So far, 2011 has been a very good year for Robert Deluce and Porter Airlines.
February 24, 2011 By Peter Pigott
So far, 2011 has been a very good year for Robert Deluce and Porter Airlines. Scheduled to begin in February, Air Canada’s plans to return to Billy Bishop Toronto City Airport have been delayed – and in January, a judge ordered the carrier to pay $1.8 million in legal fees to Porter and the Toronto Port Authority. To see if they were popping the champagne, Wings correspondent Peter Pigott sat down with Porter’s president and CEO to get his perspective on everything from Queen Elizabeth II to making air travel fun again.
|Robert Deluce, president and CEO, Porter Airlines, with Queen Elizabeth II crew. PHOTO: porter airlines
Wings: What made you start an airline from Billy Bishop Toronto City Airport, which was barely known then?
Deluce: I learned to fly at the airport as a high school student, so I had a familiarity with Toronto City Airport – Toronto Island Airport, as it was known then. I watched it as a place that was waiting to be developed. It had potential and the opportunity came along in 2005/06 when we entered into agreements with the Toronto Port Authority (TPA) that would give us the necessary foundation blocks with which to build a really good airline. We moved ahead and haven’t regretted it. It’s been a very positive experience.
Wings: Let’s talk about your relationship with Air Canada. You are suing them right now for $5 million. Do you really want to fly them or is it the principle of the thing? Or is this a publicity stunt that Richard Branson would pull – David vs. Goliath?
Deluce: In regard to the personal lawsuit, it’s a case of ensuring that Air Canada is taken to task with respect to honouring the contract that dates back to my original sale of Austin Airways to them in 1986/87. It’s not so much about me flying with Air Canada, but about Air Canada being unhappy about the millions of passengers now flying on Porter. I think on their part it’s a bit of a strategic move to try to bully and influence us. The good thing is, I’m not paying a lot of attention to this or their tactics.
Wings: What about your relationship with the Toronto Port Authority (TPA)? You came in here in 2006, built the airport up, brought publicity to the airport, and now because the TPA is a profit-making body, it’s allowing Continental Airlines and Air Canada in. How do you feel about this? I know that it’s only 16 slots and 30 slots to Porter’s 156, but Porter’s strength was its monopoly at Billy Bishop Toronto City Airport.
| Air-to-air shot of Porter’s Q400 aircraft with Toronto’s downtown in the background PHOTOs: porter airlines
Deluce: Other carriers could have chosen to use the airport at any time since we’ve been here, but we recognized right from the beginning the value of this airport and how well it would work as main hub for short-haul regional destinations. The fact others are now seeing the value of this and are contemplating adding services here we take as a compliment. We have remained focused on providing customer service no matter who else comes in – that’s not going to change. Location is one thing, but providing a different level of service is quite another. I suspect Continental and Air Canada will introduce this airport to new passengers, who will ultimately end up being Porter fans.
Wings: Continental Airlines has just merged with United Air Lines – their passengers who fly from here to Newark will have access to the world’s largest network. How is Porter going to compete?
Deluce: It’s an opportunity rather than an obstacle. Our business model is built around origin and destination traffic and we have been able to generate a significant amount of online traffic. One such instance is Thunder Bay, where we now have passengers that not only come to Toronto’s downtown airport, but connect to Ottawa, Montreal, Quebec City, Halifax, Boston and Chicago. Passengers coming out of our U.S. destinations will also see there are opportunities to connect with Porter out of this airport to places that we provide service to but our competitors like Continental do not. Our frequency out of Newark is very strong – 11 flights now that we hope to eventually grow to 14-15. We can hold our own quite nicely to anyone in that market. Regardless of who comes in, we will continue to remain focused on a good solid level of customer service – that is what will differentiate us.
Wings: What about the “mythical” rail link to Pearson? When it does happen, is it going to hurt both the TPA and Porter? What will Porter do?
|Several prominent dignitaries have flown with Porter Airlines in recent months, including Queen Elizabeth II and Prince Phillip. “It was a really special day for everyone,” said president/CEO Robert Deluce. PHOTOs: porter airlines
Deluce: Having a rail link to Pearson and a viable downtown airport aren’t mutually exclusive. Any time you can strengthen the transportation network by connecting to the airport with a rail link, that’s a very positive thing. We always thought of that rail link as being neutral to positive in terms of its impact on us. We appeal to those who reside in the downtown Toronto area. Nothing is going to change – we will still be an airline that services the downtown core. The simplicity of this airport is that you can leave from the downtown core in the complimentary shuttle bus to be accommodated here at the airport in a pretty nice lounge, and then enjoy a high level of superior in-flight services. It all adds up to a good value proposition, one our passengers will continue to appreciate.
Wings: Some of your recent passengers were Queen Elizabeth II and Prince Phillip. They flew Porter to Kitchener-Waterloo. What was that like?
Deluce: It was a real honour – a really good day for everyone. We did nothing special to the aircraft – I think we removed two seats just for a little bit of extra room, but there were some 40 other passengers who flew on the aircraft, too. Her Majesty was very much aware that the airport had once been called Port George VI Airport for the king, who, of course, was her father. Prince Phillip is a pilot himself and was particularly attentive – he had the map out and was looking at various landmarks as they flew to Kitchener.
