Porter's IPO

[ivanhoe]

http://www.theglobeandmail.com/globe-in ... le1572514/

[Jastapilot]

BNN-Streetwise is talking about Porter. They're delaying their IPO by at least a week because of the stock market conditions. The BNN comentators also mentioned the stock is overpriced, and questioned why anyone would buy Porter since their monopoly is ending... etc.

[yycflyguy]

More fuel for the fire.
http://www.financialpost.com/story.html?id=3070845

[twinpratts]

[ivanhoe]

Porter Aviation Holdings Inc. plans to delay the date of a public offering of its shares and will drop the price as well after investors failed to jump on the original pricing.

The Toronto Island airline now intends to price its initial public offering at $5.50 a share, down from between $6 and $7 a share previously, a source familiar with the matter said.

The offering, which was originally planned on or around May 21, had already been delayed a week due to the turmoil in the market created by the Greek crisis. It will now occur on Tuesday, due in part to the long weekend in the U.S., the source said.

Those familiar with the deal remain convinced there is interest in the offering, which is in part how the new price was determined.

Porter still intends to raise roughly $120-milllion through the offering, which would imply roughly 21.8 million shares would be sold, with an overallotment of up to 15%.

[airmech07]

soon Jazz will by Porter

[airliner]

I think you mean BUY, right. I doubt it, lets just see what happens.

[eeffoc]

soon Jazz will by Porter

You mean, Porter will buy Jazz, don't you.................

[twinpratts]

soon Jazz will by Porter

You mean, Porter will buy Jazz, don't you.................

Like Jazz has the money to buy them...

[Squid]

from realitychex, (I'm not buying any stock) pretty good assessment IMO


Porter launched its high cost, low fare strategy in 1Q 2010, resulting in higher loads, but forcing yields down 15.7% and rasm down 5.1%.

Oh dear. Look what happened to the BELF. It shot up to 54.62%.

The delta between their l/f and belf is now 7.58 percentage points, second worst in North America after AMR at 7.72% points.

Watch for that BELF to continue climbing through the year. Competition at YTZ will knock the average fare down at least $20 to $144 and both fuel and maintenance will increase.

Porter's loads will increase to about 53%, but their BELF will shoot up to about 62.5%. Their margin, including interest will wallow between -15 and -18%, with quarterly losses in the $6.5 to $8m range.

The stock will sink down, down, down. Watch for a collapse the nano second the stock becomes unrestricted and original investors can bail and all those shares flood the market.

At $5.50 a share, they need 46 cent earnings with a 12x multiple, (and I don't know who would dream up 12x for an airline that loses money hand over fist), to support the stock price. That means net earnings of close to $14m. The best quarter they've ever had was $455,000 profit, which is tantamount to a rounding error. They've lost $10.58m net in the past 5 quarters alone.

If there is any more obvious shorting opportunity on the planet, I'd like to see it.

If I were a Porter Captain, I'd be keeping my career options wide open.

1Q 2010

Available Seat Miles 220,868,900
Revenue Passenger Miles 103,897,802
Load Factor 47.04%
Delta between BELF and actual L/F -7.58%
Expenses $53,308,000
Interest Expense $3,667,000
Revenues - from all sources $49,070,000
Operating Earnings -$4,238,000
Op Earnings incl interest -$7,905,000
Operating Margin -8.64%
Operating Margin including interest -16.11%
Cost per ASM $0.2414
Cost per ASM including interest $0.2580
Yield per RPM $0.4723
RASM $0.2222
Profit/Loss per ASM (incl interest)-$0.0358
1Q break-even load factor 54.62%
ASL 370

[mattedfred]

soon Jazz will by Porter

You mean, Porter will buy Jazz, don't you.................

Like Jazz has the money to buy them...

sure do

Jazz has paid out close to half a billion dollars to unit holders in the last 5 years.

Jazz has provided senior executives with million of dollars worth of Jazz units.

Jazz recently invested $15 million in Pluna.

[yycflyguy]

sure do

Jazz has paid out close to half a billion dollars to unit holders in the last 5 years.

Jazz has provided senior executives with million of dollars worth of Jazz units.

Jazz recently invested $15 million in Pluna.

Exactly... so that money is long gone.

[Valhalla]

If there is any more obvious shorting opportunity on the planet, I'd like to see it.

If I were a Porter Captain, I'd be keeping my career options wide open.

Thanks for the career advice... A little short sighted though, in my opinion.

Nonetheless, I'd like to point out a couple of things that never seems to get mentioned in the papers regarding the IPO.

1. Porter has been in major acquisition mode up until now, especially 2009. Not only did the fleet double in size, but Porter also built a terminal building. This year will be the first year with a proper terminal and a proper fleet of airplanes. There will be roughly 1.5 million passengers passing through YTZ in 2010, up from 26,000 annually when Jazz was evicted in 2006. There has been a ton of Porter money spent marketing the airport to the public to attract all of those passengers, which is why now all of a sudden Air Canada wants back into the airport they wanted nothing to do with 4 years ago. When I started in 2006, I was told it would take 5 years to realize the potential of the island airport. We are now in year 3.

