Regional airline Porter Aviation Holdings Inc. is setting its sights on elite status as a continental carrier by purchasing as many as 80 Embraer jet aircraft for up to US$5.82-billion.
Porter plans to fly Embraer E195-E2 jets from Ottawa, Montreal, Halifax and Toronto’s Pearson airport to U.S., Mexican and Caribbean destinations, starting in the second half of 2022. The Toronto-based Porter will compete directly with larger domestic rivals Air Canada and WestJet Airlines Ltd., and discount and U.S. carriers.
“We are bringing Porter’s distinct style of service to dozens of new North American cities,” president and chief executive officer Michael Deluce said. “We believe that now is the right time to make this investment, as the pandemic resets the aviation landscape.”
Mr. Deluce co-founded Porter 15 years ago with his father, Robert Deluce – now the company’s executive chairman – and said growth plans have long included adding jets to the fleet. He said Porter wants to expand at a time when many airlines are struggling financially and cutting routes because of the pandemic. The Globe and Mail reported in May that Porter planned to acquire Embraer jets.
Porter will continue short-range flights from Billy Bishop Toronto City Airport, near downtown, on De Havilland Dash 8-400 turboprop aircraft. Government regulations prevent jets at Billy Bishop airport, and Mr. Deluce said the airline has no plans to fly Embraer planes from there.
The Brazilian-made E2 aircraft can carry 146 passengers. Porter has made firm commitments for 30 and has options to buy 50 additional jets, creating as many as 6,000 new jobs for flight crews, maintenance workers and sales staff, the airline said in a news release. It said the list value of the 80-aircraft contract is US$5.82-billion.
Porter shut down all flights in March, 2020. As pandemic restrictions ease, the company plans to resume operations on Sept. 8, hiring back about 500 staff. The federal government loaned Porter $270.5-million in June as part of a program to support the domestic airline industry. Mr. Deluce said the money will be used to restart operations and refund passenger tickets.
The carrier plans to finance the Embraer purchase with money from existing shareholders and aircraft sale-leaseback agreements, which are widely used in the industry. Porter is a private company, and its shareholders are the Deluce family, pension plan OMERS, State Street Corp. and private equity funds Edgestone Capital Partners and Dancap Private Equity Inc.
“With this order for up to 80 of our largest aircraft, the E2 is making a stunning North American debut,” said Arjan Meijer, chief executive officer of Sao Paulo-based Embraer’s commercial aviation division. About a third of the E2′s components come from Canadian manufacturers, including engines from Pratt & Whitney Canada in Quebec, avionics from Thales Group in Ontario and landing gear from Alta Precision, a division of Quebec-based Héroux-Devtek Inc.
The Brazilian company offered Porter a hefty discount, sources in the aircraft-finance industry said. One aircraft-leasing executive estimated the firm order for 30 E2 jets will likely cost US$1-billion, with Porter putting up about US$200-million when the aircraft are delivered next year. The Globe is not naming the sources because they are not permitted to speak for their companies.
In 2013, Porter announced plans to acquire 30 Bombardier C Series regional jets, an aircraft now manufactured by Airbus SE under the A220 brand. The conditional order fell through, in part because Porter was not permitted to expand the Billy Bishop runway.
Airbus spokeswoman Marcella Cortellazzi said in an e-mail on Monday that the company does not comment on airlines’ fleet decisions.
Mr. Deluce said the decision to buy Embraer jets was based on E2′s efficiency. The planes are 65 per cent quieter than the previous generation of regional jets, and carbon emissions per seat are 25 per cent lower.
“The E2 is the most modern and fuel-efficient aircraft in the world and offers passengers the Porter in-flight experience they expect,” Mr. Deluce said. The Embraer jet has two seats on each side of the aisle so, as Mr. Deluce said, “no one ever faces the dreaded middle seat.”
Several of Porter’s rivals are expanding their networks. In late June, Westjet announced plans to ramp up Canadian flights. Last week, Air Canada restarted routes to 11 cities in Europe, Africa and the Middle East, while Edmonton-based discount carrier Flair Airlines launched flights to six U.S. vacation destinations, including Orlando, Las Vegas and Phoenix.
“This is a huge jump for [Porter],” said Addison Schonland of boutique aerospace consultancy AirInsight Group, adding that expanding to Pearson will pit the company more squarely against rivals. Porter currently has 29 aircraft, compared with more than 100 at Westjet and 150 in the Air Canada fleet.
“Okay, you’re going to Pearson. That’s a big-boy airport with all the other big-boy competitors,” Mr. Schonland said. “How big is the Canadian market to enable Porter to survive against people like Flair, which is a low-cost operator, Air Canada, which is the giant in the room, and WestJet, which is a very clever operator?”
Porter’s expansion plans were welcome news at airport owners such as the Greater Toronto Airports Authority, which operates Toronto Pearson International Airport. Passenger traffic plummeted when pandemic restrictions began, idling facilities and leading to layoffs. GTAA spokesperson Hillary Marshall said: “Pearson welcomes all new airlines and looks forward to working with Porter to discuss future operations at our airport.”
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