"Lived it Lecture" with Robert Deluce – Entrepreneurship 101 2009/10

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"Lived it Lecture" with Robert Deluce – Entrepreneurship 101 2009/10

welcome back to cibc presents entrepreneurship 101 I don’t have a lot today in terms of course administrivia just a few comments about the upstart competition most of you should have heard from the adviser who has been assigned your case I know a few haven’t namely those who drew me as an advisor and I promise I will get to you tomorrow so we we do seem to be in pretty good shape in setting up those one-hour sessions so that’s about all that I have regarding the course i will tell you today is part of our series are lived it series and we’re truly fortunate to have a special speaker tonight but i’m going to turn the podium over to Ilse terminix Mars a CEO to do the introductions thanks very much Tony and welcome everybody to tonight I am we have a treat in store for you tonight speaker is Bob to lose who’s the president and CEO of porter airlines and he is one of Canada’s true entrepreneurs that brought has brought to the airline industry not just his own experience but he’s family’s experience so this is a little bit like the Michael McKean story where you know it was really in the drinking water from the very very early days and that makes him a pretty fierce competitor for some of the big guys as as they’ve learned so over the last 50 years that the loose family has been involved in doing everything you could possibly do with regional airlines in Canada they started with white river air services nor on ter Austin Airways air cree back air ontario air manitoba airlines canada 3,000 airlines then in 1987 he became the president of the loose capital and currently he’s the president and CEO of porter aviation which holds porter airlines so porter airlines serves started out serving Montreal Ottawa from the Toronto City Airport but as you’ve seen from there absolutely fantastic ads in The Globe and Mail they’ve started to fly to a number of other jurisdictions in Canada and now also across the border and as the border to the US has thickened the attraction of flying from the city city airport has become even more powerful so so how have they differentiated their business well any of us who fly porter airlines regularly know that they have focused really on new innovative approaches and customer service so when you go down to the city Toronto City Airport you will often see Bob and his brother Bill talking to customers and it’s funny how small things become quite legendary i was on a board of company in Ottawa and they always knew I came for her and always asked me for the cookies did I bring any cookies from the Toronto City Airport so we’re absolutely delighted to have Bob here thank you very much for joining us this evening and I hope we all will recognize how lucky we are we going to be inspired to think big tonight so thanks very much Bob thank thank you very much and also thanks for the warm introduction good afternoon ladies and gentlemen it’s really my pleasure to join you and share with you some of the porters story and when I think back almost ten years to those and this whole serious thoughts that we had about putting together a business plan for what ultimately would become Porter it seems like a different world altogether many of the assumptions that we made at the time have held true good number of them as a matter of fact well others change rapidly and and unpredictably it’s unlikely that you can chart a course for any new business without allowing for a few course corrections but in running an airline

you’d better count on it unfortunately portrait progress has been quite positive compared to the more general industry trends that that have taken place particularly in the last few years since taking off back on October 23rd 2006 with service between Toronto and Ottawa Porter has grown to become now Candace third largest scheduled courier our fleet and destinations have expanded building upon a base of toronto city airport and the convenient downtown location along with delivering superior level of customer service now when it comes to starting an airline flying is supposed to be the fun part but they’re really a good number of basic decisions required before you actually get to fly an aircraft before you actually have it in service what type of aircraft will you use what routes and frequencies will you fly how much capital do you have and how are you going to allocate it who is your target market all these seem like pretty simple concepts but the answers don’t always come easily we’ll look at some of these decisions from Porter’s perspective here today everything from operations to customer service sales and marketing regulatory agencies in multiple jurisdictions must be taken into account and in order to succeed you need to identify and deliver on a unique value proposition we’ve been extremely busy since our first flights with everything from aircraft deliveries to opening up some ten destinations to constructing a new terminal so I can tell you from my own experience at the time has passed rather quickly not only for myself but for everyone at Porter I’m not trying to suggest for a moment that it has simply been a matter of selecting destinations and making aircraft available and watching them fill up with passengers that just haven’t been the way that it’s worked it has been an exciting few years comprised of some challenges in thankfully a good number of successes when you’re in the airline business it is wise to prepare for at least a few speed bumps and that’s why we ensured that Porter got off the ground with a fairly unique business plan and with a dedicated team that are delivering results now even with this plan in place a number of issues have come our way somewhere unique to Porter such as local political matters and I’m not going to go too far down that path and talking bridges and mayors and other things like that but while others like oil prices and swine flu were felt by the wider airline industry and then there’s a broader economic uncertainty which impacted everything from government policy to corporate travel and Beyond in much of this news especially more recently created an environment of indecision and retrenchment but Porter continues moving ahead successfully this isn’t something we take for granted but before I go too far off in the direction of lofty economic predictions I think what I’ll do it is shift gears here for a bit and provide a little bit of basic information about Porter and obviously that’s a subject with what should I am a little more comfortable and more conversant the financial community believed in our business plan right from the start we raised over 125 million dollars in equity from some of the most sophisticated institutional investors around before our first plane had actually taken off edge stone Capital Partners all merge strategic investments GE asset management and Dan cap private equity at the time this represented the highest sorry the second highest equity raise for a start-up airline in the world behind only that of JetBlue now the best aspects of a low-cost airline model including high-frequency service ticketless distribution a single type fleet form the basis of our plan along with improved service levels in given Porter’s emphasis on the time sensitive business traveler we are typically able to maintain higher yields or revenue per

