ATW editors discuss the different strategies of two airlines in challenging times: U.S.-based JetBlue and Canadian carrier Porter.
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Karen Walker: Hello everyone and thank you for joining us for Window Seat, our Aviation Week air transport podcast. I'm ATW and Aviation Week Network air transport editor-in-chief Karen Walker, and I am delighted to welcome you onboard. Now today I'm very happy to say I am joined by ATW senior editor Chris Sloan, and we will be talking about his interviews that he's done recently with senior executives at JetBlue Airways and at Porter Airlines, for which he has written features in upcoming issues of ATW magazine. (Chris’ article on JetBlue can be found here.) These are two interesting airlines, very different. JetBlue, of course, is based in New York, while Porter is based in Toronto, Canada. Each are independent and they're actually small compared with the major airlines with which they compete, both in the US and Canada. And each has its challenges in the post-COVID environment. So, while Chris' two features each examines one airline and its current strategy, our discussion today will mainly focus on the similarities and differences in those strategies. So, Chris, welcome. Thank you so much for joining me today. Let's just quickly start with who did you talk to at JetBlue and at Porter?
Chris Sloan: Well, thank you and thank you for having me. We spoke to the president of JetBlue, Marty St. George, who has returned in the last year to spearhead its turnaround, and then his chief operating officer, Warren Christie, and at Porter we spoke to Michael Deluce, and Michael is the CEO of the airline, and he's been there since the beginning. His father actually was the original CEO. His father, Robert, is now the chairman, and Michael became the CEO just before the pandemic. And Kevin Jackson, who's the president, who interestingly enough has been there since 2013, but he was with America West and US Airways, so he had basically made the move north. So as a very interesting difference and similarities—a yin and yang of their sensibilities.
Karen Walker: Certainly you were talking with both airlines at a high level. For anyone who doesn't know JetBlue or Porter, and I think Porter is well known in Canada and in certain markets, but is probably the less known of the two. But how do you sum up what each airline is about?
Chris Sloan: Well, I mean I think some of the similarities, they're both hybrid airlines. They are completely unique business models. They're challenger disruptor brands. JetBlue has been since it's 25 years and Porter in the last, since 2018. And from a passenger experience standpoint, they're both pledging to be high quality with a bit of a premium level bent with low costs. JetBlue obviously a leisure-based airline. Its real strengths [are] from the Northeast, transcon[tinental], Florida and the Caribbean. It's about 5% of the domestic US market, ranking sixth. Porter, by difference, is almost two separate airlines. It was founded in 2006, and it was really based around Billy Bishop's Island Airport, which actually owned the terminal and created a franchise that was very business centric. Operating from there through Eastern Canada has become very strong. But what's really interesting is it shut down unprecedentedly for 18 months during COVID, completely shut down with very highly restrictive COVID environment there in Canada, and it chose to relaunch in 2023 and create national relevance as a [Embraer] E2 airline. And that's the world's largest carrier of functioning of E2s. And so where it ranks it’s a very different scenario. It actually has about 10.7 domestic share and is the third-largest carrier and growing. And Porter is also now the sixth-largest provider of Canadian-US capacity. So, there's a very stark contrast between the two airlines and their challenges.
Karen Walker: So I'm very familiar with JetBlue and remember they're also both really relatively new airlines in many respects. And we're able to both come in with, as you say, sort of different business models that have worked well, that help themselves being very customer friendly, new nice aircraft and all that. So, talking of the aircraft, there is one little bit of overlap here, not so much these days, but you mentioned the Embraers at Porter and of course JetBlue still has some of those, some of its Embraers, but is moving to an all [Airbus] A320 family, A220 family. So, like you say, both interesting. And as we've also mentioned adapting Now, what are their current challenges for each airline?
Chris Sloan: Well, as you rightfully point out, and we've covered extensively, it's no secret. JetBlue is living through somewhat of an identity crisis in its 25 years. It is no doubt in a turnaround mode. It has suffered from a failed M&A of Spirit, which was its attempt to gain national relevance. It's been struck by significantly raised costs. The Justice Department obviously put the kibosh on the NEA and the airline is trying significant efforts to return to profitability after six years. So that was obviously well-documented, and we talk about a lot of this in the article and really about their turnaround efforts. Porter, by contrast, as we talked about is the last three years after the COVID shutdown embarked on a significant change of its business model. And it's now literally where JetBlue is fighting many Goliaths. Porter has taken the opportunity to fight two Goliaths, and that's Air Canada, which is by far and away the most significant player in the market, and then WestJet, which has entrenched back into western Canada, which has left this opening, and so the problem with Canada, obviously, as you well know, it is an extraordinarily saturated market in terms of LCCs, carriers, liquidations, and it's a very small population base, second-largest geography in the world. It's only 40 million people. It's the size of California. So, the US market is about eight times [the size]. And then to compound that their cross-border franchise, which represents about 20% of their traffic between the US since our little tariff dispute—I think there's a little tiff going on, you might've read about it—but that's 20% of the traffic and it's down significantly. So, they're now having to pivot and that's a significant kind of a curve ball that's been thrown at them.