Wings: The Q400 is a great aircraft, but has it reached the end of the envelope? In capacity and range how far can Porter take it? Any truth to the rumour that you might be upgrading to the CSeries?
Deluce: Bombardier are good partners and we always see benefit in being in such close proximity to the main assembly plant at Downsview. On their part, they don’t hesitate to bring some of their key customers through this airport. Sometimes, I think we are an extension of their sales department. It works for them and it works for us. As to the CSeries, we are very focused on the Q400. It’s a great airplane – there a lot of places we can access from this airport with the Q400 and, in the short term, that’s where our attention is. There are advantages to having just one type of aircraft and we have an order in for 10 additional Q400s; the first will be arriving in April. At this point, we are focused on an 800-mile radius out of Toronto, Montreal, Ottawa and Halifax, and when we look at cities within this circle we have a lot that we can go to. The Q400 is remarkably quiet – the little Cessna I occasionally fly from here is 10 times noisier.
Wings: One of the reasons for the Initial Public Offering (IPO) was to purchase new aircraft. But the IPO was dropped in June in favour of private financing. You cited “unfavorable market conditions for an IPO.” Could you elaborate?
Deluce: Timing is everything with IPOs: we had a good road show and we had a lot of interest but in that May/June time period there was a lot of uncertainty, the market itself was pretty rocky. We might have been able to close the transaction had we chased the price to some extent but our own view is we didn’t need to do that. We were able to do an internal equity raise and that satisfied our short-term equity requirements. We will probably come back in the first half of 2011 to examine whether we want to do a further private equity raise or whether we want to look at a further IPO. Market conditions will dictate what we will do. In hindsight, it was the right thing to do in withdrawing from the market. In the short term we are in good shape. Our resources are such that we don’t need to be in a hurry to do that and when we do it we will do it right. It’s not something we will think about until the first half of 2011.
Wings: Fuel prices continue to rise – what effect will that have on your expansion?
Deluce: Fuel prices over the last couple of years have been a bit erratic, but the good thing about the Q400 is even when fuel prices approached $150 a barrel back in 2008, our strategic advantage over our close competitors actually increased. The fact we have an aircraft that burns 23 per cent less fuel per seat mile than does the aircraft flown by our competitors gives us a significant advantage.
Wings: When I flew Porter, I couldn’t help but notice that the flight crew were both female. How many female pilots are there? How many people work for Porter altogether? I might add that Porter staff are wonderful people – I love flying the airline because of them. Porter is the way flying used to be when I was a kid.
Deluce: Porter employs 204 pilots, of which 15 are female and that is 7.4 per cent of the total. The total number of our team members will move to 1,200 this year. As to flying as it used to be – the retro style uniforms of the flight attendants, the pill box hats – all these things bring you back to the days when flying was more fun.
Wings: But Porter staff is non-unionized. Why? How do you keep them satisfied?
Deluce: A very high priority is hiring the right people and creating an environment where individuals feel they don’t need to have a union in order to represent them. Ultimately, the team members and employees will decide if that’s something they want to do. We go out of our way to make sure we listen to them and that they’re well respected and well represented. We feel quite comfortable with the relationship and our employees feel the same way. The front-line team is very enthusiastic and happy; they are largely the ones who deserve credit for the high level of customer satisfaction that we enjoy with all our passengers. A recent Ipsos poll survey showed we have an 86 per cent satisfaction rating by passengers with the service they’ve received. And that compares favourably with our competitors, whose satisfaction rating is significantly lower.
Wings: The traffic statistics that Porter released last month show a year-over-year load factor improvement of 8.2 points to 55.8 per cent from 47 per cent. What do you attribute that to?
Deluce: In 2009, our break-even load factor was 49 per cent. Now, that’s the lowest break-even load factor of any airline in North America. It’s a combination of the aircraft, the airport and the level of service. But it works and it gives us a very big advantage over our competitors, many of whom have break-even load factors like WestJet at 71 per cent to Air Canada at 83 per cent.
Wings: Let’s talk about the future. What do you see for Porter 10 years from now?
Deluce: Definitely more organic growth and taking advantage of those destinations, which are within close proximity of our focus cities. More Q400s are part and parcel of what we can expect and whatever destinations we go to we shall maintain a close attention to detail. In the last year, we’ve added Myrtle Beach, Sudbury and Moncton, and increased service to places like Ottawa, Boston and Mont Tremblant. So, it’s not only adding destinations but increasing frequency as well. Our emphasis is on speed, convenience and service. Given the recent recession and, more importantly, the strategic investments we have made since 2006 in purchasing $500 million worth of aircraft and building a $49-million passenger terminal in Toronto, the bottom line profitability for 2010 should be positive and in line with our expectations. These investments are now paying off as routes mature, passenger numbers increase every month and the economy continues improving. We will continue to hire people as we grow, so I think there will always be a mix of experienced and new people with enthusiasm. We put a lot of effort into maintaining a corporate culture that lends itself to service – that will always be an important part of our growth.
Wings: I have written about the airline business in Canada for many years and know your family’s contributions to it. Your father must be very proud of you.
Deluce: He was. My dad passed away last January and he was certainly proud of what we are doing at Porter. He flew with us a number of times and he always had a little bit of advice – as you would expect of any father. On our part, we were lucky to have had him around as long as we did. He was an inspiration to us in this business.