two will have any real impact on us,” he said.
In the spring of 2010, Porter Aviation tried an initial public offering (IPO) but withdrew the plan after
a lukewarm reception from institutional and retail investors. The IPO was contemplated again in 2011, but no issuance of shares ever transpired.
Porter Aviation appeared to have a valuation of $340 million in 2010, prior to the cancellation of the IPO. Over the past four years, airline shares such as WestJet and Air Canada have soared in value.
“We backed off on that IPO and we’ve never had regrets about doing so,” Deluce said. “We’ve got to be worth more than back in those days when the market wasn’t so good.”
Privately owned Porter Aviation’s shareholders include Regco Capital Corp., led by Deluce, Porter chairman Donald Carty and other investors such as Bay Street money manager Ira Gluskin.
“We always said we wouldn’t necessarily do an
IPO. It’s a possibility, but the sale-leaseback of the terminal–a non-core asset–is a good example of another way to raise capital to fund an operation that has significant upside and potential,” concluded Deluce.