Karen Walker: One quick thing, you mentioned NEA when you were talking about JetBlue, just want to clarify, that's the Northeast Alliance that JetBlue had with American and it was predominantly about that East Coast partnership. And as you say, that's come to an end now. So, there's like a double wham, if you like, for JetBlue in that it, first of all had, it was denied the merger with Spirit Airlines, as you said, the low-cost carrier, and now no longer has the NEA, so we'll maybe talk a little bit about that in terms of their strategy, in terms of how they're going forward out of that. But just going back to Porter, it's interesting what you've just said about the little tiff on tariffs. It's bigger than that though really, isn't it? There's a lot of anti-American feeling I think, because of all that's been going on politically. When you were talking to the Porter people, did you get an impression that it is having an effect on demand for that cross-border travel to the US?
Chris Sloan: Certainly. And their franchises are really in two areas with regards to that, as the initial one was New York Newark [and] the Northeast and Boston, the short-haul markets. And so, the double whammy there is the business market has already decreased significantly post COVID, and then they launched all their jet service outside of the United States, outside of Canada is all the lower 48 of the United States, its significant, and a lot of that is to Florida and California. And so, they've received just as they were building that franchise, and we'll talk about in a little bit of how they're addressing it, they were hit. And on a personal level, I'll say having just returned there is that we see the inflation numbers here, we see the economy holding here. Well, in Canada the unemployment rate is north of 6%. And when you watch the news, when you talk to people, there's not necessarily antipathy, but it's like what happened to America? You’re our big brother. And make no mistake, we're agricultural, we're steel, we're our products, and it is significantly hurting our economy. It's hurting the—not only inflation, but you're literally, you get much more of a sense of the damage not just psychologically, but the damage it's doing to their financial wellbeing. And that certainly has impacted Porter, and they've got dramatic plans to shore that up, which we'll get into later. But there are definitely some interesting differences and similarities between these two.
Karen Walker: That's interesting. Yeah, so they're actually feeling, they're already feeling literally the impact of some of this. And of course, as we know, if people are feeling uncertain about the status of their job and their wealth, et cetera, one of the first things that they'll cut out is travel. That doesn't necessarily mean just to the United States, it's just, do we need to do that vacation? Do I need to do this trip right now?
Chris Sloan: And I find also something really politically interesting is that Canada, when it surpassed 40 million people, the largest growing diaspora is Southeast Asia, so it's always been Chinese, right? Toronto, which used to be considered Toronto the good, a very almost homogenous city, is one of the most international cities in the world. And so, the entire country embraces immigrants and embraces immigration and they look at that as what's powering them toward the future. So, they use that, in many respects, I mean it certainly does have negatives, right? But it's very much of a positive in the building of the nation and pushing it forward. And so, it's a completely different mindset from the government and it's actually galvanized people in favor of immigration and also toward the Liberal party, interestingly enough, because they're seeing what happened to America. So it's like two worlds.
Karen Walker: Very interesting. Yeah. So let's get to that term, the differences and similarities as you talked to both airlines set of executives about the strategy, the challenges they're dealing with and how they're dealing with it. So can you start to just sum up a little bit where you saw differences and where you saw similarities, even though I know there are two very different airlines, but I think it's interesting.
Chris Sloan: Yeah. Well, I mean obviously the similarities as we mentioned right up at the top is these are industry disruptors who are truly battling Goliaths in very crowded markets. They're beloved brands. It's not just that they're beloved for brands, but they're beloved because they are taking on incumbents. Everybody always likes to beat up on the national airline, Air Canada, kind of semi-loathed to some extent because it's the incumbent. And so, these airlines both offer, let's say free Wi-Fi, at least on the jets. Porter uniquely adds free beer and wine. And by the way, they troll Air Canada when Air Canada just launched free beer and wine. And then Porter is like, well, please thank us for that. Now Porter is very cheeky. JetBlue is very cheeky as they both operate two aircraft fleets, the ERJ and the A220, A320 and then the Dash 7.
