April 11 (Bloomberg) -- Porter Airlines Inc.’s bid to more than double the reach of its network hinges on winning over governments in Toronto and Ottawa amid potentially fierce opposition from local residents in its hometown.
Chief Executive Officer Robert Deluce must persuade officials to end a ban on jets at Billy Bishop Airport on a Lake Ontario island in Canada’s biggest city. Deluce plans to add 12 Bombardier Inc. CSeries jets to Porter’s all-turboprop fleet by 2016 to reach as far as Los Angeles and the Caribbean as it challenges the country’s two biggest carriers, Air Canada and WestJet Airlines Ltd.
Deluce needs jets to go beyond the short-haul service favored by financial professionals from Bay Street, Canada’s financial hub, because of Billy Bishop’s proximity to downtown. Flying the CSeries there would mean lengthening the runway, lifting aircraft restrictions and mollifying nearby residents.
“It’s a political decision now,” Chris Murray, a transportation analyst at PI Financial Corp. in Toronto, said yesterday after Porter unveiled its plane order and proposed airport upgrades. “Technically, the extension makes sense.”
Deluce, 63, is trying to bulk up a closely held airline so small that Air Canada’s traffic each day is more than twice as large as Porter’s for a month. The stakes in his gambit include a plan to add 1,000 jobs and as much as $2.3 billion of plane orders for Bombardier.
Air Canada and WestJet are watching how Porter’s plans take shape, spokesmen said. Both serve Toronto Pearson International Airport, the city’s main gateway, while Air Canada also uses turboprops at Billy Bishop.
“The CSeries’ superior economics versus other small narrow-body aircraft employed by WestJet and Air Canada is a significant added advantage,” Fadi Chamoun, a BMO Capital Markets analyst in Toronto, said in a note to clients. “We suspect we will see moves by Air Canada and WestJet to counter this new strategic threat.”
Air Canada rose 2.2 percent to C$3.25 at the close in Toronto, while WestJet gained 0.7 percent to C$24.78. Both fell more than 1 percent yesterday as the benchmark S&P/TSX Industrials Index advanced.
After starting flights in 2006, closely held Porter has been profitable “for the last couple of years,” Deluce said without elaborating. He said he had no plans to revive an initial public offering scrapped three years ago.
The Toronto Port Authority, city of Toronto and Canada’s government would have to consent to jet service, a step Deluce said may come in 2013. He may face a repeat of the battle he waged last decade to start flights at the airport, which local opponents said would clutter the shoreline and lead to noise and air pollution. Then-Mayor David Miller, who served from 2003 to 2010, scuttled a planned bridge to the island from the mainland, though a pedestrian tunnel is now being built.
Billy Bishop, named for the Canadian World War One ace, sits about 100 meters (328 feet) off Toronto’s downtown waterfront. That has drawn business fliers just five minutes away by cab, along with skiers heading to Quebec’s Mont Tremblant or Burlington, Vermont.
“We have concentrated on the time-sensitive business traveler,” Deluce said in a telephone interview from Toronto. “But we have developed a very significant leisure clientele who like the style of service that Porter delivers and want to go a little further.”
Buying jets departs from Porter’s focus on short flights with Bombardier Q400 turboprops, putting venues such as Florida and the Caribbean within reach, as well as Canadian cities including Winnipeg and Calgary. The Q400’s maximum range is 1,014 nautical miles (1,878 kilometers), while the CS100 can fly as far as 2,950 nautical miles, according to Bombardier.
Porter said it will make a request “shortly” for two amendments to permit Bombardier’s 107-seat CS100s to fly to Billy Bishop. They would permit the use of that plane and add a 168-meter extension over water to each end of the 3,988-foot main runway.
The CS100 model ordered by Porter has a minimum landing distance of 4,400 feet, according to a Bombardier fact sheet published last month, too long for Billy Bishop.
Where Porter sees only a “modest” change to a landing strip, Toronto resident Alastair Dickson sees an airport that’s “just a bad idea” and should be closed.
“It’s madness to put an airport in the middle of a thriving city like Toronto,” said Dickson, a 62-year-old sculptor who has lived in the Toronto islands for more than 30 years. “It benefits only a few people.”
Jets are banned at Billy Bishop until 2033 under a three-way accord among the port authority, Canada’s government and the city. The port authority and Transport Canada had no immediate comment on how they might respond to Deluce’s plan.
No changes will be considered “until a determination is first made by the elected representatives on Toronto City Council,” according to a statement from the port authority, which runs the facility.
Some current and former Toronto politicians are already weighing in.
Mayor Rob Ford said today he doesn’t “have a problem with” Porter’s plan, according to comments that were e-mailed by his press secretary, George Christopoulos. “If these jets are as quiet as they say they are, it creates jobs, it is good for business. But again obviously I have to look into it,” Ford said.
A city councilor, Pam McConnell, said yesterday that Porter’s proposal showed “arrogance and disregard for the Toronto residents,” while ex-Mayor Miller said jets should be restricted to Toronto Pearson.
“It’s completely the wrong direction for the waterfront,” said Miller, who is now counsel for international business and sustainability with Toronto law firm Aird & Berlis LLP.
Bombardier also has a stake in Porter’s quest to start jet service. Completing an order tied the airline’s ability to serve Billy Bishop with jets would allow the company to showcase its new plane for the first time at a domestic airline.
The plane’s technology may help Porter’s case in persuading officials that any disruptions from jets would be minimal.
Bombardier says the CSeries, which will feature the new geared turbofan engine from United Technologies Corp.’s Pratt & Whitney, will be about four times more quiet than existing jets.
“The noise profile of the CSeries is dramatically better than conventional aircraft,” said Karl Moore, a professor of business strategy at Montreal’s McGill University who specializes in the airline industry. “Some people on the island understandably will fight it so it will take persuasion to win them over. There is uncertainty, there’s no question about it.”
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