Porter and Profits
How many times can a company become profitable for the "first time?" It depends on what is meant by "profitable."
On June 9, 2007 Robert Deluce, the president of Porter Airlines, said that the company turned a profit in May 2007. Then on June 25, 2008 Hanna Westfield, a writer for a website called Carrentals.co.uk http://news.carrentals.co.uk/porter-airlines-to-start-seeing-profits-3422734.html quoted a representative of the airline as saying "Porter will turn its first profits later this summer."
Confused? How about this. Porter received $115 million from investors in equity funding. That means the company does not have to pay the money back because it is equity not debt. They used that money to purchase aircraft. Profitability for Porter, therefore, may be when the company can pay its overhead: salaries, fuel, landing fees, and other expenses. The fact that they are still not profitable even though they are not making payments on their aircraft must be pretty worrying for Robert Deluce.
And there is another thing that must be keeping him awake at nights. The investors in Porter are venture capitalists. Some call them "vulture"capitalists because they are people who want high profits from their investments. What are they going to do when they find out that Porter is not going to deliver a high level of profits and in fact may never go into the black. The airline industry is in crisis around the world because of the recession and high fuel prices. It must be particularly hard on a start up company.
Porter is a private company and we do not know its financial situation or the plans of the investor, but it may not be a happy time for Mr. Deluce.
Bill Freeman with Bob Kotyk
On June 9, 2007 Robert Deluce, the president of Porter Airlines, said that the company turned a profit in May 2007. Then on June 25, 2008 Hanna Westfield, a writer for a website called Carrentals.co.uk http://news.carrentals.co.uk/porter-airlines-to-start-seeing-profits-3422734.html quoted a representative of the airline as saying "Porter will turn its first profits later this summer."
Confused? How about this. Porter received $115 million from investors in equity funding. That means the company does not have to pay the money back because it is equity not debt. They used that money to purchase aircraft. Profitability for Porter, therefore, may be when the company can pay its overhead: salaries, fuel, landing fees, and other expenses. The fact that they are still not profitable even though they are not making payments on their aircraft must be pretty worrying for Robert Deluce.
And there is another thing that must be keeping him awake at nights. The investors in Porter are venture capitalists. Some call them "vulture"capitalists because they are people who want high profits from their investments. What are they going to do when they find out that Porter is not going to deliver a high level of profits and in fact may never go into the black. The airline industry is in crisis around the world because of the recession and high fuel prices. It must be particularly hard on a start up company.
Porter is a private company and we do not know its financial situation or the plans of the investor, but it may not be a happy time for Mr. Deluce.
Bill Freeman with Bob Kotyk
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