Both airlines have multi airport strategies. So where Porter has really established is building a beachhead in multiple airports in Montreal, and then in the greater Toronto area, which we'll get into Toronto, Hamilton, and the Island airport, while JetBlue has really focused on New England, Boston, Hartford, Providence, and the New York City metro airports, particularly JFK, LaGuardia, Islip, and then of course the Caribbean. So, they're trying to create their own beachheads. Both airlines are rolling out significant partnerships, but Porter's is different. It's a much more robust full JV/ATI outside of revenue share, that's with Air Transat. We know that United and Blue Skies is a more modest [arrangement] right now, earn-and-burn and some other aspects, but significantly could be pushing forward into something more robust, but they're trying to stay out of the eyes of justice.
Karen Walker: Can I just interrupt you there? I'm sorry. You just said JetBlue-United. So again, I just want to clarify, we just talked earlier about the NEA with American Airlines ending, and this is part of their strategy for JetBlue, isn't it? They've announced an agreement with United, but it's quite different, as you say, they're trying to stay out of the eye of the Department of Justice and antitrust and all of that, but it's not as big as the NEA, correct?
Chris Sloan: For sure. Yeah, thank you. That's exactly correct. And then both airlines have actually been significantly affected by the GTF engines, though JetBlue more significantly. It's interesting, the E2 operators do have the benefit of not having as much of the commercial delivery delays, but those airplanes don't operate as quite as much the thrust on the 1900s as the A320/220. So, though it has not been great for them, it's not been anywhere near the impact it's had on the JetBlues and Spirits and GOLs of the world. You want to talk about the differences. I think that's really important. Porter starkly, the one-liner elevator pitch on this is Porter solidly is a growth story, where JetBlue is shrinking its way to return to profitability and growth. The most interesting takeaway out of this that I saw is that Porter realizes that in a market of the size of Canada being number three, and we're talking about 40% domestic, maybe they're around with Air Canada, maybe they're around 10%, they realize long-term that that is not necessarily tenable.
So, their strategy is to, at breathtaking speed, create national relevance and take advantage of the fact that WestJet retreated to the West. So, they are now very strong, a strong number, not a strong number two, but they're definitely the challenger brand in Eastern Canada and they're going for it. I cannot think of another growth story in the last three years post-COVID that can compare to this, in a recent model. They're strategy is we are going to scale so fast and we're going to scale and we're going to find unique niches before Air Canada. And they say this bluntly before Air Canada can kill us, it's like whack-a-mole before they can take us out before they see what's happening, we're going to go for it. And in addition, what they have that JetBlue doesn't is because the Dashs, which once the business model changes, they have a significant more amount of regional feed, which of course competes against Jazz [a Canadian regional airline].
And so these guys, they've been a niche boutique player, they're going for it to play at that level, though they're not flying long haul. That is where you get in the Air Transat position. They're not introducing first [class]. That's what JetBlue is doing. JetBlue is shrinking to return to profitability and growth, has determined its beachheads, but JetBlue is going for it to be adding lounges, adding first class, adding more premium. That's not the Porter story. They are still sticking to this high-level economy service. And it should be said again, just so we get this apples to oranges, is that in terms of ASMs, JetBlue is still 20 times the size of Porter. JetBlue's fleet is four times larger. JetBlue has six times number of employees. And the biggest difference is, which has made this story really interesting to unpack, is that JetBlue is a public company. We know a lot more about them. Porter is private; they have institutional investors that have been there since the beginning, but their overall situation, finances are much more opaque. And what they will say, pretty much all they'll say is, well, of course we all know JetBlue's profitability story is challenging, but Porter said, well before COVID we were, and right now in this incredible growth phase we're not, we will probably eventually go [public], but our investors are patient. That's kind of all we know about Porter's finances.
Karen Walker: That is interesting. You've mentioned the Dash 8 turboprop a few times as well. I'll just quickly say that's in many ways an ideal aircraft for many of the Canadian destinations and routes, isn't it? It's operationally very reliable, very efficient. You get great numbers on that, and it just works so well with the geology and climate of their destination. So that's an advantage they have. But as you say, it's interesting that actually getting numbers out of them is much more difficult.
Chris, can I just ask you, having been to see both airlines pretty close, and I know you know these airlines well anyway, but having had this closeup time with them, what was your sense of either optimism or caution for each airline in terms of where they're going and how the strategies are going to play out for each?
