This is a delicious story. A Globe article on Saturday revealed that Porter Airline, the scourge of Toronto’s waterfront, is having trouble paying its bills.
That’s not a surprise, since it hasn’t operated since March, and has no plans to restart until next February, at the earliest.
We’ve all savoured the peace and quiet we’ve had on our waterfront as a result.
The story tells us that Porter is trying to stop the terminal owner from seizing three of its planes for non-payment of $45.3M in fees owed to the terminal.
The irony is that Porter built the terminal for $50M, and sold it to the current owners for a reported $700M, a massive sum that depends on the income stream from rent payments promised by Porter.
To be sure, not all of that $700M was paid – we understand a good portion of it was to be paid when – or if – the current lease from the City for a significant portion of the Island Airport lands is extended from its expiry in June, 2033.
And another significant portion of the purchase price was required to be paid to retire the low-interest loans Porter was given to purchase its planes by the federal government’s Export Development Corporation. Required, as the purchaser wanted some assurance that Porter would stay in business, rather than cashing out.
That’s the reason Porter can talk about it being debt-free – it has replaced low-cost debt with high-cost rent to the new terminal owner.
One must also wonder what the purchaser of the Island Airport terminal was thinking. Porter’s business had “matured” some time earlier. Its sales growth has been essentially stagnant since 2013, and by the date of the sale in 2014, the writing was on the wall that it was about to see its growth plans scuppered by the determined – and ultimately successful ‐ community opposition to its proposed use of jets at the Island Airport.
Said one commentator, back when the terminal sale was first announced:
“I can’t think of a more core strategic asset than ownership of the sole passenger terminal in an airport where you control, basically in perpetuity, 90% of all commercial landings.
“Successful businesses don’t do sale/leasebacks on core strategic assets.”