Re Application of PORTER AIRLINES INC. Docket DOT-OST-2007-27402

Community Airport Impact Review (CAIR) submits that it is not in the public interest to issue the applicant a foreign air carrier permit in the form as attached in the original order.

In its Tentative Findings and Conclusions--Foreign Air Carrier Permit Application, the Department of Transport (Department) has not revisited the question of equitable access to Porter Airline's hub at the Toronto City Centre Airport (TCCA) first raised by a number of airlines at the time of Porter Airline‟s original application. We submit that in the interest of fair and open competition, it is incumbent upon the Department to do so now.

On June 20, 2007, the Department of Transportation issued NOTICE OF ACTION TAKEN -- DOCKET OST-2007-27402. In response to filings by several airlines about equitable access to the TCCA, the Department cited a single letter (OST-2007-2402-19)from Lisa Raitt, CEO of the airport‟s operator, the Toronto Port Authority (TPA), as a refutation of the airlines' claims. Ms Raitt's letter contained six-month old correspondence between the TPA and US Airways about six daily flights. Now, more than two years later, we trust that the Department will revisit the question of fair and equitable access to the TCCA and base its analysis and decision on Porter Airline's permit on more than one out-of- date example of the TCCA's accessibility

According to the Review Of Toronto Port Authority Report (http://www.tc.gc.ca/pol/en/Report/torontoPortAuthority/tpa.pdf), conducted on behalf of the Canadian government, Porter Airlines' precursor, RegCo, and the TPA signed a Commercial Carrier Operating Agreement (CCOA) on May 3, 2005. On February 28, 2006, the TPA‟s cancellation of its lease with Air Canada forced the airline to quit its service leaving Porter Airlines as the sole carrier at the TCCA. (Jazz airline asks judge to set aside flying prohibition: 'Undue preference', National Post, August 17, 2006). It has remained so for the three years up until the present in spite of Air Canada‟s attempts to find a legal means to return on an equitable basis.

As mentioned above, on May 10, 2007, the TPAs CEO, Ms Raitt, wrote that, in effect, the TCCA was open for business. Two and a half years after the claim, Porter is still the only airline in service at the TCCA.

While Ms Raitt's submission cited operating restrictions under the Tripartite Agreement and mentioned the need to sign a CCOA, it understandably did not mention the CCOA between the TPA and RegCo, Porter Airline's major investor. However, the CCOA is cited in the Review Of Toronto Port Authority Report. While the author of the Report does not question the legality of the CCOA, he does state, P.61, that Porter Airlines has “exclusivity of certain destinations and guarantees of a minimum of movements”.

It is the question of exclusivity of certain destinations and guarantees of a minimum of movements that should be of primary concern to the Department. In order to satisfy itself that any airline, U.S. or Canadian, flying to and from Porter Airline's hub at the TCCA, receives equitable treatment, CAIR urges the Department to seek guarantees that any competitor signing a CCOA with the TPA will have the same routes available based on reasonable and non-discriminatory scheduling.

According to a report published today by Bloomberg (http://www.bloomberg.com/apps/news?pid=20601082&sid=aH8_Su48zaZM): Porter's agreement with the authority barred regional carriers, including Jazz Air, from flying between the airport and New York, Chicago, Boston, Washington, Philadelphia, Cincinnati, Detroit and Cleveland, Jazz Air's lawyer Earl Cherniak said last year at a hearing.

In other words, if an applicant for access to the TCCA doesn't like the condition that prevents it from flying, for example, New York-TCCA-New York because that route is reserved exclusively for Porter Airlines, the TPA may argue that under the one-market scenario the applicant isn't disadvantaged since it can fly out of Pearson. However, based on Porter Airline's advertising, indeed their raison d'être, there are two markets: the Greater Toronto Area and Downtown Toronto. As evidenced by statements on its website such as “Gone are the hassles of getting to and from Pearson”; “The next time you fly into Toronto, you can actually fly into Toronto” ; and “That's right, avoid the additional expense and unpredictability of trips to Pearson. Porter Airlines flies out of Toronto City Centre Airport (TCCA), just minutes from downtown”, Porter Airlines has made it clear that it is serving the Downtown Toronto market.

