More Federal Dollars for Porter Airlines?

Porter-Owner Deluce Has Tapped Into Cheap Federal Loans to Build Airline  Canoe.ca_Photo_McQueen_Harper_Ford_Flaherty_Deluce_2013-11-01OTTAWA - Porter has grown into a successful airline - in parts thanks to federal dollars that the well-connected Porter-owner Deluce helped secure. And with the planned expansion of the Island Airport, Porter might benefit from federal tax dollars again.

Federal Government Gave Seed Money

Back in 2003, City Council voted down the proposed bridge to the Island Airport. After the deal fell through, the federal government gave $35 million in 'compensation' to Robert Deluce as well as the TPA and a few other companies involved with the bridge project and airport operations. Robert Deluce received the lion share of the 'settlement' - $20 million ((The Globe and Mail: article "Ottawa handed out $20-million to Island airline boss", 2006-09-27)). These taxpayer dollars formed the startup capital for Porter Airlines. The irony: the federal government wasn't legally obliged to make these payments. It probably did it since direct federal subsidies to port authorities are illegal under federal law.

Federal Loan Paid for Terminal Building

Wikimedia_Photo_BDC_Office_Moncton_2013-11-01In 2009, the federally-owned Business Development Bank of Canada (BDC) gave Porter a $30 million credit facility to build a new terminal building ((Cassels Brock: blog post "Cassels Brock Acts for BDC in $30 Million Credit Facility for Porter Airlines, 2009-08-26)).

Cheap Federal Money for Plane Purchases

The story continues. Porter was also able to secure cheap money from BDC's sister organization, the Export Development Canada (EDC) - also federally owned. Since 2008, the EDC has given Porter loans to buy its Q400 turboprop fleet to the tune of at least $300 million. It could even be as high as $650 million ((Library of Parliament: research summary, 2013-11-04)). The EDC doesn't have disclose exact numbers as it is exempt from Access to Information rules.

Date

Country

Transaction

Canadian Company(ies)

 

Financing Range (Cdn $)

October 31, 2011 Canada Purchase of Aircraft Bombardier/Pratt & Whitney Canada $50 mn - $100 mn
February 10, 2011 Canada Purchase of Aircraft Bombardier $50 mn - $100 mn
June 24, 2009 Canada Purchase of Aircraft Bombardier/Pratt & Whitney Canada $50 mn - $100 mn
February 13, 2009 Canada Purchase of Aircraft Bombardier $100 mn - $250 mn
February 29, 2008 Canada Purchase of Aircraft Bombardier $50 mn - $100 mn
Nevertheless, Porter has greatly gained from EDC's cheap financing. How is that possible for a lender that's supposed to stimulate Canadian exports ((The Globe and Mail: article "EDC: Export development bank or domestic lender?", 2012-03-11))? The loophole: Porter flies some of the planes to destinations in the US. Ask yourself, would you consider a Canadian-manufactured plane flown by a Canadian airlines touching down on US soil an 'export'?

What's Next? Federal Money for Jets?

With its dangerous jet proposals for Toronto's waterfront, Porter-owner Deluce is eyeing the next big deal with the help of public money: purchasing his coveted CS100 jets with more federal low-interest loans ((NOW Magazine: article "Cool your jets", 2013-04-18)). Bombardier's CS100 jets are innovative for sure - even if only the final assembly takes place in Canada. But we want to see them fly out of Pearson, not the Island Airport. The aspect of the airport left aside, the question is how is Deluce going to pay for his CS100 deal that's valued at $2 billion dollars ((Huffington Post: article "Porter Airlines' Bombardier Jet Purchase Would Expand Routes, Source Says", 2013-04-09)). With is superb connections in Ottawa, Deluce might get cheap federal dollars again to grow his company...

Conclusion

So far Porter's success has been greatly helped by public dollars. With the planned expansion and needed land-side infrastructure investments, tax payers might be on the hook for $300 million more. Let's be clear: Porter is a terrific success story. But now that they want to play in the big leagues, Porter should move to the big leagues airport - Pearson. Porter is more than welcome to fly its jets there.