passenger than our than our competitors when you combine that with the low operating cost structure a porter this gives us the flexibility to withstand pressures on either end of the revenue cost equation such as to fuel on the one hand or an economic slowdown on the revenue side the investors who signed on with us remain with us today and their continued with support gives us a certain validation that our business plan is being executed in a fundamentally strong and sound way and has a good future Billy Bishop trundle City Airport just more recently renamed represents a key aspect of the porter value proposition there really is no better urban Airport anywhere in the world it’s a piece of transportation infrastructure that makes travel to and from Toronto more attractive whether it’s for business or for pleasure the airport has been revitalized since Porter’s arrival and passed your traffic is now tracking well above 1 million annually to support our growth a new 50 million dollar terminal is currently under construction at Toronto City Airport and is being privately financed by Porter we have over 150,000 square feet of new space that can accommodate more than two million passengers annually along with administration and operations offices as well as retail and food concessions expanded Canadian custom facilities are included and we’ve also initiated discussions now with US Customs for preclearance in Toronto that we hope to have available as our us destinations grow the first phase of that construction and new terminal is actually nearing completion and will be open later this month phase 2 will be ready later in the year probably toward the end of summer it is perhaps the most visible change to the experience since we started flying but it is an investment that we expect will pay off both operationally and for our pastures access to the airport has also improved since Porter’s arrival the Toronto Port Authority operates the airport and invested some 15 million dollars for the initial new ferry and passenger terminals back in 2006 and that provided us for the access we needed to move forward with our business plan this year sort saw the deployment of a second modern fairy with the Port Authority committing an additional five million dollars to double that initial passenger capacity the original fairy will be used as a backup and provide the ability for necessary maintenance rotations without inconveniencing passengers earlier this year plans for a pedestrian-only under channel walkway or tunnel were advanced by the Port Authority in order to support the airport’s ongoing success it should this project move ahead it will provide consistent uninterruptedly both passengers and airport based employees and in our view it’s a fairly elegant solution and one that one that will be very complimentary to the waterfront now passenger service was neglected at this Airport in the 16 years prior to porters arrival but history shows here on this slide for certain that there was strong demand for what we are now offering this slide represents growth / porter and the airport at a time when many airlines have seen traffic drops and have been forced to cut capacity and limit their expansion plans you can see in the slide that in the in the years an approximate of 16 years prior to previous hairline leaving the airport that the traffic did slump and really it drop back to a level of about twenty thousand passengers annually obviously it has increased dramatically in these three short years that we have been there and to achieve that growth I believe that it has been quite important to be a bit bold well at the same time quite strategic the easy response especially more recently would have been to cut back and hoard

