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February 20, 2024


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Yesterday’s news about a joint venture between Canada’s Air Transat and Porter Airlines percolated overnight.  The idea they put forward looks smarter the more we think about it.

The strength, as we see it, is their combined fleet capabilities.  Neither is a big airline, but it is not necessarily a disadvantage despite the airline business being about economies of scale.  These two airlines have an attractive combined fleet.


Air Transat, based in Montreal, faces off against Air Canada daily. This is unpleasant, especially since a deal they were trying to do fell through.  Air Canada is the dominant carrier in Montreal, with great feed and distribution. Porter is based in Toronto and was focused on the city’s downtown airport with Dash8s. However, with the E2, they had to move some operations to Toronto’s main airport, where Porter faces competitive pressure from every Canadian airline. Yesterday, Porter announced they ordered another 25 E2s.

We have two Canadian airlines being squeezed.  However, doing this deal allows Porter and Air Transat to combine their capabilities.  Air Transat is essentially EU and Caribbean-focused.   It has virtually no traffic feed and distribution.  Porter is focused domestically but increasingly looks at the US for traffic.  Its E2 has an excellent range to reach into markets across the US.

We brought up the idea of how long-range single-aisle aircraft can disrupt markets a few days ago. That was focused on one airline deploying these aircraft.  The Canadian deal described above involves two airlines using two very capable aircraft: the E195-E2 and the A321neo.

This means the combined capabilities of Porter and Air Transat can take a passenger from Southern California to Paris – probably at lower prices than the current airlines.  Porter gets to sell higher-priced fares, while Air Transat gets the feed and distribution it needs.

To illustrate the potential of exploiting the US, we offer two charts illustrating US air traffic from the I-92.

The first shows the traffic from US hub airports. The upper chart shows the volume of traffic and its destination.  The volume ranges from about 2m to 4m per month.  The lower chart shows the share of traffic airline flag.  The first chart shows traffic from US hub airports.  These are US airline strongholds, as the lower chart indicates.  Bear in mind that some foreign flag traffic is allied by codeshare to US flag carriers.

AirInsight I 92

The message here is if you are running a small airline, stay away from a US hub.  The critical mass that the big US airlines bring to bear will add to operational risks.  Air Transat and Porter are experiencing this on a smaller scale in Toronto and Montreal.

The following chart is like the one above, except now we see non-hub airports. What a difference!  US airlines largely ignore these communities and funnel traffic via their hubs.  This adds a lot of travel time, and each aircraft change at a hub increases the risks of misconnecting.  Ergo, if you live a non-hub US city, you’re much more likely to fly on an airline offering more direct service.

AirInsight I 92

The Porter and Air Transat combination requires aircraft changes at a Canadian hub.  It’s still annoying, but these are typically smaller hubs than US ones.

Long-range single-aisle aircraft are the future for flights up to 4,000 miles (from the last departure point).  Airlines with tools like the E195-E2 and A321neo can exploit the vast US market without exposing themselves to a US fortress hub.  These airlines do not need to take significant risks; the combination of the E195-E2 and A321neo, deployed by the two new Canadian partners, probably requires 50 connecting passengers.  The balance needed for breakeven likely will come from primary O&D traffic.

For example, could these partners draw 50 daily residents of the greater Washington DC region away from Baltimore, Dulles, and Philadelphia to visit Europe?  We think they probably could.  Many similar conurbations offer potential. Moreover, several airlines can do this now without a partner—for example, Icelandair. And if Icelandair wanted a partner for feed, we bet  Avelo and Breeze would be happy to collaborate.

A final word on the extent of the market is apropos. The first chart provides two crucial items: attractive and growing non-hub traffic volume.

AirInsight I 92

The tables provide a context for the above chart.  Non-hub airports account for about 6% of the US international traffic.  This is a positive because the big airlines probably won’t chase this too hard as they are already at ~80% load factor.  This traffic may be too marginal.

AirInsight I 92

Interesting times.

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Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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