More Q400's for Porter

[altiplano]

-

[Metro-Sexual]

Realitychex,

Although I can see where you are coming from. You are discussing load factor trends as going down in the 1st quarter of a year compared to the 4th Quarter of the previous year. Given your obvious "exceeding familiarity " with the airline industry and your role in building 3 airlines. I would think that you understand that the 1st quarter is a bit of a slide for all airlines.
And since by the way you speak of your role in building WestJet you must have been one of the first 30 pilots hired given your "expertise" on the subject. Since you are so good at finding DoT load factors, can you find us the LF stats for WestJet and Air Canada for 4th quarter 2009 vs 1st 2010? Or do you only look for one sided facts to back up your arguments?

Desperation for the increase in EWR flights? What you are failing to see as an outsider is that load factors system wide have grown quite substantially and several customers have requested more frequency on that route.

Also you may want to look at the the economic conditions at the time when comparing WestJet's start up and Porter's. Porter bad start may have something to do with starting up during the worst recession in history! Think about it! Not to mention that oil was no where near as expensive as it was when Porter had it's worst financial results. And the fact that WestJet started with clapped out 737-200's (and they have admitted to the fact) and that were a fraction of the cost of Porter's new Q400's, not to mention the investment in infrastructure at the island and in YOW and YUL in the near future. We've all been lulled into the belief that all airline start-ups should be like WestJet's and yes in a perfect world they all would be. But anyone that has the exceptional experience and business savvy you have would realize that sometimes new companies lose money. How about posting the results from the first few years at JetBlue.

As far as having a "monopoly in Canada's busiest aviation market" well we may be the only one's at the Island but you have to remember that Pearson Canada's busiest airport also serves that market. So Jazz and Colgan operating a couple of flight a day out of YTZ may have a small effect but I don't think it will be crippling.

Sorry if it feels like a bit of a personal attack but I just feel that although I can see the merit in your opinions I feel your supporting facts may be a little one sided! Lets see what the 2nd quarter numbers look like shall we!

Happy Flying
MS

[airliner]

Realitychex, you are right our loads have only been in the single digits. This is just a desperate way to hemorrhage money before the lock goes on the door. Alas it is once again time to update the resume.
Thanks for the heads up. Hope the pay check cashes

[Realitychex]

Realitychex,

Although I can see where you are coming from. You are discussing load factor trends as going down in the 1st quarter of a year compared to the 4th Quarter of the previous year. Given your obvious "exceeding familiarity " with the airline industry and your role in building 3 airlines. I would think that you understand that the 1st quarter is a bit of a slide for all airlines.
And since by the way you speak of your role in building WestJet you must have been one of the first 30 pilots hired given your "expertise" on the subject. Since you are so good at finding DoT load factors, can you find us the LF stats for WestJet and Air Canada for 4th quarter 2009 vs 1st 2010? Or do you only look for one sided facts to back up your arguments?

Desperation for the increase in EWR flights? What you are failing to see as an outsider is that load factors system wide have grown quite substantially and several customers have requested more frequency on that route.

Also you may want to look at the the economic conditions at the time when comparing WestJet's start up and Porter's. Porter bad start may have something to do with starting up during the worst recession in history! Think about it! Not to mention that oil was no where near as expensive as it was when Porter had it's worst financial results. And the fact that WestJet started with clapped out 737-200's (and they have admitted to the fact) and that were a fraction of the cost of Porter's new Q400's, not to mention the investment in infrastructure at the island and in YOW and YUL in the near future. We've all been lulled into the belief that all airline start-ups should be like WestJet's and yes in a perfect world they all would be. But anyone that has the exceptional experience and business savvy you have would realize that sometimes new companies lose money. How about posting the results from the first few years at JetBlue.

As far as having a "monopoly in Canada's busiest aviation market" well we may be the only one's at the Island but you have to remember that Pearson Canada's busiest airport also serves that market. So Jazz and Colgan operating a couple of flight a day out of YTZ may have a small effect but I don't think it will be crippling.

Sorry if it feels like a bit of a personal attack but I just feel that although I can see the merit in your opinions I feel your supporting facts may be a little one sided! Lets see what the 2nd quarter numbers look like shall we!

Happy Flying
MS

The first quarter is a slide for airlines like Porter who choose to develop a business model that does not adjust capacity to compensate for seasonality. You can see quite clearly that the first quarter tends to be quite profitable for airlines that figure this out. In the past three years, WJ’s loads have been higher in 1Q than 4Q, and that in every quarter, the l/f exceeds the belf. Going back to day one, WJ has reported profits in 54 of 58 quarters. Remind us again of how many quarters Porter has reported profits?

