This is an interesting article…going to be an interesting couple of years with the amount of competition in Canada right now.
ATB Financial analyst Chris Murray says 2023 will be one of the most interesting years in Canadian aviation history. “Everyone has these big plans.”
Mr. Prentice says Canada can support 2½ airlines – Air Canada, WestJet and one smaller airline – not the number flying this year
Julian WoodJanuary 28, 2023
Porter Airlines’ new Toronto hub brings more competition to Canadian Airways
Porter Airlines CEO Michael Deluce with the Embraer E195-E2 prior to its maiden flight from Pearson Airport during a flight preview January 27 in Toronto.Christopher Katsarov/The Globe and Mail
Porter Airlines is looking to pull itself out of the pandemic with a billion-dollar bet on dozens of larger planes and new routes in a pivotal year for Canada’s airline industry.
Porter’s first 132-seat Embraer jet will fly customers to Ottawa and Montreal from February 1 from the airline’s new hub at Toronto Pearson International Airport.
Porter’s expanded fleet and move to Canada busiest airport, marks a new strategy for the airline, founded 17 years ago by pilot Robert Deluce, putting it in direct competition with Air Canada and WestJet Airlines. But it’s just one of many Discounters offering cheap seats to get a foothold in the domestic market.
ATB Financial analyst Chris Murray says 2023 will be one of the most interesting years in Canadian aviation history. “Everyone has these big plans.”
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Mr. Murray noted improved financial results at US airlines, which are typically six months ahead of their Canadian counterparts, and strong demand for aircraft at Boeing and Airbus. “What we’ve seen in the airline industry is when travel comes back, it comes back viciously. There is an enormous amount of catching up to do.”
While customers are desperate to move on from COVID-19, airlines and airports have so far hobbled rather than emerged from the wreckage of the pandemic and botched summer and Christmas restarts.
Mainstays Air Canada and WestJet will try to stabilize their businesses by transforming routes and fleets amid new competition from cheaper rivals Lynx, Canada Jetlines and Flair Airlines. Air Transat hopes a rebound in holiday demand will stem its losses and reduce its reliance on government bailouts. Sunwing Airlines, whose holiday mistakes have drawn the ire of politicians and stranded passengers, will seek to clean up its WestJet acquisition and allay concerns from regulators.
The competition office asked Air Canada and WestJet to investigate changes in regional traffic
And then there’s Porter, shifting its focus to larger aircraft and new markets, with its jet-powered expansion beyond Toronto’s smaller Billy Bishop Toronto City Airport, the hub for its 78-seat, short-range De Havilland Dash 8 turboprop aircraft .
“Talk about crowded skies,” said Barry Prentice, a professor at the University of Manitoba.
Can the Canadian market support that many airlines? “The answer is no,” he said.
“Of course not,” said John Gradek, who teaches aviation leadership at McGill University. “My guess is that we’ll probably lose an airline by the end of the year. I’m not sure which one.”
Mr. Deluce, the founder of Porter, flew from Brazil to Pearson on the company’s first Embraer jet in late December. “This is a significant milestone,” he said Friday at a preview flight of the plane, which is painted Porter’s familiar white with a blue, logo-covered tail.
Robert’s son Michael Deluce, Porter’s chief executive officer, said the airline is targeting economy travelers, who make up 90 percent of the market.
Porter has competed with Air Canada since Day 1, he said, and is marketing heavily in WestJet’s territory to boost business there. He said Porter’s prospects were helped by WestJet’s recent withdrawal from eastern Canada.
Porter’s new fleet will initially serve routes between Toronto, Ottawa, Halifax, Montreal, Edmonton and Calgary before expanding to other North American and Caribbean destinations. So far, the airline has been limited to the 2,040 km range of its Dash 8.
Porter flies out of Toronto Pearson’s Terminal 3, which is also used by WestJet. “They’re going to try to steal WestJet’s business, even more than Air Canada’s,” Mr Gradek said, predicting the two biggest airlines would cut prices in response.
Porter says its single-aisle aircraft will appeal to customers as there are no middle seats and passengers get free drinks and snacks. The airline’s E195 orders total 100, including 50 firm orders and 50 purchase rights, valued at over $7 billion at list prices. It already has five of the new aircraft and expects another 25 by the end of 2023.
Mr Murray said Porter has built a “great brand” at Billy Bishop, the island airport where it controls the majority of slots. But the tiny airport is not big enough for much growth, they say Little used as a transfer hub and has a jet ban, limiting Porter’s prospects there, he added.
A legal battle on the island also raises questions about Porter’s future. In October, an Ontario judge ordered Porter and an affiliate to pay the airport’s terminal owner $130 million in damages for withholding fees in recent years. Court records in the case showed Porter lost money at Billy Bishop and threatened to leave before the pandemic began. Michael Deluce said that privately owned Porter will continue to fly off the island.
The challenge at Pearson for Porter, Mr. Murray said, will be to withstand intense competition and higher costs while maintaining its unique identity.
According to his calculations, the Canadian market can distribute two major airlines and another 50 aircraft among the others. This means that the low-cost airlines have to compete with the car for the travel budget of non-normal flyers if they want to be successful. Porter needs to expand its popular niche brand and leverage its broader network to attract connecting passengers, who make up 40 percent of the Canadian market.
Even Michael Deluce agrees Canada has too many airlines. Porter will not compete on price with the discounters, he said, but will offer service at an economy fare combined with better frequency and reliability. The discount airlines “have one thing to sell, and that’s price. I can change the price at the touch of a button,” said Mr. Deluce.
Mr. Prentice says Canada can support 2½ airlines – Air Canada, WestJet and one smaller airline – not the number flying this year.
Moves by Air Canada and WestJet to reduce services in each other’s main regions — eastern and western Canada, respectively — could make room for the smaller carriers, he said. And the new discount airlines will not be burdened by the debt and accumulated losses that incumbent carriers have taken on during the pandemic, allowing them to gain market share, he added. However, the newcomers offer fewer flights, what reduces comfort and can pose Hurdles in the event of flight cancellations.
“We have many choices,” said Mr. Prentice. “But in some cases it looks better than it is.”
