Porter Airlines Critique Assignment
1.
A comfortable and safe passenger jet is the basement of excellent customer service. If Porter raises the bar of customer service, Bombardier will have to react (i.e. modify or upgrade aircrafts) to meet Porter’s demand. But airline industry is highly competitive and has relatively low margin, while the cost to improve customer service can be rather high. Even if Bombardier can react fast enough to meet the ever-changing demand from airlines, how does it negotiate the high cost associated with R&D with airlines? Bombardier must consider the cost and benefit before accepting airlines’ offer.
Another issue become more salient as Bombardier is losing its supplier power. Its performance on stock market is unsatisfying, and it desperately needs more support and orders from airlines (Van Praet, 2015). Therefore Bombardier’s reliance on Porter grows bigger, undermining its bargaining power when making offers with airlines. On the other hand, to compete with Air Canada and Westjet, Porter is considering to expand its destinations, that is, to include in more long-haul routes to attract customers (Owram, 2015). Although Bombardier C-series has the capacity to meet Porter’s expansion plan for now, it’s hard to say whether Bombardier has the capability to meet Porter’s expansion in the long run. By then Porter can turn to Boeing or Airbus for more advanced long-haul airplanes. Consequently, Bombardier’s poor performance and Porter’s growing needs contribute to imbalanced bargaining power between these two companies, casting a cloud over their relationship.

2.
The completion of Union Pearson Express is really a bad news for Porter. One of the core competitive advantages of Porter was its base location – Toronto City Airport. It offers huge convenience to travellers who need a quick stop at downtown Toronto. However Pearson express changed this situation. 25 min non-stop from Pearson to downtown, it is as convenient as travelling to Billy Bishop. Travellers now have options not limited to Porter, they can take Air Canada or other Major airlines flight to Pearson and get to downtown Toronto in a timely manner. Compared with airport express, the opening of pedestrian tunnel at Billy Bishop Toronto City Airport does not improve the convenience significantly. In the meanwhile, Air Canada is trying to curb the expansion of Porter. On one hand, Air Canada opposed jets to fly at Billy Bishop in order to decrease competition from Porter on long-haul routes (Owram, 2015). On the other hand, Air Canada wanted to have more landing slots at Billy Bishop, in an effort to bite shares on short-haul flights. Political environment also adds more difficulties to Porter’s expansion. Toronto City Council has yet to decide whether to allow a 400-metre runway extension and lift the ban on jets on the waterfront (Chown Oved, 2014). The longer the waiting, the more losses Porter will suffer.
I will analyze three forces: suppliers, rivalry, and buyers. Supplier power is currently moderate as mentioned above. However Bombardier will regain bargaining power as aviation industry revives from recession (Van Praet, 2015). Furthermore, Porter will stick with Bombardier if its expansion plan does not work, this will give Bombardier more power because it is difficult and costly for Porter to look for another supplier who can provide similar products. If Porter successfully establish its long-haul routes, it will then be subject to the power of Boeing and Airbus who dominant the manufacturing of long-haul passenger jets. Rivalry is high now and will become tenser in the following years as competitors are trying to limit Porter’s expansion and taking shares from short-haul routes. If Porter successfully expands its operation continent wide, it will face more competition from big international airlines. Buyers’ power will also increase over the next two years as passengers have more options to choose from (mentioned above). The potential price war (CBC, 2013) will also give buyers more bargaining power as switching cost becomes very low. Please refer to Appendix to see the rating of 3 forces.
3.
Porter’s charitable support focuses on creating economic and societal benefits for communities it serve. The charitable support policy (Porter, 2015) requires that charitable support must have direct impact on communities and must support local needs. However it does not support individuals and have stringent criteria on selection of organizations it will support. So Porter’s charities are very community focused. Of course Porter is not doing this for free. Its intention is to raise brand awareness thus increase competitiveness. That’s why Porter requires application must include an alignment with its brand and details of recognition and promotion it will get (Porter, 2015). Porter creates shared value by doing charities to communities while enhancing its brand recognition and competiveness.
Porter can enhance shared value creation by redefining productivity in the value chain, specifically by reducing energy and resource use in order to minimize environmental impact. For example, it can reduce fuel consumption by operating fuel-efficient aircrafts in its fleet. Recent technology development has made environmentally friendly fuels available, which can be utilized by Porter.
Porter can also invest in employee wellness. For example, it can purchase health plans or insurance for employees. The societal benefits will come from increasing happiness of employees and their family, and happy employees will bring better service to customers. In the meanwhile, Porter will benefit from increasing productivity.
4.
a) I think Porter sold terminal for two reasons. First it not only cut operating cost for Porter, but also provided proceeds to fund expansion of destinations. Porter Airlines is at the critical phase of further development, it needs large amount of cash to employ strategy to defend its market share from Air Canada and needs money to finance expansion which involves purchasing new airplanes. Although terminal is a valuable asset, it cannot provide liquidity that Porter desires. By leasing back terminal Porter can maintain current operations.
Second, selling terminal makes Porter less diversified. It can focus on airline business and embark on creating more value for customers. Besides, as the article mentioned (Chown Oved, 2014), the airport will benefit from professional third-party management, which is expected to enhance overall passenger experience. It’s a win-win deal for both Porter and passengers.
b) Porter will become less attractive for investors. First of all, Porter has received large amount of proceeds from selling the passenger terminal, it is not necessary to go public at this point. In fact, selling terminal is an alternative to IPO. Second, Porter is just about to use the capital from sale to fund its expansion, it is really unlikely that Porter will allow newcomers to step in its plan.

Appendix. Three Forces Ratings (on a scale of 1-10) | 2015 | 2016 | 2017 | Power of Suppliers(moderate to high) | 6 | 7 | 8 | Rivalry (high) | 8 | 9 | 9 | Power of Buyers (high) | 7 | 8 | 8 |

Reference
CBC. (2013, April 10). Porter aims to become Canada's 3rd national airline. Retrieved September 27, 2015, from http://www.cbc.ca/news/business/porter-aims-to-become-canada-s-3rd-national-airline-1.1304634

Chown Oved, M. (2014, August 29). Porter puts Billy Bishop airport terminal up for sale | Toronto Star. Retrieved September 27, 2015, from http://www.thestar.com/business/economy/2014/08/29/porter_puts_billy_bishop_airport_terminal_up_for_sale.html

Owram, K. (2015, May 1). Porter Airlines Inc. CEO accuses Air Canada of flip-flopping on Toronto jets issue. Retrieved September 27, 2015.

Porter. (2015, September 27). VIPorter. Retrieved September 27, 2015, from https://www.flyporter.com/About/Charitable-Support?culture=en-CA

Van Praet, N. (2015, August 25). Bombardier struggles to avoid penny-stock status amid lack of new C Series orders. Retrieved September 27, 2015, from http://www.theglobeandmail.com/report-on-business/bombardier-struggles-to-avoid-penny-stock-status-amid-lack-of-new-c-series-orders/article26093792/