WJ L/F - BELF

2007
1Q 81.1%/72.1%
2Q 80.9%/72%
3Q 83.2%/63.7%
4Q 77.2%/67.4%
2008
1Q 81.9%/73.3%
2Q 79.5%/70.7%
3Q 81.4%/72.6%
4Q 77.6%/70.4%
2009
1Q 80.4%/74.4%
2Q 76.1%/73.3%
3Q 79.7%/71.7%
4Q 78.4%/75.7%
2010
1Q 81.7%/78.7%
2Q 80.0%/76.7%

What load stats would you like? Would it interest you to know that WJ’s transborder loads from Jan thru Sept 30 2009 were 86.3%

How about YVR-LAX, which started in Jan 2010 and ran at 85% for the quarter with a system BELF of 78.7%.

ACY-YYZ ran at about 50% and was cancelled. You might want to familiarize yourself with that term. It’s what you do to routes that lose money. Routes like YTZ-BOS and YTZ-MDW……

Porter’s EWR Loads
Jan 29.5%
Feb 33.8%
Mar 41.2%
Apr 46.8%
May 48.6%
Jun 47.4%
Jul 50%
Aug 57%
Sept 54.5%
Oct 59.4%
Nov 54.8%
Dec 51.9%
Jan 45%
Feb 48.7%
Mar 53.1%

Although capacity has increased from 22,400 seats in Jan 09 to 30,730 in March 2010, with l/f’s increasing into the 50% range, the passenger l/f growth has stalled out. That’s the time to consolidate frequency and drive l/f and yield north.

More importantly, according to Porter’s own data, system yield dropped from 56.6 cents in 1Q 2009 to 47.2 cents in 1Q 2010, about 16%. Some of that can be attributed to the increased asl, but not anywhere close to a huge 16% decline. In other words, Porter dropped fares to increase load factor. Playing the low fare game with the highest unit costs is not a strategy I’d recommend to any airline.

Porter started up on October 23 2006. The recession didn’t hit until Sept 2008. Porter had almost two years of unprecedented boom times prior to any economic slowdown yet lost wads of cash in the process. Last time I checked, the recession impacted all airlines. It’s funny how some airlines continue to make a profit during recessions, eh?

Everyone in Western Canada recalls the recession of 1996-1997 when oil plunged to $13 and layoffs were coming fast and furious in Alberta, WJ’s home base. Those were ugly times. If you happened to live in BC, you would recall the NDP induced recession of 1998, which impacted 5 of WJ’s key destinations.

You might also recall an event on September 2001 that didn’t exactly do wonders for the airline business.

Everyone was impacted by the oil run up to $130+++, and the subsequent meltdown to $35 a year later.

WJ was profitable through it all.

WJ started with older model 737’s for one reason. They were proven money makers. You got a problem with that?

The Q400’s are, for some, a nice airplane. It don’t mean jack if their economics result in the production of the worst operating margins in North America.

I am constantly amused at the argument that Porter’s cosy monopoly somehow competes with Pearson and that they are unconcerned about head to head competition. Anyone who knows the lengths Porter has gone to exclude head to head competition at YTZ is, literally ROTFLTAO over that argument.

Reporting margins including interest payments of -16.11% in 1Q 2010, when the collective industry reported a margin of -4.1% and a peer reported a near industry leading margin of 3.7% is all the context most investors will consider when reviewing the prospects of a business, any business, that is almost 4 years old.


Your job security at Porter is purely a function of the company’s ability to generate both operating and net profits. Porter has yet to produce either.

The markets could care less about free wi/fi, free booze, Rocky Raccoon, shuttle buses or Q400’s. They want profits and a return on their investment.

Porter has not performed, even with the benefit of 2 years in a boom economy with a monopoly in Canada’s largest city’s downtown airport.

And that, my friend, is the bottomline.

[Troubleshot]

Realitychex,

your a real piece of work...I mean you really take the cake when it comes to WestJetter's on this site. I mean we get it, WestJet is a solid company....what is the motive here anyway? Do you feel it is your responsibility to take Porter (or any company) a down a peg or two? you do it time and time again here...you can't possibly act this smug towards your peers in the real world...can you?

I say we give a 4 year old company that is growing rapidly and trying to do the right thing (product-wise) a break. Porter is not Jetsgo. I think a company that has managed to crack "the Triangle" market in such a short period that does not give seats away deserves a bit of credit. From what I know Porter is thriving this year in YHZ, YQM, YYT, and YOW also.

