Porter Airlines Inc. is poised for a significant expansion with the purchase of up to 30 Bombardier C Series jets, but it faces stiff competition and limited options as it eyes new markets.
A report that the Toronto-based airline struck a deal with Bombardier Inc. for the jets, which can be configured for up to 110 seats and have a much greater range than Porter's current fleet of Q400 turboprops, took industry watchers by surprise.
According to a source familiar with the deal, Porter will acquire 12 CS100 jets, with an option to purchase 18 more. The airline is set to officially announce its plans on Wednesday.
"Nobody at Porter, nobody in the industry, has been hinting about this," said Rick Erickson, an air-industry consultant in Calgary.
Porter is set to expand into already crowded skies, as Air Canada launches its new vacation-oriented discount airline Rouge and WestJet Airlines Ltd. introduces its regional service, both this summer, creating the prospect of stiff competition and a fare war in an already low-margin industry.
"It is going to be a very, very competitive environment," Mr. Erickson said.
And the airline could face restrictions on what the new jets can be used for, depending on whether it plans to use its existing hub in Toronto or create a new hub at another facility, such as Montreal's Pierre Elliott Trudeau International Airport.
Porter has built its business on flying turboprops out of the tiny Billy Bishop Toronto City Airport, near the downtown core on the Toronto Islands.
Continuing to fly out of Billy Bishop to connect with Porter's network of regional flights makes the most sense, say company-watchers, although it includes the most hurdles. The CS100 jets are capable of taking off and landing on the short, 4,000-foot runway, but would have to be reconfigured with a much lighter takeoff weight, which in turn reduces its flying distance
"This would probably rule out transcontinental flights from Billy Bishop Toronto City Airport, but would put cities such as Winnipeg and Halifax well within range and would also allow the airline to fly to points potentially as far south as Florida," analyst Cameron Doerksen of National Bank Financial, writes.
Any plan to expand the Toronto Islands runway to allow the jets to carry a full payload would face strong opposition from some city councillors and local residents.
A three-party agreement between the city of Toronto, the federal government and the Toronto Port Authority, which operates the airport, prevents an extension of the runway and the use of jets, city councillor Adam Vaughan said. "I just can't imagine the city wants to pave a 500-foot path into Lake Ontario."
But a public campaign to entice fliers has already started. Full-page colour advertisements by Bombardier and engine maker Pratt & Whitney have run in local media for the past week, touting the C Series jets, which is highly unusual for the transportation giant, one source familiar with the company said. The ad is not aimed at airlines because any airline would be well aware of the planes through Bombardier's marketing and sales campaigns within the industry.
A second option for Porter would be to pick another hub airport. Toronto's Pearson International Airport makes little sense, as Porter doesn't currently fly from there, analysts said.
If the airline were to choose a hub such as Montreal's Trudeau airport, it would be entering a hornet's nest of competition from Air Canada and WestJet, which have major reserves of cash to fend off rivals, said Robert Kokonis, managing director of industry research firm AirTrav Inc. in Toronto. "You're going to go in a 110-seat jet and take on an Air Canada Airbus A320 with 146 seats or a WestJet 136-to 175-seat Boeing 737 to Calgary? I don't think so," he said.
Porter would also be in a tough situation if it planned to fly to major U.S. destinations, where the competition wouldn't only come from the two domestic carriers, but from their U.S. code-sharing partners. "I don't think there's any undiscovered gold at the end of the rainbow in the Canadian market at this point," said George Hamlin, an aviation industry consultant who heads Hamlin Transportation Consulting in Fairfax, Va.
The prospect of a fare war doesn't bode well for Porter, Mr. Hamlin said. "The only way you can overcome that is to have deep enough pockets to have staying power," he said. Porter's position at Billy Bishop is protected by the fact that there are no more departure slots available, but at another airport, competition would be much fiercer.