Bravo Porter!
Porter: the little airline that could
Porter Airlines was supposed to flop. But founder Robert Deluce has beaten back cutthroat competition, hostile locals and political foes to pose a serious threat to the big airlines in his market niche.
Brent Jang
Globe and Mail Update
Published on Friday, Nov. 20, 2009 7:44PM EST
Last updated on Saturday, Nov. 21, 2009 10:14AM EST
With a hard hat, safety vest and steel-toed shoes setting off his elegant suit, Robert Deluce surveys the battle scene with satisfaction.
It's only a vast expanse of concrete floor right now, but it will soon be the new terminal of Canada's fastest-growing airport. And it is here, at Toronto City Centre Airport, that Mr. Deluce, the chief executive officer of Porter Airlines Inc., plans to triumph doing exactly what has felled many a small airline – competing head-on with Air Canada.
Although Porter is tiny compared to its rival, Mr. Deluce, 59, has one particularly sharp stone in his sling. He's fighting the dominant player in Canada's skies with a little monopoly of his own, courtesy of the Toronto Port Authority.
The fight will intensify over the next year, both on the tarmac and in court. Air Canada's Halifax-based offshoot, Jazz Air, will likely start flying from the island airport itself in 2010, albeit at Mr. Deluce's indulgence.
Next year is also when a federal court is likely to move on a long-simmering complaint filed by Jazz that it was unilaterally voted off the island by Porter in 2006.
But the stakes are not limited to Toronto for either Air Canada or Porter, a short-haul specialist. In the barely three years since it ran its first flight from Toronto to Ottawa, privately owned Porter has evolved from a local curiosity to a success, adding destinations along the way. It overtook WestJet as the No. 2 carrier in the crucial battleground of the Toronto-Montreal-Ottawa triangle this spring.
In the coming months, it plans to encroach further on the turf of the two biggest Canadian airlines, adding flights between Thunder Bay and Winnipeg, as well as more American destinations. And if that goes well, Porter could eventually push all the way to B.C.
Mr. Deluce has gotten this far by innovating in an embattled sector whose history is littered with the corpses of companies that challenged Air Canada. Now, as the island airport expands and Mr. Deluce plots his moves for the West, he stands to realize his lifelong ambition to be a national player in the skies.
‘Little guy from Timmins'
For a man who mingles with the Bay Street elite, Mr. Deluce does an impressive job of playing outsider, the northerner who's challenging an entrenched old-guard colossus.
“He's the little guy from Timmins, Ontario. He's got that folksy Jean Chrétien way about him,†says Rick Erickson, a Calgary-based aviation consultant.
Mr. Deluce comes from a family with deep roots in aviation and some history with Air Canada. Growing up in Northern Ontario, Mr. Deluce and his six brothers all obtained their pilot's licences as teenagers. Their father, Stanley, who had been a fighter pilot in the Second World War, ran a charter carrier.
The island airport has been on Mr. Deluce's mind since his high-school years, when he was sent to board at St. Michael's College in Toronto. He remembers skipping out of class early some Friday afternoons in 1966 to take flying lessons at the harbour airport. Back then, he recalls, the stately Royal York Hotel, all 28 storeys of it, dominated the Toronto skyline.
Even then, Mr. Deluce recognized the potential in the airport's location – so close to the action of downtown, where a cluster of office skyscrapers was emerging.
Over the years, the Deluce family added regional carriers Austin Airways and Air Ontario to their holdings. The family sold part of their stakes in those carriers to Air Canada in the late 1980s, and unloaded their remaining interests in the early 1990s.
In 1999, Mr. Deluce led a group that unsuccessfully tried to acquire the regional operations of Air Canada and Canadian Airlines International Ltd. While Mr. Deluce's ambition was thwarted, the defeat set him on the long journey to found Porter.
Porter watchers say they aren't fooled by Mr. Deluce's polite manner and outsider act.
“He is deliberately self-deprecating to conceal a sharp mind well-attuned to influencing others,†says Douglas Reid, a Queen's University business professor and former port authority director. “He naturally attracts support because he's the northerner, the outsider, the striver – even though he's at core an insider in Corporate Canada.â€
Porter's board includes Senator Pamela Wallin; David Wilkins, who formerly served as U.S. ambassador to Canada; and Jacques Demers, a high-ranking corporate lawyer who heads up a key investment unit of the Ontario Municipal Employees Retirement System, one of the country's largest pension funds.
Porter's shareholders include some of the smartest money on Bay Street: OMERS' Borealis Infrastructure Management Inc. (which holds 21.4 per cent of the shares), EdgeStone Capital Partners (18.3 per cent), GE Asset Management Inc. (14.6 per cent) and Dancap Private Equity Inc. (3.1 per cent).
But the largest block of shares, 42.6 per cent, is held by Regco Capital Corp., the vehicle of a group of investors led by Mr. Deluce, veteran Bay Street money manager Ira Gluskin and Donald Carty, Porter's chairman, with whom Air Canada clashed frequently when he was CEO of American Airlines Inc. and Canadian Pacific Airlines.
Peter Power/The Globe and MailPorter’s fuel-efficient Q400s don’t need as many passengers as the bigger planes used by Air Canada and WestJet to post an operating profit.
Samuel Duboc, founder and president of EdgeStone, was a key convert to the Porter concept. “We were the first investor in,†says Mr. Duboc, a frequent flier and Porter director. “The first thing that attracted us was Bob.â€
Mr. Deluce has a tenacious streak that shouldn't be underestimated, Mr. Duboc adds. Neither a losing battle to construct a bridge to the airport nor the onset of the recession have fazed him. In the fall of 2008, Porter's traffic out of New York collapsed. “Lawyers, business people and accountants quit flying for a while, but Bob Deluce stayed very true to his expansion strategy,†Mr. Duboc says.
Porter's backers realized early on that there was an opening in the market after Air Canada emerged from bankruptcy protection in 2004. Frequent fliers in Toronto were ready for a spruced-up flying experience, not to mention savings in cab fares: A taxi ride to Pearson International Airport from the heart of Toronto's business district typically costs around $50, compared with $10 to the ferry terminal that serves the island airport.
It was a natural step for Mr. Deluce to tap the frustrations of the corporate crowd. His personal life is interwoven with that of his key customers. His wife, Catherine, founded Chestnut Park Real Estate Ltd. in 1990, a leader in the carriage trade in both Toronto and the cottage haven of Muskoka. The couple make the social rounds whenever their schedules permit, and on these occasions, Mr. Deluce is ever the Porter ambassador. Two of the Deluces' sons work at Porter: Michael is executive vice-president and chief commercial officer, while Jason works in IT.
