Finamore, Robert (OST) 

From: 

Sent: 

To: 

Cc: 

Subject: 

Attachments: 

Brian Her [biler@ilercampbeil.com] 

Tuesday, July 26, 2011 11:53 AM 

Finamore, Robert (OST) 

David M. Endersbee; John Palo; charters@evergreenairlines.com; Malcolm L Benge; Angle 

Garbuzinski; pmurphy@lopmurphy.com; Tom Fosko; Kass, Howard; Aaron A. Goerlich; Cohn, 

Robert E.; Robert Silverberg; 'Kathy Luhrman'; steve.morrissey@united.com; 

lhalloway@crowell.com; Weiss, Dan; Anita.Mosner@hklaw.com; jennifer.nowak@hklaw.com; 

sascha.vanderbellen@delta.com; Barnett, Sametta C; Morgan, Jeff; Neison, Carl; John 

Richardson; jjohnson@sgbdc.com; Sinick, Marshall S.; Stephen Lachter; 

rpommer@atlasair.com; Atwood, Mark; Hill, Jonathan; John Fredehcksen; Joanne Young; Bill 

Evans; John Mietus; Lisa Dunn; Cargoair@aol.com; Echristensen@skywest.com; 

Montgomery, Kevin; peter.beckett@polaraircargo.com; Tom Gillies; Hobbs. Tim; 

john.allen@faa.gov; Keiner Jr., R. Bruce; Blank, Jonathan 

RE: Response of CommunityAIR to Porter's Reply - Your Docket OST-2007-27402 

Response to Porter reply July 2011 .pdf 

Dear Mr. Finnamore, 

We have prepared the attached Response of CommunityAIR but do not see an opportunity on the regulations.gov site 

for us to post it. Could you ensure it is posted and considered? That would be appreciated. 

You will see we have copied all relevant parties. 

Brian Her 

Chair, CommunityAIR 

Suite 700, 890 Yonge Street 

Toronto M4W3P4 

Work: (416)598-0103 xll4 

Cell: (416)835-4384 

Fax: (416)598-3484 AIR http://www.communitvair.orE/ 

'"•"i 
CommunityAIR - working towards a dean, green waterfront 

^ -- July 26,2011 

Ccmtnumittf AIR 

AIRPORT hupACT REVIEW 

Office Of The Secretary 

Department Of Transportation 

Washington, D.C. 

Re Application of PORTER AIRLINES INC. Docket DOT-OST-2007-27402 

CommunityAIR Response to the Porter Airlines Reply dated July 18. 2011. 

We are a community-based volunteer organization deeply concerned with the 

impact Porter's massive expansion of its air traffic at the Toronto Island Airport is 

having on Toronto's prime recreational area. 

In its reply, Porter Airlines attempts to make much of CommunityAIR's standing 

and motives in our objection to both Porter Airline's request for renevi/al of its 

exemption from the requirement for a foreign air carrier operator certificate and 

its request for a certificate. 

We do note that Porter has chosen not to respond to the questions we raised. 

Porter Airtines advances several reasons why the Department of Transport 

should expedite its exemption renewal and permanent carrier permit. 

With regard to Porter Airlines comments on our standing and motives, we were 

not aware that there were any membership qualifications or standards to take 

part in public discourse in a free and democratic process. However inconvenient 

Porter Airlines may find a third party expressing its view, it should realize by now 

that the Department of Transport welcomes our input. We are disappointed that 

Porter Airtines has not noticed this self-evident fact before attempting to shoot 

the messenger. 

CommunityAIR responds. 

Porter alleges Community AIR's objections are based on incorrect facts 

Porter Airtines argues that our contention that the Toronto Porter Authority (TPA) 

could not have offered U.S. Airways access to its airport for a PhiladelphiaToronto-Philadelphia route because of restrictions in the TPA's 2005 Commercial 

Carrier Operator Agreement (CCOA) with Porter Airtines is wrong, regardless of 

1 
testimony reported by Bloomberg News. Porter Airtines bases its rebuttal on the 

claim that the restrictions did not apply to U.S. carriers. 

Of course, we are not privy to the 2005 CCOA to examine that claim. We are 

dependent upon the public record. Your Department can, and should, examine 

that document. 