It doesn't matter what we think, Porter will go as long as the shareholders believe in Deluce's plan. For all we know Deluce might have foreseen a tough road to profitability but had a plan in place to achieve that goal, now maybe he didn't foresee a recession but if he has the blessing of his shareholders and partners to forge ahead maybe he'll right the ship back on course...or maybe not, who knows? not you.

My brother owns a very successful advertising agency and he is a very well off young man, but guess who called me his first year in business to ask if I could help him pay his mortgage one month?...you see where I am going with this? Most new business ventures in the first years of operation are financially strapped and that is a fact. All it takes is belief from someone that it can work....not that it works right now.

[airliner]

It almost seems that someone is sick and tired of the CAREintee. So now its time to come home and kick the small company. You have too much time on your hands to worry about another company that has 0 effect on you and your ownership. Dont stress about Porter unless soon we will be called WestJet regional and we can all share in the losses of our company.

[airliner]

double post

[canuckjetsetter]

I think someone overdosed on the Kool-aid today

It's ok, though. I've heard if this happens, you can overcome the affects by sipping a Steamwhistle or two.

Make sure to let us all know how you feel in the morning.

[airliner]

In stead of Westjet Regional I like it the other way, Porter Economy. Nice ring dont you think

[Realitychex]

Realitychex,

your a real piece of work...I mean you really take the cake when it comes to WestJetter's on this site. I mean we get it, WestJet is a solid company....what is the motive here anyway? Do you feel it is your responsibility to take Porter (or any company) a down a peg or two? you do it time and time again here...you can't possibly act this smug towards your peers in the real world...can you?

I say we give a 4 year old company that is growing rapidly and trying to do the right thing (product-wise) a break. Porter is not Jetsgo. I think a company that has managed to crack "the Triangle" market in such a short period that does not give seats away deserves a bit of credit. From what I know Porter is thriving this year in YHZ, YQM, YYT, and YOW also.

It doesn't matter what we think, Porter will go as long as the shareholders believe in Deluce's plan. For all we know Deluce might have foreseen a tough road to profitability but had a plan in place to achieve that goal, now maybe he didn't foresee a recession but if he has the blessing of his shareholders and partners to forge ahead maybe he'll right the ship back on course...or maybe not, who knows? not you.

My brother owns a very successful advertising agency and he is a very well off young man, but guess who called me his first year in business to ask if I could help him pay his mortgage one month?...you see where I am going with this? Most new business ventures in the first years of operation are financially strapped and that is a fact. All it takes is belief from someone that it can work....not that it works right now.

If the investment communty thought Porter's plan could work, the May IPO would have been oversold at $10 a share and the stock would currently be trading at $14.

Taking $40 million of shareholders equity to buy marketshare isn't exactly an innovative plan. I'm sure BMW could sell more cars if shareholders agreed to accept margins of -16% including interest costs to subsidize losses. How many fabulous restaurants with exceptional service, dedicated employees and great food have gone banco because they didn't keep an eye on the bottomline? I can begrudgingly accept a year or perhaps two of losses, but this has gone on for almost 4 years now. At some point, management has to smell the coffee. Surely they owe this to the shareholders, if not their own workforce?

Show me a strategy that has a chance of succeeding and I'd throw $500k at it. I don't see it, at least not from current management. Trying to grow into profitability when there hasn't been an inkling of profitability since day one, even with monopoly status at the only downtown airport in Canada's largest aviation market does not exactly inspire confidence, especially with competition on the horizon.

For that reason, my startup airline investments are currently way south of the border.

[Valhalla]

Realitychex, you've garnered quite a response to your posts. Please understand that predicting the demise of the 3rd largest scheduled (sorry Jazz) airline in Canada will make a lot of people angry. If this was your intent, it was a douchebag move.

When Porter first started there was a 5 year plan. The initial phase is not yet complete, but will be soon with the full completion of the YTZ terminal in November.

Having said that, going forward, Porter will have to perform. I for one will welcome any competition that means increased exposure to the island airport since Porter will always have at least 90% of the capacity. Plus, Air Canada and Continental will be paying Porter at least just as much as the GTAA charges plus use of the business lounge.

[Realitychex]

Realitychex, you've garnered quite a response to your posts. Please understand that predicting the demise of the 3rd largest scheduled (sorry Jazz) airline in Canada will make a lot of people angry. If this was your intent, it was a douchebag move.

When Porter first started there was a 5 year plan. The initial phase is not yet complete, but will be soon with the full completion of the YTZ terminal in November.

Having said that, going forward, Porter will have to perform. I for one will welcome any competition that means increased exposure to the island airport since Porter will always have at least 90% of the capacity. Plus, Air Canada and Continental will be paying Porter at least just as much as the GTAA charges plus use of the business lounge.