resources until things improved but that has not been our approach we now project that Porter will carry just under 1.4 million passengers through Toronto City Airport in 2010 and a number of additional passengers who actually don’t touch the airport including those who fly with us between Ottawa and Halifax and those who travel between Halifax and st. John so just what Toronto City Airport alone it’s a four hundred percent growth in terms of passenger numbers from 2007 through to present time just to put this into perspective Porter will be carrying more than 50 times what air canada handled in its last full year operating at Toronto City Airport in 2005 if i can put another way Porter is carrying the previous carriers annual traffic approximately every three to four days with the introduction of sudbury in March Porter will be serving 12 markets outside of Toronto will be the only will have the only nonstop flight from Canada to Myrtle Beach as of februari 28th eliminating the hassle of travelling through other airports in the US or a very long 19-hour Drive Boston service began back in September with the highest percentage of pre bookings against target for any of our us destinations to date so much so that a fourth daily flight was quickly added in November a short time after we had started a number of other destinations such as Ottawa with its 17 daily return flights Montreal with 14 Quebec City with three Halifax with five in New York now with eight return flights a day are also seeing more porter servers adding flight frequency to key markets such as these is an important part of Porter’s growth strategy along with introducing new cities to the network we basically want our passengers to have porter flights available to them whenever they need it the demand is there and we intend to meet it as far as new destinations go we still view Philadelphia and Washington as leading cities on the short-term list for US service when we anticipating having at least one of these on the schedule this coming year we’re also looking domestically in considering new destinations that are just a bit closer to home and as a means of further knitting the existing network together the ability to book connecting flights was also introduced this past year and we knew that a significant number of passengers were already creating their own connections by purchasing multiple flight segments when we didn’t anticipate was the sharp an immediate revenue spike experience when this function was actually turned on and as a network continues expanding we do anticipate that this source of revenue will actually grow significantly a little bit on competition when Porter indicates that it is entering a new market the competitive response is predictable and consistent to put it simply other airline’s don’t want us in their marketplace the biggest weapons used against new entrance by established airlines are price and capacity typically they slash fares add flights or use larger aircraft and the Adept objective is always to keep passengers from trying out the new comer on the basis that they can still get the lowest price in a convenient flight on the carrier they already know in addition from roots with little or no competition are often used to subsidize lower fares on the highly competitive routes once the new entrant disappears fares magically rise to previous levels are higher and the customer takes it on the chin when Porter Anders a market we typically see the lowest fares on any given route drop by approximately fifty percent or more pushed lower by westjet or Kenda and others Porter currently boasts a fleet of 18 Bombardier q400 aircraft in by spring actually by April this number will grow to 20 and it’s also quite possible that will place a follow-on order in order to continue our

growth track these planes are assembled just up the road at Bombardier downsview facility which gives us an X and that’s an extra sense of pride just knowing that thousands of highly skilled design and manufacturing jobs are being supported right here in our home city the efficiency and performance characteristics of the q400 make it ideal for Porter’s operation fuel savings of some thirty to forty percent compared versus comparable jet aircraft means that our competitive advantage actually increased as oil prices approach 150 + dollars a barrel back in 2008 we actually operated profitably and didn’t cut get caught with those overpriced fuel hedges as other airplanes did once prices actually declined the q400 also has airtimes that are within minutes of jets on even the longest regional routes and block times that are sometimes less when you factor in the short taxi times for aircraft at Toronto City Airport and we don’t release load factors but we have stated in the past the past year levels have been consistently ahead of targets and Porter doesn’t actually rely on eighty percent load factors like many others in the end of three one reason is the incredible economics of the q400 many operators of this aircraft type are profitable with load factors in and around the forty percent level of course this low cost structure does not translate into a discount service for our passengers the porter experience is refined and it’s designed to restore certain amount of dignity to regional air travel for all of our passengers and we will always be price sensitive price competitive but our emphasis is on creating a real value using a combination of speed convenience and service the total passenger experience is something we pay very close attention to everything including the stylish brand the toronto shuttle bus servers the simple check-in process the well-appointed passenger lounge lounges now and premium in-flight service is geared toward increasing passenger comfort and creating a stress-free refined environment these are just some of the attributes that are resonating quite well with our passengers but I think the one which is defining us more and more is service once aboard you receive premium snacks beer wine leather seating and extra legroom all at no added cost on the ground in Toronto and now in Ottawa there is complimentary access for all passengers to lounges with a selection of snacks beverages Wi-Fi and comfortable seating once again these amenities are free this complimentary premium service on its own is often seen as remarkable by passengers in this day and age particularly when most of these amenities are charged for on an add-on basis the fact that we make it available across the board to everyone regardless of fare class adds to the actual and perceived commitment and value our first dedicated passenger lounge outside of Toronto recently opened in Ottawa and as our second busiest airport with now up to 44 daily departures the new lounge is a popular edition for passengers the features in design are much the same as in Toronto for those who have experienced it and the possibility exists for Porter establishing other lounges in the future at our busiest centres and cities Porter’s approach to customer service is recognized in the most recent episodes business travel survey the numbers that you can see on the screen indicate Porter’s exceptional satisfaction levels compared to other Canadian scheduled couriers in fact 93% of actual travelers are at least very satisfied with the service and within this group an even higher percentage was extremely satisfied it shows was quite astonished with these numbers particularly given the fact that we’re an airline they told us that the numbers might actually be difficult to beat in terms of any industry now perhaps the