You may also find relevancy in the findings in the Canadian Federal Court case 

between AIR CANADA, Applicant, and TORONTO PORT AUTHORITY and 

PORTER AIRLINES INC. Respondents, Dockets; T-488-10, T-692-10, Citation: 

2010 PC 774, Toronto, Ontario, July 21, 2010 by The Honourable Mr. Justice 

Hughes. According to the findings, the Competition Bureau of Canada sent a 

letter to Regional Aviation Holdings (REGCO), the Porter Aviation Holdings 

predecessor. The letter outlined the Competition Bureau's understanding of a 

Memorandum of Understanding between REGCO and the TPA as follows. 

The Proposed Agreement 

We understand that Regional Airlines Holdings Inc. ("Regco") and the 

Toronto Port Authority ("TPA") entered into a Memorandum of 

Understanding ("MOU) on September 6, 2002. The following Is our 

understanding of the relevant facts related to the MOU: 

• All restriction (sic) identified in the MOU are limited in time for a total 

period of 30 months following completion of Period 2 as outlined in 

Schedule A of the MOU and defined as the date of completion of the 

bridge /inking the Toronto City Centre Island and the main land ("the 

Bridge"). Our understanding is that the present target date for completion 

of the Bridge is May 2004. 

• TPA shall grant to Regco an irrevocable option exercisable on or before 

February 26, 2003 to acquire from the TPA the exclusive right to utilize 

115 large turbo prop daily movement slots (as that term Is defined In 

Schedule A of the MOU) at the TCCA on a "take or pay" basis. 

• Regco shall commence operating a regional airline based at the Toronto 

City Centre Airport ("TCCA") upon completion of the Bridge. 

• TPA shall only make available to Air Canada and Air Canada Associates 

(as defined in the MOU) between 22 and 32 large turbo prop movement 

slots. 

• TPA shall only lease to Air Canada or Air Canada Associates space In 

the new terminal if Air Canada or Air Canada Associates cannot renew 

their existing leases at their current location. 

• TPA shall limit Air Canada and Air Canada Associates to destinations 

currently served by them collectively from the TCCA. 
• TPA shall hold In reserve 20 to 30 large turbo-prop slots. TPA shall not 

make available or allocate to any other carrier any of the 20-30 movement 

slots held in reserve to Air Canada and Air Canada Associates, or any 

other carrier to enable such carrier(s) to provide service to or from the 

same destination as Regco. 

• In the event that before the expiration of the roll-out period, either the 

TPA increases the movement slots available for large turbo-prop aircraft at 

the TCCA beyond 167, or any of the 22-32 large turbo-prop slots allocated 

or to be allocated to Air Canada or Air Canada Associates become 

available, TPA shall not grant such additional slots to any party without 

first offering such movement slots to Regco. 

• The slots allocated for use by small turbo-prop aircrafts are not restricted 

for routes not served by Regco. 

• The Agreement does not appear to affect the TPA's ability to respond to 

demands of cross-border carriers. 

In comparing the Competition Bureau's understanding of the MOU to Article 5, 

Paragraphs 1 and 2 of the Canada - U.S. Open Skies Agreement, we feel that 

there are matters that need elucidation, especially as they concern Paragraph 2. 

ARTICLE 5 

Fair Competition 

1 . Each Party shall allow a fair and equal opportunity for the designated 

airlines of both Parties to compete in providing the international air 

transportation governed by this Agreement. 

2 . Neither Party shall unilaterally limit the volume of traffic, frequency or 

regularity of service, or the aircraft type or types operated by the 

designated airlines of the other Party, except as may be required for 

customs and other government inspection services, technical, operational, 

or environmental reasons under uniform and non-discriminatory conditions 

consistent with Article 15 of the 

Convention. 

First, the Competition Bureau states that the MOU does not appear (our 

emphasis) to affect cross-border carriers. It is difficult to see how this is the 

case. The TPA is restricted to 167 slots. The agreement gives REGCO 115 

large turbo prop slots and reserves between 22 and 32 large turbo prop slots for 

Air Canada. 
In essence, the two carriers share between 137 and 147 of the 167 large turbo 

prop slots. The remaining 20 to 30 slots are further restricted. From the 

Competition Bureau's interpretation above, it seems that these slots are not 

available to carriers wishing to compete on routes serviced by REGCO. 

Furthermore, if more than the 167 slots come available or if Air Canada's 

reserved slots are up for grabs, REGCO gets first right of refusal. 

It is difficult to understand how this MOU appears to not affect cross-border 

carriers in light of the Open Skies Agreement that states, "Neither Party shall 

unilaterally limit the volume of traffic, frequency or regularity of service, or the 

aircraft type or types operated by the designated airiines of the other Party, 

except as may be required for customs and other government inspection 

services, technical, operational, or environmental reasons under uniform and 

non-discriminatory conditions consistent with Article 15 of the Convention." 