The third largest sched airline in Canada? Who feeds you this drivel?

ASM's are the industry standard measurement of plant production. That's what passenger aircraft do. They create ASM's.

In the last reported quarter, and I have a feeling we won't be seeing any more disclosure for quite some time, Porter produced 220.9m asms. Jazz produced 1.23B asms. WJ produced 4.7B asm's and AC was about 3x that. I suspect Transat produces more sched ASM's in a week than Porter does in a quarter, but then, by your logic, Porter is bigger than Transat, and Virgin Atlantic as well....

What do you think will be cheaper over the next few years for AC and Continental? Paying off interest and principle of roughly $350,000 a month on a $45m facility in addition to all the operating costs and taxes on a commercial building, or paying some ground rent and some general terminal fees to a third party, just as they do at every other airport they serve on the planet? It'll be pretty tough for Porter to collect any more than about $30 for lounge use, $300 per domestic, $700 per international landing, $80 per gate hookup and about $7,000 per tail per year in aircraft parking charges. Remember, the taxpayers own the airport, not Porter.

Remember that the incumbents had 100% of the capacity in WJ's world prior to 1996. It's amazing what happens when prices drop 40% overnight.

[Troubleshot]

I think your callin the kettle black when discussing price drops there, chex...

[airliner]

Your views about Porter in 2007 were wrong and we are still around.

I Think you should invest your fountain of knowledge in your own company and help them resurrect your eastern triangle loads. Im sure those runs will be the first to be cut.

Thats right Westjet is only second best of two majors.

[altiplano]

done

[altiplano]

done

[airliner]

Compared to Georgian or PEI air.

[Realitychex]

Scoff all you want.

A business, ANY business, will not survive if it can not create margins higher than the cost of capital, which, these days, is about 4.5%. Cashflow isn't profit.

I'm sure Porter is a great place to work, it's a fine product and there is little doubt a Torontonian's are enjoying the shareholders generosity in subsidizing fares by over $40m in the last 4 years or so.

However, the sobering truth is that according to the data provided by Porter itself, (page 41 of the Final Prospectus), it needs to raise the average fare from $164.36 to $200.56, without losing any passenger traffic whatsoever, operating over the same asl, in order generate margins approaching the cost of capital, (in this instance, 4.83%). If breakeven is the goal, the average fare needs to move to $190.65.

With direct competition entering the marketplace at YTZ, I think most people, including the investment community, believe this is unlikely to occur. I can think of a direct comparison where a legacy airlines margin in head to head markets tumbled from +7% to -23% over the period of 18 months with the entrance of a competitor offering a fraction of the incumbents capacity. That's what competition does. I doubt it'll be much different as competition arrives at YTZ and Torontonian's using the d/t airport can make a choice based on both service and price for their travel plans to Ottawa, Montreal and Newark.

With ExpressJet's 2Q release earlier today, every publicly held airline has lifted their shorts to show the world what they achieved in the most recent quarter. If I were Porter, and I'd produced numbers to crow about, especially after the dismal 1Q 2010 numbers, and was still contemplating a public offering in the next short while, I'd make the numbers available to the public and start generating a buzz. Add a solid 3Q to the mix and you never know, an IPO could succeed in 4Q.

I'm from Missouri. Show me.

[pointyertoes]

Dear RealityChex/Bean/Obnoxious Westjetter:

I commend you on the depth of your market research. You clearly spend a great deal of time glued to your computer entertaining this hobby.
However, I cannot figure out why you continue to parrot out the same dire predictions and level such blunt criticism post after post about Porter and neglect to mention any similar (or greater) failing of other airlines.
For example: When was AC last profitable? Why do they not fail? Has is their slot allocation at T1 in YYZ always been percieved as equitable by other carriers? What is AC and WJ history regarding predatory market behavior, or better yet, corporate espionage (that was WJ wasn't it?)?

The more pressing question I have though, is: Why do you take such schadenfreude in predicting the demise of Porter and the loss of over a thousand jobs? Why the extreme arrogance?

I get what you're saying. Why not say it once and like a gentleman, wish us all well. Are we not all in the same industry?
It seems as though you have forgotten that there are people like you (only more likeable) behind your statistics.

Next time you pass a Porter crew in the terminal think about that (and if you have the balls, introduce yourself with your handle and real name).

Regards to fellow pilots wherever you work,

-PYT

[Realitychex]

There's nothing I'd like to see more than Porter become a successful, and that means profitable, airline.

I have a passionate distaste for company's that promise the world to their investors but produce nothing but red ink. I detest companies that are too obstinate to recognize their strategy is a failure and take bold steps to change it. These companies end up destroying the dreams of, not to mention ruining the career paths of their dedicated employees. Some of us have been around a long time and seen this over and over and over again.

