Porter breaches obligation to the federal government
Community Air Press Release of June 30, 2010:
Porter Flagrantly Breaches Obligation to its Major Lender: the Federal Government
Export Development Canada, a federal government agency, with a mandate to finance
exports by Canadian industry, has loaned $283 million of taxpayers’ money to finance
Toronto-based Porter Airlines’ purchase of 16 of its 20 aircraft.
In an apparent effort to provide cover for the fact that Porter’s aircraft are not exported,
EDC required Porter to use those 16 planes at least 60% on cross-border routes. This
obligation is revealed in the fine print of the Preliminary Prospectus for Porter’s recent
aborted IPO.
By statute, these loans had to be approved by both Industry Minister Tony Clement and
Finance Minister Jim Flaherty. These are political loans.
Looking at Porter’s current schedule, it has 1076 weekly flights - each of Porter’s 20 planes
therefore fly about 54 flights per week. 16 planes therefore fly860 flights. To comply with
the covenant to EDC, 60% of those flights, or 516, must be to U.S. destinations.
However, an analysis of that schedule shows only230, or 26%, of the weekly flights by
those 1`6 planes are to the U.S.
This is most certainly a clear and flagrant breach of Porter’s covenant to EDC. The normal
result of such a breach is a demand for repayment, or an insistence that the breach be
promptly remedied. Given Porter’s weak financial condition, and its prospects for a
fundamental shift in its business prospects in the U.S., neither is possible.
“We’ve seen Porter breach its legal obligations to the communities affected by the Island
Airport expansion time and again. And we’ve seen Porter consciously and repeatedly mislead
the media as to its profitability – now admitted to be illusory. Now Porter’s not bothering to
come close to satisfying an admitted obligation to its major creditor.” said Brian Iler, Chair,
CommunityAIR. “Will Porter’s friends in Ottawa come to its aid again, and waive this
covenant? Or are Porter’s days numbered? And could someone explain how funding Porter’s
planes was within EDC’s mandate anyway?”
Porter Flagrantly Breaches Obligation to its Major Lender: the Federal Government
Export Development Canada, a federal government agency, with a mandate to finance
exports by Canadian industry, has loaned $283 million of taxpayers’ money to finance
Toronto-based Porter Airlines’ purchase of 16 of its 20 aircraft.
In an apparent effort to provide cover for the fact that Porter’s aircraft are not exported,
EDC required Porter to use those 16 planes at least 60% on cross-border routes. This
obligation is revealed in the fine print of the Preliminary Prospectus for Porter’s recent
aborted IPO.
By statute, these loans had to be approved by both Industry Minister Tony Clement and
Finance Minister Jim Flaherty. These are political loans.
Looking at Porter’s current schedule, it has 1076 weekly flights - each of Porter’s 20 planes
therefore fly about 54 flights per week. 16 planes therefore fly860 flights. To comply with
the covenant to EDC, 60% of those flights, or 516, must be to U.S. destinations.
However, an analysis of that schedule shows only230, or 26%, of the weekly flights by
those 1`6 planes are to the U.S.
This is most certainly a clear and flagrant breach of Porter’s covenant to EDC. The normal
result of such a breach is a demand for repayment, or an insistence that the breach be
promptly remedied. Given Porter’s weak financial condition, and its prospects for a
fundamental shift in its business prospects in the U.S., neither is possible.
“We’ve seen Porter breach its legal obligations to the communities affected by the Island
Airport expansion time and again. And we’ve seen Porter consciously and repeatedly mislead
the media as to its profitability – now admitted to be illusory. Now Porter’s not bothering to
come close to satisfying an admitted obligation to its major creditor.” said Brian Iler, Chair,
CommunityAIR. “Will Porter’s friends in Ottawa come to its aid again, and waive this
covenant? Or are Porter’s days numbered? And could someone explain how funding Porter’s
planes was within EDC’s mandate anyway?”
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