In serving the Downtown Toronto market from the TCCA, Porter Airlines is at a significant cost advantage. Based on airport rates published respectively on Pearson and TCCA websites, a full 70-seat Q400 turboprop costs 4/5ths less to operate, take-off and landing, out of the TCCA - $801.08 vs $ 2,509.70 for Pearson. It is clear to see that Porter Airlines has a significant cost advantage over competitors required to fly out of Pearson. What is not clear is how the TPA plans on allowing other airlines into the Porter Airlines‟ hub to provide competition.

3. Porter's Complaints regarding Access to Newark International Airport

The combined effect of these changes is to reduce Porter's daily roundtrips Monday through Friday from seven to five, or a 30% reduction in the number of Porter's operations and to disrupt Porter's Saturday/Sunday operations. This is not a “fair and equal opportunity to compete” as promised by the U.S. in the Open Skies Agreement with Canada and unfairly and discriminatorily penalizes Porter despite its attentive and meaningful engagement in the scheduling process since last summer.

On October 13, 2009, the Department issued its Order to Show Cause notice regarding the Porter Airline's permit. In a remarkable coincidence, three days later, on October 16, 2009, the TPA posted a bulletin titled "Toronto Port Authority accepting expressions of interest regarding Toronto City Centre Airport” on its website. We trust that the Department will not regard the issue of this bulletin as evidence that the Porter Airline's hub is open for fair, competitive service to any and all comers. One reason is the condition cited in Ms Raitt's correspondence with US Airways, the Tripartite Agreement.

While seemingly open for business, the bulletin makes clear with the paragraph that follows, there are conditions. It states, “The Tripartite Agreement, in conjunction with an NEF Contour study that is currently underway, limits the number of daily commercial flights that can be operated at the TCCA”. The bulletin goes on to say that the TPA won't be in a position to respond to the aviation community until the study is under way.”

The bulletin, however, ignores an important comment from the Review Of Toronto Port Authority Report on Page 60. “In June 2003, RegCo would have understood that the total ceiling for large turboprop movements (number of departures and landings) would be 167 in and out of the airport each day. Under the 2006 CCOA with RegCo, the number of movements is far lower than the number contemplated in 2003, as the ceiling for total flights is now 120 movements.” The figure is from an authoritative source citing the TPA's CCOA with Porter Airlines‟ holding company.

As recently as October 17, Mr. Robert Deluce, CEO Porter Airlines, cited in an article in the Globe and Mail, Jazz wants a piece of Porter's monopoly, stated that Porter Airlines had about 100 daily flights. This figure may be confirmed by an analysis of Porter Airlines‟ current schedule published on its website.

The same article, Jazz wants a piece of Porter's monopoly, refers to Porter Airlines‟ planned expansion by adding five more aircraft and Philadelphia and Washington D.C. as destinations. The article goes on to cite Mr. Deluce's claim that, “By next April, it forecasts that it will be using 120 slots a day … ".

Thus, the Review Of Toronto Port Authority Report states that the total number of flights is 120 and Mr. Deluce is claiming those 120 flights. The Globe and Mail article also cites a CAIR analysis that puts the number of daily flights between 120 and 167. The 167 is also referred to above in conjunction with the Review Of Toronto Port Authority Report. Even at the greater number, the competition will have only 47 or 28% of the daily slots available. Offering less than 1/3rd of the TCCA's capacity to competitors is not in the public interest.

The record shows that in the four years since the TPA and RegCo first signed their CCOA no other airline has arrived at the TCCA. In fact, since the signing, the one resident competitive airline was forced out.

While constraining other airlines' access to the Toronto Island Airport, Porter has exercised its right to fair and equal treatment in its efforts to expand its operation s in Newark. What benefits Porter in Newark should also benefit other airlines in Toronto.

The operating costs are 1/5th for the Downtown Toronto Market at the TCCA over those at Pearson giving Porter Airlines a significant competitive advantage. A simple mathematical analysis shows that less than 30% of the TCCA's capacity could become available to the competition. 

The TPA's bulletin, "Toronto Port Authority accepting expressions of interest regarding Toronto City Centre Airport‟ offers no proof that the TCCA is open for competition.