Porter Airlines is not so much reinventing itself with the introduction of its first-ever jet aircraft as much as doing more of what it does well: The economy travel experience.
The Toronto-based airline’s new Embraer E195-E2s will keep the all-economy cabin familiar to Porter’s fleet of De Havilland Dash 8-400s. But, while almost every other airline in the Canadian market is going downmarket in economy to compete with the rapidly expanding ranks of discount airlines, Porter will instead launch what could be viewed as a premium economy-light product, PorterReserve, with all the bells and whistles of business class except the seat. The airline will also offer all passengers free inflight wi-fi — though no in-seat entertainment — on the E2s, and continue with its standard economy offering that includes free beer and wine served in real glassware.
“From our perspective, economy is kind of a multi-segmented part of the market,” Porter Chief Commercial Officer Kevin Jackson said in an interview. To that end, its full-service PorterReserve product will be complemented by its existing Porter Classic fares, as well as a no-frills fare option to compete with budget operators.
Porter will introduce its first of 50 E195-E2s that it has on order in early 2023. Jackson declined to say what routes the planes will initially fly — an announcement will be made “soon” — but the plan is to operate them from Halifax, Montreal, Ottawa, and Toronto Pearson on longer routes to western Canada, the U.S., and Caribbean destinations. Porter secured a second operating certificate, in addition to the one it uses for Dash-8 flights, for its new jet operation.
Betting that travelers will pay more for an elevated — but still economy — experience is fraught. Remember American Airlines’ “More Room Throughout Coach” campaign in the early 2000s? The carrier attempted to get travelers to pay a little more for extra legroom at every economy seat only to find that people still bought the cheapest fare; though United Airlines proved flyers were then willing to pay an extra fee for additional legroom with its Economy Plus product. American quickly put seats back and dropped the campaign only to emulate United with an extra-legroom offering years later.
Fast forward 20 years and it is a different market. Budget airlines are more budget today with fees for everything from seat assignments to carry-on bags. Segmentation, where an airline splits an aircraft cabin with numerous fare and cabin offerings where the differences are as fuzzy as the curtain dividing economy and first class, is now the norm among large airlines. Even leisure travelers, as they have returned from the pandemic, have shown a greater willingness to pay more for greater comfort when they fly. That last point, also known as premium leisure travel, was named a 2022 Megatrend by Skift.
A more-segmented future is clearly what Porter plans with its new E2s. While the entire aircraft will feature the same hard product in a 132-seat layout, PorterReserve travelers will be able to sit in seats with extra legroom. And, on flights over 2.5 hours, they will receive free meals; the same meals will be offered for purchase to other passengers. Other than that, everything will be the same onboard — from the wi-fi to the drinks and glassware
This standardized service, where the main difference is whether something is free or for purchase, will reduce costs as compared to offering a separate business or first class cabin, Jackson said. Lower costs, in turn, will ensure that Porter can continue to provide an elevated level of economy service.
“If you’re going to compete in economy, as we intend to do, you have to compete on cost and you have to compete on product,” Jackson said.
Asked about the revenue side of the equation, Jackson said Porter sees a significant potential market of travelers for an offering at the “upper end of the economy segment,” particularly among corporate flyers who do not currently pay for business or first class. Leisure travelers willing to pay for additional onboard space and perks are also a target market, though he repeatedly mentioned the corporate market. Porter has an established brand and relationships with many businesses, as well as travelers, in eastern Canada, particularly Toronto where it is based.
Porter lost money during the pandemic when it shut down for 18 months after a profit in 2019, and expects a loss this year having invested significant capital in its new jet operation, Jackson said. The airline, which is privately held and does not disclose financials, hopes to return to profitability in 2023.
Costs are a challenge for airlines globally. While red-hot travel demand has driven yields well above 2019 levels in many cases, staffing issues, supply chain backlogs, and high oil prices have simultaneously driven up costs. In the U.S., trade group Airlines for America (A4A) estimates that non-fuel unit costs, or cost per available seat mile excluding fuel at its member carriers will increase roughly 19 percent this year compared to 2019. A “normal” increase is typically in the low single digits or flat. The metric was up nearly 15 percent year-over-three-years at Air Canada, Porter’s main competitor, during the quarter ending in September.
Canada’s other main domestic airline, WestJet, in June unveiled plans to return to its low-cost roots and refocus its network on western Canada, particularly its Calgary base. That pivot, while occurring nearly a year after Porter announced its jet plans, created a potential opening for Porter to pick up WestJet flyers in Canada’s eastern cities who are not interested in the airline’s shift west or the offering of its discount subsidiary, Swoop.
Of course, even with WestJet’s pull back in eastern Canada, there is no promise of success for Porter. The Canadian market has seen a surge in low-cost startups during the pandemic, including Jetlines, Lynx Air, and OWG. Porter’s new jet operations, while positioned in a different segment of the market than these startups, will still have to compete with these airlines in a country that has long been dominated by just two major network airlines.