Might Porter Air’s business crash?

Politically connected air carrier chooses not to disclose its financial results: “they are buying love with amenities that cost extra money while they are charging fares that are, on average, well below competitors’ pricing”—Analyst

By Brian Iler, CommunityAIR –

burningbillsFor the second month in a row, Porter has reported significantly lower sales. October’s sales were 7.5% lower than last year’s.

Sales (in revenue passenger miles) dropped from a high of 99.1 million passenger miles in August to 77.2 in September, and to 74.2 in October – a drop over the two months of more than 25%.

By comparison, last year, its sales remained steady through those months, at 81.6 in August, 79 in September, and 80.2 in October, 2011.

Porter has always struggled to fill its seats – load factors (that percentage of seats that are sold) for Porter have always been in the 50-60% range – exceeding 60% only over the summer months, when it offers huge discounts for vacationing flyers. This year, load factors have fallen from 74.5% in August to 62.3 in September, and to 59.4 in October.

By comparison, WestJet and Air Canada consistently report load factors in the 80% range.

While Porter states that Hurricane Sandy affected its result for October, analysts were having none of it: The Bean, a pseudonym for a well-known aviation expert had this to say:

I don’t buy into Porter’s Sandy excuse for lighter loads. It’s nonsense.

The planes did not fly to [Newark, Washington Dulles, or Boston] so no available seat miles or revenue passenger miles were generated during the 3 or 4 days and therefore the impact on load factor would be, for all intents and purposes, negligible.

Besides, there would have been an inordinate flurry of activity in the day or so before Sandy to get home before it hit and loads should have been huge as service resumed.

For Porter, flying fewer available seat miles will cause an increase in cost per available seat mile and will contribute to higher than normal losses for Porter for the month.

Added Dagger, another knowledgeable commentator:

“My read on Porter is that they are beloved by most who fly it, but of course, they are buying love with amenities that cost extra money while they are charging fares that are, on average, well below competitors’ pricing.

“Their load factor reflects an inability to construct a hub at the Island Airport – there just isn’t enough feed from Montreal, Ottawa or other markets, at good enough fares, to make this work.”

And while people living or doing business in Downtown Toronto tend to rave about the overall package, that’s only a small portion of the total GTA market. I took a group to Chicago last month and everyone but one guy living out in the Beaches was closer to Pearson than to [the Island Airport]. Toronto is massive sprawl, and for all the condo construction Downtown, and for all the office towers, people underestimate just how many people live and how much business is done in Pearson’s natural catchment basin outside the Bloor/Waterfront Downtown quadrant.

Is this evidence that Porter’s demise is nigh?

Unlike WestJet and Air Canada, Porter chooses not to disclose its financial results. The only time it did, in its aborted IPO, the news was not pretty:

Its balance sheet, revealed that a working capital deficit of $11,846,000 as of December 31, 2009 deteriorated to $33,467,000 by March 31, 2010.

Furthermore, net income of $455,000 in Q4, 2009, slid in Q1 2010 to an operating loss of $5,972,000 in Q1 2010. That loss over the first three months of 2010 was $1,363,000 greater than the total loss for all of 2009. Porter’s accumulated deficit, as at March 31, 2010, was $44,505,000.

There is nothing in the figures reported for October 2012 that suggests Porter has turned the corner on viability.

Should it occur, Porter’s financial failure would, of course, be great news for those who value the recreational potential of our waterfront, and for those thousands who now live on the waterfront, and are constantly inflicted with Porter’s noise, fumes, and overwhelming traffic.