Porter Airlines CEO and Minority Master Michael Deleus has a word to describe his experience managing an airline during the most disruptive event in the centennial history of commercial aviation:
Within a few months, the Toronto-based airline halted its flights, laid off nearly all of its employees, lost millions of dollars in customer revenue, received millions of dollars in government aid, and $45 million from its airport landlord. Fought over unpaid tenancy fee of Rs.
It is definitely different. A more animated CEO might have used another word – “stressful,” maybe. “A real headache,” probably.
But Deluce sticks with “different”. And there may be a good reason for her to remain calm.
In recent months, the airline has been quietly preparing for an expansion that could shake up the Canadian airline industry.
Porter doubled the size of its fleet over the summer and began plans to fly to international airports in Ottawa, Montreal and Halifax, as well as Pearson Airport. It paid $5.82 billion for 80 Embraer E195-E2 jets — a hefty discount, experts say — that will expand the company’s route catalog to include sun destinations such as Mexico and the Caribbean starting in 2022.
Porter’s services at Billy Bishop Airport — comfy lounges, snacks, coffee and alcohol — will move to their new locations with the airline, Deleuce told Star in an interview outlining its plans for the company.
“This is an investment in our future. Some of our big competitors have lost billions that will permanently damage their business going forward, and it leaves an opportunity for us,” he said.
“We’re going to deliver a better product.”
Industry experts say the airline needs to grow to survive the pandemic. When the lockdown began, Porter suspended its services with smaller airlines such as Sunwing and Air Transat and fired most of the employees. The nation’s two biggest airlines, Air Canada and WestJet, have reduced dramatically in size, laying off thousands of workers while canceling flight routes on an almost monthly basis.
Porter’s flights from Billy Bishop Airport on the island of Toronto resumed this September after an 18-month suspension.
Consumer habits also changed. Business travel took off, while demand for leisure flights soared.
Throughout the lockdown, the federal government provided more than $7.3 billion in bailouts to Canadian airlines. Porter, one of the first to receive financial assistance, received a $135 million loan from Export Development Canada in May 2020. It received a further $270.5 million in repayable loans in July.
In the early months of 2021, while other airlines were negotiating bailout terms with the Finance Department, Porter purchased 30 Embraer passenger jets with the option to buy another 50.
The price the company paid for those jets was a “sweetheart deal,” said John Gradek, a former Air Canada executive who now works as a faculty lecturer in aviation leadership at McGill University.
Aviation prices fell during the pandemic, while airline travel fell, allowing airlines with capital to rebate on new assets.
“So now they’ve got these brand new, amazingly equipped jets for a great price. It puts them in a good shape,” Gradak said.
Whether Porter can compete with mega-airlines that dominate airports like Pearson remains to be seen. But Deluce says his airline can offer competitive prices and better services.
“We have great potential to ensure that we can expand in a competitive environment,” he told Star.
While Deleus insists the company will not abandon Billy Bishop Airport, Porter’s expansion to the new airports comes as it battles with the airport’s landlord – Nieuport Aviation – over fees associated with parking airplanes.
The feuding companies have launched a series of lawsuits against each other during the pandemic, each alleging that the other violated its contractual obligations. Nieuport alleges that Porter is owed $45 million for parking space for their planes. Porter argues that the fees should have been waived during the harshest lockdown of the pandemic, when the company could not operate profitably.
Details of the lawsuits reveal how Porter once threatened to drop Billy Bishop entirely on his terminal fees in 2018, estimating the loss of $35 million in benefits if he stayed at the airport.
Deluce says the company has resolved those issues with Nieuport and made Billy Bishop a “long-term part of our network.”
But the legal dispute between the companies continues; Their dispute goes to trial in November.
Gradec thinks the lawsuit is one of several ways the company is cutting expenses while funding its expansion — a cutthroat move by a company fighting to stay profitable.
“It’s an interesting trading strategy, more than anything else,” Gradec told the Star. “Airport owners have to be careful, as Porter is their primary source of income, and now Porter has money in the bank after Billy Bishop hasn’t paid rent.”
Legal action has previously worked to Porter’s benefit. In 2006, Deluce co-founded the company with his father, Robert Deluce, in the midst of a bitter fight at Island Airport.
A few years earlier, in 2002, the Toronto Ports Authority had announced plans to improve access to what was then known as Toronto City Center Airport – a small property that would only serve Air Canada’s Jazz flights to Ottawa. – including a $15 million bridge. From downtown core to airport.
When the bridge was abruptly canceled due to political protests, Robert Deleus – who used to operate an airline at the refurbished airport – filed a $505 million lawsuit against the city and the federal government. They obtained an unspecified settlement in 2006 and purchased the airport building shortly thereafter, quickly canceling the lease to Jazz.
Porter moved into the airport within the year, although restrictions on the size of the aircraft have prevented it from flying routes outside North America.
“Michael is building on this larger vision of his father,” said Robert Kokonis, founder of Toronto-based aviation consulting firm AirTrav.
“To grow, he now has to look at other airports in this country and beyond.”
Kokonis says the company’s expansion is a way to protect itself from the decline in business travel, which is one of Porter’s main offerings in Billy Bishop.
“The impact of virtual calls and remote work will have a hangover effect on business travel,” Kokonis said. “By relocating flights to Pearson, they have the opportunity to tap into a larger segment of leisure consumers.”
Deleus knows this. New aircraft and airport locations give the company the flexibility to move away from business travel as needed. “Business travel will be one of the last segments of the market, and it is uncertain whether it will fully recover,” he said.
Things will be different, that’s what he is saying.