2. If competition were to come to YTZ, it would mean additional revenue for Porter. As a condition of using the slots at YTZ, any carrier would first have to negotiate use of the terminal, lounge and gates. Guess who ownes the terminal, lounge, gates, fuel tanks, fuel trucks, all the hangars (except Vicktor's), etc... I would personally welcome Air Canada, or anyone else (except maybe Colgan) as it would mean additional revenue per passenger. Plus, this may be a surprise to some, but Porter already competes with Air Canada!

[Squid]

I'll stick to realitychex. I think that argument is weak because that's not going come anywhere near the posted losses. If this ipo fails it's gonna be a big hill to climb my friend.

[Jastapilot]

Valhalla I admire your optimism, but you need to see the writing on the wall for what it is. Porter's numbers just don't add up, the rest is just wishful thinking.

[Troubleshot]

Jasta, What writing? The company is 3 years old and in a major growth phase. What will you say when say WestJet has back to back losing quarters ( it will happen some day) will you say the writing is on the wall? or it was just a bad half of the year?

[Squid]

the difference is 1 billion in the bank. the best q ever for porter was 400 plus k. Add in some competition and a weak offering (if it goes at all) that's a lot different then our friends out west.

[Valhalla]

My optimisim stems from believing in a concept that is currently in its infancy. I believe that YTZ will mature to a very busy airport (much like London City). And any and all commercial traffic at YTZ will benefit Porter, in much the same way as if Pearson terminal was owned by Air Canada.

The Porter IPO is not just about the airline. The IPO is for the parent company which owns the airline as well as all the airport assets. It's really about wether or not you think the island airport is commercially viable.

As for realitychex, or any other American internet blog you may like to read, sometimes you've got to look beyond the numbers to see the potential.

[Squid]

Better start eating crow Val

Valhalla wrote:

There's an awful lot of assumptions there. Wait till the end of the year when the employee profit share numbers comes out - it's audited by a third party and is currently projected to be around 10% of years salary for 2008. And by the way, the Q400 breaks even around 25-30% load factor (the fuel surcharge more than takes care of increased fuel costs), so even if 36% was correct - which it's not, it's still a money making load.

But people have been predicting the demise of Porter since before it started, so I'm sure this one will not be the last.

I've been there at Porter since day 1 and have seen the passenger numbers grow to where I can confidently call bullshit. And I'll be enjoying my profit share cheque at the end of this year, just like I enjoyed my bonus last year. That will be the only hard fact regarding profitablity that you're going to get because Porter is not obligated to submit financials being a private company.

The "hard facts" as you call it, are loosely based, and don't include flights that departed and arrived at airports away from YTZ. For example, in 2007, as the numbers are based, we operated YHZ-YUL flights and YHZ-YOW flights throughout the year that we're packed - probably our busiest route.

And in case you really need an education regarding your question as to why Q400's aren't everywhere (I did catch your sarcasm, by the way) - the Q400, like every other commercial turbo-prop, was designed for and make most economic sense on short routes where a jet spends far more of its time in climb than cruise (in case you didn't know, a turbo-prop is much more fuel efficient at low altitudes versus a jet.) But on longer legs, the fuel burn at higher cruising altitudes of a jet versus turbo-prop start to make more sense. Maybe you should find out why Horzon, in this new world of $150/barrel oil, is trading in their brand new CRJs for an all Q400 fleet?

[Valhalla]

Allright... you got me. But I am still an optimist. And that comes form working at the island, and seeing what's happening there first hand. Now don't tempt me into digging into your hundreds of posts...

[CanadaEH]

As for realitychex, or any other American internet blog you may like to read, sometimes you've got to look beyond the numbers to see the potential.

Potential is one thing, fact is another. Deluce has been talking Porter up to be something it's not: profitable. In fact, the numbers have been broken down and Porter is one of the worst performing airlines in all of North America, in terms of margin.

[Troubleshot]

I think you guys are freakin crazy to be puttin down a 3 yr old company.....sure an airline is a easy way to lose money but come on...

the first couple of years your still hiring like mad and training people ($$$), still buying very expensive aircraft, support equipment, building a very nice terminal, opening new routes, etc...my opinion on it is lets just wait for the dust to settle before to see what the books say....I think we will all be surprise in 2 years at the #'s. Contrary to popular belief WestJet is not the only company that can make money in Canada, anyways time will tell.

[rudder]

Porter Airlines is using the "If you fly it, they will come" business model. Problem is that generally passenger traffic levels in Canada have been stagnant so there is an implied need to strip passengers away from existing carriers. Capacity growth is not a panacea for a lack of traffic. Unit costs go down but so do unit revenues (just take a look at Q1).

[Jastapilot]

Honestly I think Deluce didn't intend on owning porter this long. Neither Air Canada, Westjet or Jazz took the bait last year.

[mattedfred]

Would RD have been able to secure the same level of investment capital if he had chosen to purchase/construct or assist with the construction of everything except the airline operation? (i.e. terminal, FBO, ferry boat etc)

Why would anyone have invested in such a venture when the only airline servicing the island was reducing capacity to near zero?

Is RD pretty confident that he can sell or lease his Q400's for a profit?

Has RD creating demand for slots at YTZ by deciding to run his own airline operation?

Would the slots have been as desirable without Porter Airlines?

I love PD. I commute on them around 8 times per month.

However, I think the airline operation will be the first thing that PD spins off while retaining the real estate and support services component.

If JALP purchases PD then at least the merger will be DOH. What is the WJPA's position on pilot mergers?