Bloomberg News

Porter Weighs Debt Backed by Jets to Finance CSeries Plane Deal

May 01, 2013

Porter Airlines Inc. will consider selling aircraft-backed debt to pay for CSeries planes from Bombardier Inc. (BBD/B), a purchase that marks the carrier’s first foray into jet travel, said Chief Executive Officer Robert Deluce.

The conditional deal to buy at least 12 Bombardier CS100 planes signals a break with Porter’s strategy of short-haul turboprop flights from Toronto’s Billy Bishop airport, on an island in Lake Ontario. The CSeries deal, with a catalog value of about $870 million, would let Porter start long-haul service to cities such as Los Angeles and Nassau, Bahamas.

Issuing debt secured by the new planes “is one of the options for sure,” the 63-year-old Deluce said yesterday in an interview at Porter headquarters in Toronto. “Our finance guys are pretty sophisticated, and they will look at any and all means of financing the aircraft at the point in time where we’re faced with that.”

Those sales are common outside Canada, with carriers issuing at least $77 billion in the U.S. for jet purchases since 1987, according to a JPMorgan Chase & Co. report in April. Air Canada (AC/A) became the country’s first carrier to sell enhanced equipment trust certificates when it issued $714.5 million to pay for five Boeing 777-300ER aircraft last week.

Compounding the novelty is the fact that the CSeries jets haven’t even flown yet. Bombardier plans to conduct the plane’s first flight next month, a deadline it postponed by six months in November.

Geared Turbofan

Additional financing options for the CSeries jets include loans from Export Development Canada, the country’s export- financing arm, Deluce said.

The CSeries will be Bombardier’s biggest-ever aircraft and cost about $3.4 billion to develop. The planemaker said the CSeries, which will feature the new geared turbofan engine from United Technologies Corp.’s Pratt & Whitney, will be about four times quieter than existing jets.

Porter, which is closely held, doesn’t disclose financial results, and Deluce would say only that the company is profitable. Porter has no immediate plans to revive an initial public offering that it scrapped in 2009, the CEO said.

Porter’s order with Bombardier also includes options for another 18 CS100s, as well as purchase rights on six Q400s. Should all purchase rights and options be exercised, the value of the deal would increase to about $2.3 billion at list prices, Bombardier said.

Runway Expansion

For the deal to proceed, Deluce must persuade officials to end a ban on jets at Billy Bishop airport and stretch the runway by about 28 percent. Deluce said yesterday he’s still confident of winning approval from the City of Toronto and two other parties to the agreement governing the airport -- the federal government and the Toronto Port Authority -- this year.

“Things are progressing, maybe even a little quicker than we had originally been anticipating,” Deluce said. “We always knew there would be a full conversation around the merits of Porter’s plans. We remain optimistic.”

Studies on how much the proposed extension would cost are under way and will be completed “in the not too distant future,” Deluce said without being more specific. Until they’re finished, it’s premature to speculate how large an investment would be required, he said.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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