Porter says more competition could lower prices
Published Wednesday, June 23, 2010 6:35PM EDT
TORONTO - Porter Airlines' CEO says a decision that could give two larger carriers access to the Toronto Island airport also gives the regional airline new flight slots, which it could use to add destinations and pressure competitors into lowering prices.
"We have typically seen base prices drop by at least 50 per cent when we enter a new market and I think that will probably continue to be the case," Robert Deluce said Wednesday after Air Canada (TSX:AC.B) and U.S. carrier Continental got initial approval to fly into and out of Toronto Island's airport.
"It's a very pro-competitive market. Our presence in the marketplace has been highly stimulative in terms of providing new competition and that benefits all travellers."
Deluce said he's not irked by the presence of competitors on the island, adding that he believes privately owned Porter has earned customer loyalty, and already competes with Air Canada in every market the smaller carrier serves.
The Toronto Port Authority said Wednesday that an independent consulting firm has recommended allocating 44 of 90 available landing slots to Porter Aviation Holdings Inc., the only existing carrier at the Billy Bishop Toronto City Airport.
That would bring Porter's total up to 156 slots from its historic usage right to 112 daily slots. It currently uses about 140 daily slots -- allocations of time in which a company can fly in and out of the airport.
"It's just slightly less than we thought we would have gotten but it's not far off. We thought we would have got 50 per cent of the 90 slots being made available," Deluce said.
"We're getting 44 out of the 90 and that's probably fair ball, given the fact that it's pretty hard to give out only a half a trip a day. You need two slots to do a return flight."
Airport Co-ordination Ltd., the British consulting firm hired to help with the assessment, also recommended giving 30 slots to Air Canada and 16 to Continental (NYSE:CAL), a major U.S. carrier based in Houston.
The new carriers will be required to sign a formal deal with the port authority before they can use the airport. The carriers are expected to use the island airport once a new $50-million terminal is completed at the end of this year.
Porter, which began operations in 2006, currently runs a fleet of 20 aircraft flying short-haul flights within Canada and the United States.
The airline has been expanding rapidly, recently adding routes to Sudbury in northern Ontario and to Moncton, N.B.
Deluce said the airline would likely add frequency to existing routes, as well as new destinations. Although the airline hasn't announced anything official yet, Deluce noted that they have indicated Philadelphia and Washington, D.C. were on its list.
Porter, which promotes itself as a more convenient alternative to other airlines due to its location near Toronto's downtown core, recently suspended an initial public offering due to poor stock market conditions.
The airport along the Lake Ontario waterfront has been growing its operations since Porter began flying from there four years ago. That growth has helped ease some of the congestion faced at Toronto's major airport, Pearson International, just northwest of the city.
Mark McQueen, chairman of the Toronto Port Authority said Wednesday's announcement was an important milestone in its goal to diversify the number of destinations and airline carrier options for travellers.
"Over time, we hope our carrier partners will add a series of new destinations, which will further enhance the value proposition of Billy Bishop Toronto City Airport," he said.
Peter Fitzpatrick, spokesman for Air Canada said Canada's largest airline is pleased about the progress made on slot allocations and its re-entry to Billy Bishop.
"We are anxious to resume operating at this facility as soon as possible to better serve our clients who wish to fly to and from the Toronto city centre."
However, he added, Air Canada is seeking a total of 74 slots to allow it to fly 15 round trips a day to Ottawa and Montreal, and seven a day to Newark, N.J., a hub for flying into New York City.
In March, Air Canada won the right in Federal Court to challenge the port authority's allocation of take-off and landing slots at the Island Airport. The airline accused the port authority of giving Porter an "unfair monopoly."
Jazz, Air Canada's regional partner, had operated out of the island airport until 2006, when it was evicted from its terminal by a company owned by Porter founder and CEO Robert Deluce.
The Federal Court hearings will be carried out on July 6 to 8 to determine whether the proposed slot allocations and the port authority's earlier decisions have been undertaken fairly.
Shares in Air Canada fell three cents to $1.76 apiece Wednesday on the Toronto Stock Exchange.
In trading on the New York Stock Exchange, Continental stock fell five cents to US$23.13.