For example, if REGCO received permission under Open Skies to provide a 

cross-border service to Newark, this MOU would mean that other carriers flying 

the same type of aircraft could not compete. In another example, if a U.S. carrier 

applied for all or some of the 20 to 30 available slots open for large turbo prop, 

REGCO, with right of first refusal, would be calling the shots and could simply 

deny the request by claiming the slots for itself. Indeed, the inclusion of the 

descriptor 'large turbo prop slots' limits, contrary to Open Skies, the aircraft type 

or types operated by U.S. carriers if they wish to access the TPA's airport. 

While the argument we put forward is based on an MOU between the TPA and 

Porter Airiines' predecessor REGCO, there is no guarantee that the same 

restrictions found their way into the 2005 CCOA between the TPA and Porter 

Airiines. However, Roger Tasse in his report. Review of Toronto Port Authority 

Report, October 2006, commissioned by the federal government, references on 

Page 60, a third MOU between the TPA and REGCO that was converted into a 

CCOA on May 3, 2005 and states, 

"The CCOA does, for example, provide for certain 

guarantees regarding the use of the airport by RegCo (sic), 

for a rollout period of time, to assist RegCo (sic) to establish 

itself as a carrier." 

Only an examination of the 2005 CCOA will tell if the TPA in granting Porter 

Airiines' predecessor REGCO 'certain guarantees regarding the use of the 

airport' contravened Article 5 of the Open Skies Agreement and if Porter Airiines 

took part in the contravention. 

Porter Airiines in its reply points out that the 2005 agreement has been amended. 

Therefore, we see no reason that it not be posted so that we and the Department 
of Transport may examine it in order to confirm that the TPA and Porter Airiines 

did not contravene Open Skies. 

If the original permissions granted to Porter were in fact based on facts that were 

not true, then that must affect how your Department regards the present 

applications. 

As for Porter Airiine's contention that the 2010 Amended and Restated 

Commercial Carrier Operating Agreement has no restrictions on route 

competition, it is curious to note that although the TPA went through an exercise 

to allegedly to assure fairness in awarding newly opened slots, of the total 202 

now available, Air Canada was awarded 30 and Continental 16, the same or 

fewer numbers available to the competition under the original MOU. See 

attached document Porter to remain dominant player at Island airport. 

Porter alleges neither CommunityAIR nor anv other party objected to Porter's 

application on fitness grounds 

Community AIR has not objected, up to now, to Porter Airiine's application on 

fitness grounds primarily because the data was not available to do so. After 

several years of cross-border operations and two unsuccessful attempts, April 

16, 2010 and May 21, 2010, to launch an Initial Public Offering, (See attached) 

we now feel that there are facts that may be brought to the Department of 

Transport's attention. 

In the introduction to its reply. Porter Airiines describes itself as popular and 

successful transborder services. With the exception of its seasonal flights to 

Myrtle Beach, the Bureau of Transportation statistical data for 2010 seems to 

paint a different picture. According to Transportation Bureau of Statistics 

published information, the load factors for the year for Porter Airiines three 

regularly schedule U.S. destinations are as follows: Boston 40.28%; Chicago 

38.85%; Newark 54.11%. Aircraft flying half full or less, on average, is a curious 

measure of popularity and success. 

Porter Airtines describes itself financially fit. The following was attributed to 

Robert Deluce, Porter Airiines President and CEO, in an interview published in 

the Globe and Mail on November 21, 2009, Porter - The Little Airline That Could. 

Mr. Deluce says Porter has been profitable since mid-2007 on 

a "fully allocated" basis, though he declines to give accounting 

details - information that would only become public if the 

carrier decides to raise equity financing through an initial 

public offering. 

Five months later, its April 16, 2010 preliminary prospectus showed that Porter 

lost 
• $11,486,000 in 2007, 

• $3,317,000 in 2008, 

• $4,609,000 in 2009, 

• $5,972,000 in the first quarter of 2010. 

By March 31, 2010, Porter had accumulated overall losses of $44,505,000. 

