Porter Airlines’ new Toronto hub brings more competition to Canadian airways

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Porter Airlines is aiming to shoulder its way out of the pandemic with a billion-dollar bet on dozens of bigger planes and new routes in a pivotal year for the Canadian air travel industry.

The first of Porter’s 132-seat Embraer jets begins flying customers to Ottawa and Montreal from the airline’s new hub at Toronto Pearson International Airport on Feb. 1.

Porter’s expanded fleet, and the shift to Canada’s busiest airport, marks a new strategy for the airline founded by pilot Robert Deluce 17 years ago, placing it in direct competition with Air Canada and WestJet Airlines. But it’s just one of several discount carriers offering cheap seats in an attempt to gain a toehold in the domestic market.

Chris Murray, an analyst at ATB Financial, says 2023 will be one of the most interesting years in Canadian aviation history. “Everyone’s got these big plans.”

Mr. Murray pointed to improved financial results at U.S. airlines, which are usually six months ahead of their Canadian counterparts, and strong demand for aircraft at Boeing and Airbus. “What we’ve seen in the airline industry is when travel comes back, it comes back viciously. There’s tremendous pent-up demand.”

While customers are eager to leave COVID-19 behind, airlines and airports have so far limped rather than soared out of the pandemic wreckage, bungling summer and Christmas restarts.

Mainstays Air Canada and WestJet will attempt to stabilize their businesses as they revamp routes and fleets amid new competition from cheaper rivals Lynx, Canada Jetlines and Flair Airlines. Air Transat hopes a rebound in vacation demand will stanch its losses and cut its dependence on government bailouts. Sunwing Airlines, whose holiday blunders drew the ire of politicians and stranded passengers, will attempt to sew up its takeover by WestJet and assuage regulators’ concerns.

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And then there’s Porter, shifting its focus to bigger aircraft and new markets with its jet-powered expansion beyond Toronto’s smaller Billy Bishop Toronto City Airport, the hub for its short-range 78-seat De Havilland Dash 8 turboprop planes.

“Talk about crowded skies,” said Barry Prentice, a professor at University of Manitoba.

Can the Canadian market support so many airlines? “The answer is no,” he said.

“Of course not,” said John Gradek, who teaches aviation leadership at McGill University. “My guess is we’ll probably lose a carrier by the end of the year. Not sure which one.”

Mr. Deluce, Porter’s founder, flew into Pearson from Brazil late December on the company’s first Embraer jet. “This is a significant milestone,” he said on Friday at a preview flight of the plane, painted in Porter’s familiar white with a blue logo-covered tail.

Robert’s son Michael Deluce, Porter’s chief executive officer, said the airline is targeting economy travellers, who constitute 90 per cent of the market.

Porter has been competing with Air Canada since Day 1, he said, and is marketing heavily on WestJet’s Western turf to boost business there. He said Porter’s prospects are helped by WestJet’s recent pullback from Eastern Canada.

Porter’s new fleet will initially work the routes between Toronto, Ottawa, Halifax, Montreal, Edmonton and Calgary before expanding to other North American and Caribbean destinations. Previously, the airline was limited to the 2,040-kilometre range of its Dash 8s.

Porter will fly from Toronto Pearson’s Terminal 3, which is also used by WestJet. “They’re going to be trying to steal WestJet’s business, more so than Air Canada’s,” said Mr. Gradek, predicting the two main carriers will slash prices in response.

Porter says its single-aisle planes will appeal to customers because there are no middle seats, and passengers get free drinks and snacks. The airline’s E195 orders total 100, including 50 firm orders and 50 purchase rights for a value that exceeds US$7-billion at list prices. It has five of the new planes already and expects another 25 by the end of 2023.

Mr. Murray said Porter has built a “great brand” at Billy Bishop, the island airport at which it controls the majority of slots. But the tiny airport is not big enough for much growth, is of little use as a transfer hub and has a ban on jets, all of which limits Porter’s prospects there, he added.

A legal battle at the island also raises questions about Porter’s future. In October, an Ontario judge ordered Porter and a related company to pay $130-million in damages to the airport’s terminal owner for withholding fees over the past few years. Court filings in the case showed Porter was losing money at Billy Bishop and threatening to leave before the pandemic began. Michael Deluce said privately owned Porter will continue to fly from the island.

The challenge at Pearson for Porter, Mr. Murray said, will be to withstand the intense competition and higher costs while maintaining its unique identity.

By his calculations, the Canadian market can support two big airlines and another 50 aircraft divided among the others. That means the low-cost airlines will have to compete with cars for the travel budget of those who are not regular flyers if they are to succeed. Porter will have to expand its well-liked but niche brand, and tap its broader network to draw connecting passengers, who account for 40 per cent of the Canadian market.

Even Michael Deluce agrees that Canada has too many airlines. Porter will not compete with the discounters on price, he said, but will offer service at an economy fare coupled with better flight frequency and reliability. The discount airlines “have one thing to sell and that’s price. I can change the price at the click of a button,” Mr. Deluce said.

Mr. Prentice says Canada can support 2½ airlines – Air Canada, WestJet and one smaller carrier – not the number flying this year.

Moves by Air Canada and WestJet to reduce services in each other’s main region – Eastern and Western Canada, respectively – could make room for the smaller airlines, he said. And the new discount carriers are not burdened by the debt and accumulated losses the established airlines took on in the pandemic, which allows them to grab market share, he added. However, the newcomers offer fewer flights, which reduces convenience and can pose hurdles if flights are cancelled.

“We are getting a lot of choices,” Mr. Prentice said. “But in some cases it looks better than it is.”