"Air Canada will eat Porter's lunch"
The Toronto Star's business
pages published an article on Saturday on the imminent competition between
Porter and Air Canada at the Island Airport. This is the
link.
The article is illustrated with a cute drawing of
the Porter raccoon bailing out of a Porter aircraft and floating down to the
ground by parachute. The illustration captures the conclusion
the article draws from the impending competition. This competition
from Air Canada will not be good for Porter.
Despite this the article quotes Robert Deluce
trying to put a positive face on the development: "We're actually pleased that
other carriers are coming aboard now that Porter's made the airport
viable."
But then the article goes on to give a very
negative analysis.
"There is no question that Air Canada will try to
eat Porter's lunch," said Ramy Elitzur of Toronto's Rotman School of
Management.
Air Canada has a history of loading up on certain
routes and dropping prices to compete with smaller upstarts. "It put
CanJet out of business with that strategy, lowering prices below the level where
CanJet could retaliate," commented Joe D'Cruz, professor, University of
Toronto. "There's a whole string of airlines which have failed because Air
Canada retaliated with price.."
This puts the proposed Porter IPO at serious
risk. "Investors are not going to be keen on investing in a company
which is being attacked competitively by Air Canada," continued
D'Cruz.
The only "expert" who agreed with Robert Deluce
that believed Air Canada coming to the Island Airport was a plus for Porter
was Fred Lazar, of York University. Fred Lazar has been a Porter booster
since 2006. The records of CommunityAIR indicate that he was a member of
REGCO, the predecessor to Porter Aviation Holdings. He is hardly an
independent analyst.
As an indication of the coming price war between
the two airlines, Porter's lowest round trip fare to Montreal, taxes included,
is $455.90. On March 7 Air Canada listed its fares on the same
route. It's cheapest ticket went on sale at $444.60.
It looks like Porter is in deep trouble. But
in the meantime, those of us on the Waterfront
have little to cheer about. On May 1 Air Canada will be bringing more Q400
aircraft to the Island Airport. There will be more flights, more noise,
more pollution, more cars and more taxis streaming through the
neighborhood.
Bill Freeman
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