April 15, 2013
Signing up a Canadian launch customer barred by existing rules from operating the aircraft at its hub airport may do little to quell critics of the slow-selling CSeries, but could bolster Bombardier's claims that it can penetrate new markets with its clean-sheet narrowbody.
Porter Airlines has placed a firm order for 12 CS100s, plus options for 18, for delivery beginning in 2016. But the order, worth $2.08 billion at list price, depends on the privately held airline persuading local and federal officials the CSeries is clean and quiet enough to justify lifting the ban—in place since 1983 and set to last to 2033—on operating jets from its lucrative hub at Toronto's downtown airport.
Billy Bishop Toronto City Airport is on an island in Lake Ontario, and the deal also depends on its runway being extended—also prohibited by the 1983 agreement—enough to enable the 107-seat CSeries to fly transcontinental distances and open new routes to the U.S. and Caribbean. Porter has until year-end to have both barriers rescinded, or the order will lapse.
When news of the CSeries deal broke a day before the official announcement on April 9, industry analysts were surprised and baffled by the move, given Porter's dependence on a hub that bars jets. “This came completely out of left field,” says Canadian aviation consultant Rick Erickson. Analysts speculated about a change in business model and the possibility of Porter opening a second hub at Toronto's main Pearson International Airport or, more likely, in Montreal.
But that would have placed Porter in direct competition with Air Canada and WestJet, both with larger networks, better frequencies and billion-dollar war chests with which to kill off an upstart competitor. And a price war would not fit Porter's brand, built on offering a premium service targeting business travelers. “[The airline] has a recognized brand that people associate with the convenience of the island airport,” says Cameron Doerksen, an financial analyst with Canada's RBC Capital Markets.
Instead, Porter will attempt what some believe is impossible: to persuade the signatories of the 1983 “tripartite agreement”—the Toronto City Council, federal government and Toronto Port Authority—to lift the ban on jets and extend the runway. “They can lobby to get the rule restricting jet operations removed, but I would expect pretty fierce opposition,” says Doerksen.
“As an independent operation, it is up to Porter to pursue its own business plan for the benefit of its customers, shareholders and employees,” states the Toronto Port Authority. The airport operator says it will not consider any change “until a determination is first made by the elected representatives on Toronto City Council regarding Porter's proposed changes to the 1983 Tripartite Agreement.”