Porter Airiines claimed in its May 21, 2010 prospectus [found at www.sedar.com], 

Page 6, a breakeven load factor (BELF) of approximately 49% in 2009 compared 

to low-cost carriers Southwest and JetBlue with BELFs at 74% and 73% 

respectively. Given that Porter Airiines' 2009 BELF was 49% and the load factor 

on two of three of its U.S. routes were below that a year later (2010), when 

normally costs would have risen, it is difficult to see how its U.S. operations 

contribute to it financial fitness. 

Finally, the May 21, 2010 prospectus reveals another interesting fact. In the 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Note [i] Page F-16 

states in part, "The lender [an arm of the Canadian Government] will also require 

that the aircraft and engine it finances be used at least 60% on cross border 

routes and that at least 80% of their departures originate from or are destined to 

BBTCA." 

At that time. Porter Airiine.s' fleet nr^mnrised ?0 0-400 airr^raft 1fi nf whir.h wprp 

financed. A Community AIR analysis based on the concurrent timetables 

showed that approximately 30% of its flights were cross border. Mathematically, 

and presumably operationally, it was not possible at that time for the 16 financed 

aircraft for a 60% cross border utilization. This being the case. Porter Airlines 

was, and perhaps still is, unless lending requirements have changed, in 

contravention of the lender's requirement. The prospectus does not give the 

penalty for the contravention. If failure to meet the 60% requirement triggers a 

default, this is indeed a disclosure that the Department of Transport should take 

into account. 

Conclusion 

Community AIR has raised what we believe are substantial issues, from the 

effect on Open Sky access of the Porter Airiines and TPA's 2005 CCOA to the 

current availability of slots at the airport to Porter Airtines' financial fitness, that 

the Department should consider before expediting Porter Airiines' requested 

approvals. 
Yours truly. 

Brian Her, Chair 

Attachment 

From Globe and Mail Monday, Mar. 07, 2011 

Porter to remain dominant player at Island airport 

BRENT JANG 

Update 

Published 5:00PM EST 

Last updated Monday, Mar. 07, 2011 6:54PM EST 

Porter Aviation Holdings Inc. will remain the dominant player at Billy Bishop 

Toronto City Airport, controlling 77 per cent of the takeoff and landing slots while 

Air Canada (AC.B-T2.62-0.03-1.13%) will have only 15 per cent when it starts 

Toronto-Montreal flights in May, says Porter chief executive officer Robert 

Deluce. 

Far from retrenching. Porter is in a strong position with its 156 slots, Mr. Deluce 

said in an interview Monday. Porter owns the regional airiine and City Centre 

Terminal Corp., which will collect lease payments from Air Canada. 

Mr. Deluce said some Air Canada customers will shift from Toronto's Pearson 

International Airport to Billy Bishop. "It is a cannibalization of Air Canada's own 

product," he said. With new slots at Billy Bishop likely to be awarded in 2013, 

Porter stands to benefit, he asserted. 

Nina Slawek, co-founder of consumer travel website TakeOffEh.com, said 

travellers who avidly collect Aeroplan points will appreciate having the option of 

catching Air Canada flights at Billy Bishop. Air Canada, which will be deploying 

Bombardier Q400 turboprops operated by Sky Regional Airiines Inc., will only 

offer the Toronto-Montreal route at first, for 15 daily round-trips, or 30 slots. 

Last summer, Houston-based Continental Airiines Corp. (UAL-N24.781.476.31%) 

garnered the rights to the remaining 16 slots, but it hasn't set any launch date yet 

for possible transborder flights to Newark, N.J. 
Porter has a fleet of Q400s and its network includes 16 destinations. 

Ms. Slawek said Mr. Deluce has carefully crafted his moves at the Toronto island 

airport, devising a strategy that allows him to oversee a regional airiine while he 

also plays the role of airport terminal landlord. "He has set himself up nicely 

there," she said. 

Porter has enjoyed a monopoly on commercial flights at Billy Bishop since 

October, 2006, when the Toronto-based carrier began operations. A terminal 

company headed by Mr. Deluce ousted Air Canada Jazz from the airport in 

February, 2006. 

On Monday, Air Canada began selling tickets for flights between Billy Bishop and 

Montreal, offering one-way fares as low as $149, effective for selected May 

flights. Travel agents caution that airfares change frequently, and while Porter 

has base fares as low as $119 one-way on its Toronto-Montreal route for May 

flights, consumers need to read the fine print for restrictions. 

With WestJet Airiines Ltd. (WJA-T15.050.040.27%) preparing to step up its 

service at Pearson with discounted ticket prices. Air Canada is offering one-way 

fares as low as $69 on the Pearson-Montreal route for travel in May.