Porter's load figures
Hi Mr. Kotyk,
Thanks for your thorough reply.
For the record, I did NOT characterize Porter as "wildly successful" but I did say that they have continued to grow during a devastating economic downturn. I also stated that low load figures are not necessarily "devastating" if the cost structure is low and yields are high. Don't let a full airplane fool you - just think back to JETSGO with their 1$ fares. Full planes & bankruptcy all in one.
Of course, Porter doesn't ignore low load figures and can take steps to mitigate their impact on the bottom line. If Porter is indeed canceling flights due to poor loads (only they know the real reason for cancellations), then this goes against an important tenet of airline operations which is "schedule continuity." Porter will have difficulty attracting more high yield customers if they can't be assured that their flight "will" operate. (within reason - weather etc...) If there are consistent and unexpected cancellations, it creates a sense of uncertainty and will usually push a customer to consider other options.
Consider that Newark is one of the worst airport's in the US for delays. Some days delays average around 3 hours. This may mean that one Porter flight bumps into the next Porter flight. If the loads allow it, they may consolidate the flight into one aircraft and cancel the other. This happens at all airlines. every time delays become this significant. Montreal and Ottawa don't have any real issues with delays so numerous cancellations on these routes does indeed raise some concern.
Even with a meager 18% load figure to Chicago, Porter is within hundreds of dollars per flight of making a profit as
higher yields and loads on other routes are subsidizing the Chicago operation. Don't forget Porter has several other routes and opportunities outside of their Toronto operation that also help subsidize lower revenue flights.
With Porter expanding to more destinations (Sudbury, Philadelphia, Washington etc...) there is certainly the risk of having more routes that may not break even. Furthermore, new competition will also eat into the yields as fare wars will surely follow the return of Air Canada Jazz to the TCCA. No doubt that difficult times are ahead for Porter to see if they can sustain their momentum and growth. On the flip side, the economy is due to continue its rebound which is an "X" factor in all of our calculations of profitability. Also, as new carriers enter the TCCA market and use the new PORTER terminal, this creates a new revenue stream and eats into the yields of their competitors.
Load figures, yields and cost structures are very intriguing factors to assess and speculate about. However, it bears acknowledgment that there is an obvious market at the TCCA as a 2010 projection of 1.3 million customers must also mean something.
Take Care!
Joe
Thanks for your thorough reply.
For the record, I did NOT characterize Porter as "wildly successful" but I did say that they have continued to grow during a devastating economic downturn. I also stated that low load figures are not necessarily "devastating" if the cost structure is low and yields are high. Don't let a full airplane fool you - just think back to JETSGO with their 1$ fares. Full planes & bankruptcy all in one.
Of course, Porter doesn't ignore low load figures and can take steps to mitigate their impact on the bottom line. If Porter is indeed canceling flights due to poor loads (only they know the real reason for cancellations), then this goes against an important tenet of airline operations which is "schedule continuity." Porter will have difficulty attracting more high yield customers if they can't be assured that their flight "will" operate. (within reason - weather etc...) If there are consistent and unexpected cancellations, it creates a sense of uncertainty and will usually push a customer to consider other options.
Consider that Newark is one of the worst airport's in the US for delays. Some days delays average around 3 hours. This may mean that one Porter flight bumps into the next Porter flight. If the loads allow it, they may consolidate the flight into one aircraft and cancel the other. This happens at all airlines. every time delays become this significant. Montreal and Ottawa don't have any real issues with delays so numerous cancellations on these routes does indeed raise some concern.
Even with a meager 18% load figure to Chicago, Porter is within hundreds of dollars per flight of making a profit as
higher yields and loads on other routes are subsidizing the Chicago operation. Don't forget Porter has several other routes and opportunities outside of their Toronto operation that also help subsidize lower revenue flights.
With Porter expanding to more destinations (Sudbury, Philadelphia, Washington etc...) there is certainly the risk of having more routes that may not break even. Furthermore, new competition will also eat into the yields as fare wars will surely follow the return of Air Canada Jazz to the TCCA. No doubt that difficult times are ahead for Porter to see if they can sustain their momentum and growth. On the flip side, the economy is due to continue its rebound which is an "X" factor in all of our calculations of profitability. Also, as new carriers enter the TCCA market and use the new PORTER terminal, this creates a new revenue stream and eats into the yields of their competitors.
Load figures, yields and cost structures are very intriguing factors to assess and speculate about. However, it bears acknowledgment that there is an obvious market at the TCCA as a 2010 projection of 1.3 million customers must also mean something.
Take Care!
Joe
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