Porter Airlines will purchase up to 80 new aircraft for US$5.82 billion, a major step in the company's growth strategy that will see service expanded to more destinations.
The Toronto-based company announced Monday that it will purchase 30 Embraer E195-E2 aircraft with the right option to purchase an additional 50 jets, an order valued at up to US$5.82 billion.
The first planes will enter into service in the second half of 2022, and the company says it intends to operate the jets out of Ottawa, Montreal, Halifax and Toronto's Pearson International Airport. This is the first time Porter Airlines will include service out of Pearson airport, as the company cannot operate jet aircraft at the downtown Toronto Billy Bishop Airport.
"Billy Bishop has certain limits on growth, including a range of aircraft from that airport," Porter's chief executive and president Michael Deluce said in an interview with Yahoo Finance Canada. According to Embraer, the E2 range extends 4,815 kilometres, allowing Porter to serve additional new destinations.
"This will allow us to fly, not only from Ottawa, Montreal and Halifax, but Toronto Pearson International Airport and really expand our destinations to service across North America coast-to-coast, sun destinations in the U.S., Mexico and the Caribbean."
Porter announced last week that it will restart service on Sept. 8 after it suspended operations for nearly 18 months due to the COVID-19 pandemic. Approximately 500 employees will be brought back in the return to service. The company also reached an agreement with the federal government for a loan valued at up to $270.5 million. As part of the deal, Porter will dedicate $20.5 million towards issuing additional passenger refunds for flights cancelled through the pandemic.
"It's been a very difficult 16 months in the aviation space, certainly in Canada, where travel restrictions have limited the ability of airlines to operate," Deluce said.
"But we've actually fared well. The pandemic opened up substantial opportunity to acquire aircraft at economics that were not available pre-pandemic, but as well to get a substantial amount of deliveries during 2022 and 2023, where we see a pretty strong recovery unfolding."
Pressure on competitors
In a note to clients on Monday, RBC Capital Markets analyst Walter Spracklin says Porter's announcement will put additional pressure on Air Canada. According to Spracklin, the additional aircraft would represent 103 per cent growth in capacity for Porter, and up to 276 per cent growth it it purchases all 80 aircraft.
"Porter's decision to purchase up to 80 new E195-E2s to expand service to new routes across North America represents a fairly meaningful acceleration of their growth strategy in Canada and for transborder markets," Spracklin wrote.
"We believe this strategic decision by Porter could put additional pressure on pricing (and) yields for Air Canada, with the potential for incremental market share loss also a possible risk."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.