For all the talk of success at Porter, the harsh reality is that they lost $11.5m in their first year, $3.32m in year 2 ended Aug 31 1008, (by any definition, a boom year), $15.8m in the 16 months ended Dec 31 2009, and $5.97m in the first quarter of 2010.

That sort of run rate, in ANY business, is not sustainable. What's worse, the appearance of direct, head to head competition is very unlikely to improve economic results.

The best way to eliminate criticism is to produce results. It's very hard to develop plausible criticism of a business strategy when it produces industry leading profits.

There's the challenge for Porter. Generate 4 or 5 quarters of boffo numbers and the critics will disappear. In my case, I won't disappear. I'll aggressively invest in the venture.

[CanadaEH]

As a consumer, I always wish new airlines the best. However, as an airline employee I really dislike airlines that consistently lose money because they do a disservice to the travelling public, competition, and worst of all - their own employees.

Realitychex has been consistent of his criticism towards any airline, business plan, or concept/idea that a) isn't profitable, b) isn't sustainable, and c) has a poor strategy. I respect the fact that Porter employees want to stand up for their employer, I would if I were in your position. However, don't look past the message only to shoot the messenger. There are numbers and facts that can't be disputed, regardless of who says it.

[airliner]

Reality you do have a one sided point, but what the general public does not know is our business plan. Robby Raccoon will tell you this is what was planned, and capital investors stick around and invest more. Yes Porter has lost, but in a rapidly expanded heavily marketed 4 year old company. I can tell you that in the past 3 months you would be hard pressed to find an empty seat on over 70% of our flights.
It would seem that our only down fall is a lack of aircraft.
Sustainability will come, but first its about consuming the market share of city center airport, and what ever run the q400 can reach before any other carrier has a chance.
According to you Its about the bigger picture.
Think outside the box.

[aileron]

The Public Investor: A Real Double Sided Sword

The reality is no matter how well or how bad we are perceived to be doing, the day we require funding from outside sources we will forever be under the microscope of investors or critics like Realitychex good or bad.

When we go public we will be influenced not only by general market forces; but skittish investors too.

However, when we do go public, the positive benefit will of course be the ability to forge the business ahead; invigorate our plans, and make others believers in our vision.

Here's to Q2, Q3, Q4, and so on!

[Realitychex]

Reality you do have a one sided point, but what the general public does not know is our business plan. Robby Raccoon will tell you this is what was planned, and capital investors stick around and invest more. Yes Porter has lost, but in a rapidly expanded heavily marketed 4 year old company. I can tell you that in the past 3 months you would be hard pressed to find an empty seat on over 70% of our flights.
It would seem that our only down fall is a lack of aircraft.
Sustainability will come, but first its about consuming the market share of city center airport, and what ever run the q400 can reach before any other carrier has a chance.
According to you Its about the bigger picture.
Think outside the box.

I've had a hand in starting up three very successful North American airlines over the past 15 years that currently have combined annual revenues exceeding $7b a year. I know a little about "thinking outside the box".

Any airline business plan that is predicated on engineering a monoploy out of the d/t airport in, far and away, the nation's largest passenger market that requires 5 years+ to generate positive earnings is not much of a business plan. Furthermore, it's a mortal lock those results were not part of the original plan, nor what investors bought into.

WJA was comfortably profitable in it's third full month, and in every year thereafter. jetBlue, the company launched out of the most competitive markets in North America, NYC, without a cosy monopoly situation, with three hub airports in the immediate vicinity, EWR, LGA and JFK. jetBlue generated an operating loss of $21.3m in year one, earned $38.5m in year 2, (12% margins), $104.9m in year 3, (16.5% margins), and $169m in year 4, (16.9% margins). Volaris remains privately held and it doesn't take a genius to figure out the impact that venture has had in the marketplace and it's prospects.

Porter has yet to report anything close to an annual operating profit, and will have to dig itself out of a $4.24m, (-8.6% margin excluding interest payments...), hole it made for itself in 1Q 2010 in order to be profitable for the year.

Although I am sure there will be claims that the venture has turned the corner, you can understand why skeptics will question this. Porter claimed to be profitable on countless occasions in the years leading up to the failed IPO, both quietly on Bay St and loudly in the media. Their own prospectus proved that the claims were, um, er, aggresively exaggerated. Once bitten, twice shy. The boy who cried wolf. You get the idea...

Next time, underpromise and over-deliver.

[Jack Klumpus]

Perhaps reality is an ex-porter employee?