Chris Sloan: So the top line is we all know that JetBlue has created this JetForward program. Four pillars really about improving service, restructuring its network. They've exited like 52 cities, 52 routes, 12 Blue cities, and we talked about where the new linchpins and moats they're trying to create. And then also the added notion of premium and really supercharging lounges and supercharging loyalty and then significant pullbacks in terms of the deferring significant amounts of those 44 A321neos [which are on order]. And the goal there is to generate something like particularly improving operations around $8 million to $9 million in incremental EBITDA. So, when you talk to, and then the Blue Skies alliance. So, when you talk to JetBlue in the terms of optimism, when I talked with them, of course there's optimism, but then we see and they have seen strides in each of their four pillars. But then in mid-June there was that internal memo that came out from Joanna Geraghty, the CEO, that demand and bookings that have softened and it's pushed profitability again, now they're not going to see it this year. They were guiding. So now it's [going to be] 2026. So, in response, they're having to make additional cuts in terms of leadership, potentially employee travel. There were some pretty significant network shakeups. They pulled out of Miami, that was a big market coinciding with the NEA, and really refocusing on a number of fleets. So, they're going back in to do more surgery. So, there is optimism, but it now seems to be pushing out longer.
Karen Walker: Again, I just want to clarify, Chris, that they were hoping to be profitable, but overall for the end of this year, and they're now saying 2026 is the goal, correct?
Chris Sloan: That is correct. As we talked about Porter, just to give you a sense of the growth in the last two and a half years, they've increased capacity by 150%. They serve 22 destinations, 28 routes in 2023, and now it's up to 66. So, this notion of creating these beachheads is like this multi airport strategy in Toronto. So, they're serving, they've just added Hamilton, which is 40% of the market, and so they want to develop that into a significant hub. So, they've now surpassed in the Toronto area, which is the largest catchment area in DMA metro of the country, they've surpassed WestJet. And so, Hamilton is going to be a massive growth area. Same with Ottawa. Now Ottawa, kind of like Washington DC, in a sense—it’s a little bit sandwiched; this is the capital—but Air Canada has been the strongest airline in that market. But now out of nowhere, Porter is at 36% at close to Air Canada.
And what's interesting about what they point out is that Ottawa, which everybody overlooks, is the size of Calgary. So that's the size of WestJet's hubs. So, they've now in the nation's capital are on their way to becoming number one. That's their goal. And they've built a massive hangar. And then the biggest thing they've done is that they're going to tear a page from what they did in Toronto. And at the end of this year, early next year, they're going to create the same multi-airport strategy. And in Montreal, St. Hubert, which is a significant airport, it’s like what Seattle and Paine Field is, they're going to create a new hub. It's not just—like Alaska did with a few flights—they want to create the same critical mass at Hamilton and at St. Hubert as they do at the main airport. So, they're going to, again, build this multi-airport strategy and we're talking long haul down to the US with jets.
So, they are looking and then the last thing they're doing is in response to what we saw in America is that, I mean, this creates a lot of operational pressure, but they're going to an airline that has never served any international destination beside the United States. Beginning in December, they're going to add 13 new routes to Mexico, to Caribbean, Central America. And that was always planned. They've got like 40 aircraft on order, but now because US cross-border traffic is down, they've got to find a new place to put these airplanes. So, all these new markets are going to have Hamilton, St. Hubert, you could see point-to-point service into the Caribbean market they'd never been to before. So that is super-aggressive. And then on top of this, they've created a partnership with Air Transat and that gives them—these airlines only overlap on a few route—that gives them massive international codeshare scheduling and pricing coordination and, most importantly, loyalty. And so, Air Transat tried to merge with Air Canada; that did not pass muster with the competitive authorities. You could see where this is going. So, this is their way of battling Delta and WestJet and Star Alliance and United. And so, when you look at their optimism again, they say, we need to scale as fast as we can to win this shakeout, which they see a shakeout coming in the Canadian market.
Karen Walker: They're fascinating, as you say, certainly some similarities, but certainly some differences. And many of the differences are out of necessity of the market they're in and the situation they're in. They're both airlines are going to face incredible competition in their home markets against this. They just are. There's no way that Air Canada is just going to let Porter run free on all of this. So, it's going to be very interesting to watch this, and I really thank you, Chris for joining me today and give us some insights on that. So please make sure everybody that you do check out Chris' features. You'll get more information there. We will post the JetBlue feature first and then the Porter feature and both will be on aviationweek.com/atw. So, thank you again, Chris, thank you also to our producer Cory Hitt and of course a huge thank you to our listeners. Make sure you don't miss us each week by subscribing to Window Seat on Apple Podcasts or wherever you like to listen. This is Karen Walker disembarking from Window Seat.
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