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Porter Airlines may revisit plans for an IPO in the first half of 2011. (Peter Power/Peter Power/THE GLOBE AND MAIL)
Porter Airlines may revisit plans for an IPO in the first half of 2011. (Peter Power/Peter Power/THE GLOBE AND MAIL)

Porter's growth strategy thrown for a loop Add to ...

Porter Airlines Inc.'s U.S. expansion plans have been disrupted after American authorities rejected an application for customs officers to pre-clear passengers.

The U.S. State Department has sent a diplomatic note to Canada's Foreign Affairs Department, saying the United States has declined the application to allow U.S. customs preclearance facilities to open at Billy Bishop Toronto City Airport.

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"The decision was made based on many factors, including the passenger load at the airport in question, which does not meet the current threshold for consideration of new preclearance locations," a spokeswoman for the U.S. Department of Homeland Security said in an interview Tuesday.

Some of Porter's transborder routes have been seeing light traffic, including planes that are roughly three-quarters empty on certain flights to Chicago and Boston, industry observers say. The Toronto-based carrier, which has 10 Canadian cities in its network, currently flies to two other U.S. destinations - Newark, N.J., and Myrtle Beach, S.C.

Porter needs U.S. customs agents at the island terminal near downtown Toronto to screen travellers bound for proposed destinations such as Washington's Reagan National Airport and New York-area airports such as LaGuardia and Westchester.

Privately owned Porter, which shelved plans in June for a $120-million initial public offering, has been touting preclearance as crucial to its growth strategy.

Porter chief executive officer Robert Deluce said in an interview Tuesday that he is optimistic that preclearance approval will eventually be granted, adding that he expects U.S. authorities to reassess Billy Bishop airport in the future.

"None of these things are ever slam dunks," he said. "I would be really surprised if we don't have preclearance by the end of 2011. We haven't run into anything yet that has been anything more than a temporary speed bump."

Mr. Deluce said Porter has U.S. options that don't require prescreening, including flying to Philadelphia, Washington Dulles International Airport and Baltimore-Washington International Airport.

A spokeswoman for Canadian Foreign Affairs Minister Lawrence Cannon declined comment. But the National Airlines Council of Canada wrote a letter in April to Mr. Cannon, urging him to withdraw the application filed by the Canadian government on behalf of the Toronto Port Authority, which oversees Billy Bishop airport.

The airlines council - which represents Air Canada, Jazz Air, Air Transat and WestJet Airlines Ltd. - warned that allowing Billy Bishop airport to prescreen passengers will drain valuable resources away from Toronto's Pearson International Airport, where the council's four members offer flights.

Porter has enjoyed a monopoly on commercial flights at Billy Bishop since it began operations in October, 2006, but in June, the Toronto Port Authority awarded new slots to Air Canada and Houston-based Continental Airlines Corp., though neither carrier has set any launch date.

Earlier this month, Porter said it expects to take delivery of another four Bombardier Q400 turboprops next April and May. Those new orders will boost its fleet to 24 planes in total. Roughly half of the fleet has been financed with loans at "market rates" through Export Development Canada, Mr. Deluce said.

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