UPDATE 3-Canada's Porter Airlines plots big expansion with Bombardier jets

Wed Apr 10, 2013 5:18pm EDT

By Susan Taylor and Solarina Ho

TORONTO, April 10 (Reuters) - Canadian regional carrier Porter Airlines laid out a bold expansion plan on Wednesday built around a conditional order worth up to $2.08 billion for Bombardier Inc's new CSeries jets that would more than double its fleet.

But the push for new markets and bigger planes comes with a big "if" for Porter.

The privately held airline must first get the rules at its Toronto hub, which prohibit the operation of commercial jets, changed. Porter currently flies a fleet of 26 Bombardier Q400 turboprop planes.

"We believe it is time to spread our wings," Porter Chief Executive Robert Deluce told a press conference at its hub, the small Billy Bishop Toronto City Airport, which is a short ferry ride from downtown Toronto. "We selected, we announced, we're now going forward seeking the approval."

A 1983 agreement between the city, the federal government and the Toronto Port Authority prohibits both the operation of commercial jets at the airport on Toronto Island and the expansion of the airport's runway, which is too short for a CSeries jet.

Changing those rules is sure to spark controversy and fierce opposition over noise and pollution levels.

Deluce said he hopes an agreement will come in six months, including a pledge to punch the runway out by what Porter says is a "modest" 168 meters (551 feet) in each direction into Lake Ontario.

Founded in 2006, Porter currently flies its turboprops to 19 cities in Eastern Canada and the United States, with routes restricted by the Q400's range of about 1,000 miles (1,600 kilometers).

The CS100 has a range of just over 3,000 miles, but that depends on load factor and runway length.

Bombardier and Porter say the 110-seat CS100 boasts lower emissions than rival planes and is the quietest commercial jet, with noise levels comparable to the planes Porter currently operates.

"It's definitely the right airplane for this airport," Deluce said.

If Porter gets its way on changing the airport's rules of operation, it expects delivery of its first CS100 in 2016, allowing it to offer flights to Western Canada and to further-afield destinations in the United States and to the Caribbean.

The Toronto Port Authority said it took "no position on Porter's business aspirations," but it would not consider any change until Toronto's city council had decided on Porter's request. The city said it had not yet received a proposal.

The federal government's Transport Canada said it has not been approached by the city or the port authority, nor has it received a request to amend the airport agreement.

COMPETITION TO HEAT UP

Some view Porter's Bombardier order - it's the first Canadian customer for the CSeries - as a potential harbinger of deals with the country's other two main airlines.

Porter was the first domestic carrier to buy Bombardier's Q400 planes, before its significantly larger Canadian rival WestJet Airlines and Air Canada's regional affiliate Jazz Aviation followed suit.

Porter's growth plans will further ratchet up competition with Air Canada and WestJet, both of which plan to launch new airlines this summer.

Air Canada, the country's largest airline, has some slots at Billy Bishop airport, but Porter is the largest operator there by far.

"Air Canada wants some assurance that this public asset will be opened up to greater competition, and that slots will become available for carriers such as Air Canada, who have been actively seeking increased access for some time," Air Canada spokesman Peter Fitzpatrick said.

WestJet expects competition to increase and is preparing accordingly, spokesman Robert Palmer said.

Porter's order for 12 CSeries jets is valued at $870 million at list prices, with options for another 18 aircraft swelling the value to $2.08 billion.

The airline also announced options on six Q400 NextGen turboprop planes, taking the total deal value to $2.29 billion.

Deluce said he does not expect any problems with financing the purchase, confirming a Reuters report on Tuesday that the airline was profitable in fiscal 2012.

He said the airline is not currently considering an initial public offering of shares, but might do so in the future.

The $3.4 billion CSeries is scheduled to enter service in mid-2014 and Bombardier, the world's fourth-largest plane maker, has said it is confident it will have 300 firm orders for the plane by then. As of Dec. 31, it had 148 firm orders.

Bombardier shares added 1 Canadian cent to end at C$4.09 on the Toronto Stock Exchange on Wednesday.

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