In response to our press release last Friday, we received the following query:

“And how exactly are the numbers of Porter Airlines of any interest to Community Air?”

We responded:

“Thanks.

We have a strong interest, as you will appreciate, in recovering the relative tranquility our waterfront, and its residential communities, experienced before Porter. We think most Torontonians would agree that a massive noisy and polluting industrial use has no place there.

We’ve thought for some time – and the experience with City Express’ failure in the 1980s points to it – that the market for a passenger service out of the Island Airport isn’t big enough for an airline to be successful.

While Porter has done an admirable job of servicing its passengers, and marketing itself, it hasn’t been able to fill even one in two seats, on average, over its entire existence. Hence its losses, now adding up to $44,505,000 as of March 31. And hence the failure of its IPO, Porter’s spin on “general market conditions” to the contrary. [Would that the media would cease taking that spin as reality!]

As of yesterday, we’re much closer to our eventual goal. So attention to Porter’s number is important. We’ll continue.”


We also received some comments wondering why we used unattributed quotes, and why we compared Q1 2010 to Q4 2009, rather than to theusual comparison to Q1 2009. Here’s our response:

"I was concerned too about the unattributed quotes, but thought they pointed sufficiently in the right direction that they were worth using.

 Also, I had thought about putting a caution into the release about this being first quarter, and results may be worse than fourth quarter owing to the timing of their business cycle.

 But two points suggested that wasn’t appropriate:

 ·         Their business has changed so much (doubled that a comparison to a year ago provides little insight. But there is a significant trend –as they’ve expanded, their revenue per seat mile has declined steadily: from $.329 for the four months ending December 31, 2008 to $.231 for all of 2009 to $.227 in Q4 2009, to $.222 in Q1 2010.

 ·         Business travellers, who Porter relies on, are as likely to fly in the first quarter as in the last. In fact, Air Canada’s passenger operating revenue increased from Q4 2009 to Q1 2010 – from $2,025 million to $2,095. [Tried to get at AC’s passenger revenues for Canadian and U.S. transborder for the two periods, but so far unsuccessful.]

 But their cash flow issues are not really a cyclical problem – Porter is essentially out of cash, and desperate. The situation has worsened considerably since December 31, as I’ve pointed out. The IPO was their rescue plan. It didn’t work.

 Breakeven load factor [BELF] is load factor times total operating  expenses divided by total revenue. As our friend The Bean has noted on

theairlinewebsite.com/index.php?/topic/389763-porter-going-public-via-ipo/page__st__160, />

Porter launched its high cost, low fare strategy in 1Q 2010, resulting in higher loads, but forcing yields down 15.7% and rasm down 5.1%.

Oh dear. Look what happened to the BELF. It shot up to 54.62%.

The delta between their l/f and belf is now 7.58 percentage points, second worst in North America after AMR at 7.72% points.

Watch for that BELF to continue climbing through the year. Competition at YTZ will knock the average fare down at least $20 to $144 and both fuel and maintenance will increase.

Porter's loads will increase to about 53%, but their BELF will shoot up to about 62.5%. Their margin, including interest will wallow between -15 and -18%, with quarterly losses in the $6.5 to $8m range.

The real issue now is how long Porter’s current investors, and lenders, will contribute more money to shore this up. As of yesterday, they’ll be a lot less willing, one would think.

Brian Iler