Analysis of Issues On the 10th of April 2013 Porter Airlines announced that It plans to buy another 30 CSIOO Jets from Montr©al based-Bombardler with plans to add a dozen new routes In addition to the 19 routes currently served by Porter (CBC, 2013). President and CEO Bob Deluce vlslons a “service to destinations across North America, from Calgary and Vancouver, to Los Angeles. Miami and Orlando. ” Furthermore on September the 3rd 2013 Porter Airlines submitted an update to their runway expansion proposal to expand the main runway at Billy Bishop Toronto City Airport 200 meters in each irection (Porter, 2013).
The $2. 29 billion aircraft deal coupled with runway expansion plans are central to Porters Airlines Bid to become the 3rd national airline of Canada. In terms of growth strategies it can be said that Porter Airlines has chosen to increase their offered destinations (or product line) in order to achieve growth. However since the first CSI 00 Jets are not due until the end of 201 6 and runway expansion plans that still have not passed the approval stage, it is clear that increasing Porters product line as a means of growth Is a long term strategy. As
Porter Alrllnes has already applied a long-term growth strategy this case study will focus on possible short-term growth strategies that can further strengthen Porter’s position In the market. Possible courses of Action a) Increase short-term product line through partnerships b) Focus on Trans-border US Destinations c) Invest in a major marketing campaign Preferred Alternative The top option for Porter is to focus on trans-border US destinations. 1 . Sharply increase in market demand: In 2009 the average trans-border flights between Canada and the United States was around 445,000 flights.
This number of flights has increased In 2011 and 2012 at a rate of 6. 5% and 5. 6% respectively (CAPA, 2012). This increase In flights rapidly outpaces the domestic market Increase, clearly establishing the trans-border market as a superior growth Industry. Porter should seize this opportunity of growth to shift less profitable domestic routes with trans-border routes. 2. Possible new destinations: Porter Airlines lists proposed routes American destinations from Toronto to Cincinnati, Cleveland, Detroit, Pittsburgh and Philadelphia (Marlow, 2012).
All of these were great options for Porter. For instance, a route between Philadelphia and Toronto is well within range of the current Porter fleet and is considerably a more populous route than many Canadian destinations. Other desirable cities include Madison, Ann Arbor, Baltimore and Wilmington. 3. Main competitor comparison: According to The National Airlines Council of Canada, Canada’s largest passenger Oair carriers In 2013 are Air Canada, Air Transat, Jazz Aviation LP Cland WestJet.
Since Air Canada purchases substantially all of Jazz’s seat capacity In 2002, the maln competitors of Porter Airlines are the rest three carriers. Alr Canada provides scheduled services to 186 destinations from Toronto Pearson International Airport worldwide, and 40 of them are in the united States (Air Canada Air Canada is continuously complained as the “most expensive airlines in North America”. For the same dates departing and returning between Toronto and Philadelphia, US Airways, United and American serve flights as cheap as $516 to $571 while Air Canada prices the tickets at $730.
Air Transat only has three destinations in United States, Fort Lauderdale, Orlando and St. Petersburg, which are all located in the Florida. It offers more reasonable prices compared with Air Canada, such as $413 and $702 respectively of the round trips flights between Toronto and Orlando. However, Air Transat operates at most 2 flights to each city in the U. S per day and only 4. 4% of the dates have round-trip tickets sale provided, thus significantly restrict the possible options for passengers.
As WestJet focuses on Canada domestic airline services, it expanded into the United States market only since 2004. Until now, it serves in 21 destinations in the U. S, from which over 72% are located in California, Florida and Hawaii. Except few cities in eastern America as Chicago, New York and Miami, most of its destinations in the U. S have to transfer at Calgary or Vancouver. Porter has 4 perennial and 2 seasonal destinations in the U. S at the end of 2012, and it always offers the best prices among competitors. The potential markets in the U.
S are vast for Porter since many major cities have not been explored by the others. It would be the best time to invest in short distance, fair priced and direct flights between Toronto and Trans-border US Destinations. Contingency Plan Increasing short-term product line through partnerships will be the second best lternative for Porter. 1. Significant benefits: Airline partnerships provide commercial flexibility and connecting network traffic to Porter, while significantly reducing financial risks and expanding global aviation markets.
Results from Karin Weber’s research indicate traveler benefits from airline partnership, including ease of transfers, one-stop check-in and lower prices for a given route (Tablel-l in attachments). Porter also benefits from cost reduction in terms of sharing sales offices, maintenance facilities as well as operational facilities like catering or omputer systems. The disadvantages include less flexibility of flight schedules for given routes, and higher prices when all competition is erased on a certain route (Star Alliance, 2012). 1 .
Further development of current partnerships: In July 2013 Porter Airlines signed its third interline agreement with Icelandair gaining it access 20 destinations throughout Europe. Porter currently holds two more inter airline deals with Singapore Airlines and South African Airways thus gaining Porter limited market access to the African, South East Asian and European aviation markets. Porter’s arket access is limited as they are listed as “hub carries” which means that partner airlines offer Toronto as a destination through their main hubs in North America.
The drawback of this type of partnership is that Porter cannot offer the destinations of its partner airlines on their booking service. Porter should focus on further developing their three partnerships so that Porter can include African, European and South East Asian destinations on their own online booking system. By increasing destinations through partnerships Porter will be able to offer multiple foreign destinations that require no lag time to set up. ) Find new partners in America: As Porter has made next logical step would be to ally with a Central or South American carrier.
By linking Porter Airlines to the four main continents of the world will not only increase their potential customer base but also increase their public image standing. By offering international destinations (even through partnerships) Porters public image will be perceived as considerably more established and real threat to Air Canada. This strengthened public image would serve to increase investor confidence for a potential future IPO, which has been in the pipeline since 2011 (Deluce, 2011).