most controversial decision of all for a toronto-based airline was the use of our of a raccoon as our brand mascot Toronto apparently has more raccoons per capita than any city in the world and they are responsible for a great deal of mischief to put it bluntly we actually call our mascot mr. Porter and he’s only part of our overall branding effort where many aspects of our brand our rather corporate mr. Porter is entirely the opposite he has a playful colorful and mysterious personality which is very useful in terms of our packaging our advertising passenger communicate in other areas that call for attention you can see on screen a couple of examples of how mr. Porter is used in our in our advertising and i also have a brief 60-second animation that i’d like to show you and we’ve used various versions of this animation in TV commercials and movie theater trailers and elevator ads and it’s quite brief but we’ll run it if this works Joshua to the pump there’s been a Mon become a lovely name and it goes from young Bob thank you the Oh thank you I’ve been referred to mr Porter more than a few times and I don’t mind that at all because it means that our advertising is working I think this has been a fairly complete picture of where Porter actually stands today it is a business model for airlines that are succeeding despite today’s economic climate we are continuing to make investments in infrastructure aircraft and people to meet current and future needs I would also like to reinforce Porter’s role as a city builder whether through job creation economic development or in developing tourism when we’re in places like Chicago Boston Quebec City or elsewhere we are busy promoting Toronto in new and exciting ways our team is very proud of Porter and what has been accomplished in a relatively short time period we take great pleasure in providing outstanding service to our passengers and we receive lots of great feedback I’d like to share just two very brief email examples with you the first is one of my favorites it’s short but sweet and I quote I wrote Porter yesterday and I started to feel anxious about why I wasn’t feeling anxious sort of says it all the second email we received just last month and it reads as follows I just wanted to write and let you know that I’ve flown Porter several times and have never had such positive and easy flight experiences from the check into the baggage claims to detect from the tech into the baggage claim you guys know how to do it right and if I could it would be the only way I would fly in that ladies and gentlemen pretty much concludes my presentation thank you very much for your attention I’d be very pleased to take any questions you might have before we before we wrap up thank you so Bob what’s the secret to instilling that culture of customer service in your team do you put them through formal customer service training what what’s something in the water what do you do well it certainly starts with not sure when you can hear off this mike is it working okay working out right

good well it certainly starts with the actual hiring and selection process and think one of the things we certainly think that we did right from the beginning and that was in terms of putting in place right on day one sort of one of the first five or six employees staff members who came on board was actually a VP of people now many companies that I’ve been involved with don’t actually put an HR or a people person in place until it’s almost too late or until they really need one badly and then you’re doing a lot of ketchup so having somebody in place from day one was important so we paid a lot of attention to our selection of people and I think we spent a lot of time setting a certain corporate culture and of course once you have been selected once you’ve agreed to come on board there is a pretty good orientation lots of training it’s a sort of business where you really do have to train and train and retrain again and not only because the regulations that are in place but because of the fact that we have so many touch points with our passengers and we are firstly a customer service business and secondly an airline that flies airplanes to get passengers from A to B now we pay large amounts of attention to safety into every other aspect that every other good airline would would be mindful of but we’re very mindful as well the fact that we’re very cognizant of the fact that it is a business where we don’t have much going for us we don’t have happy passengers who well I just want to know what are some of the biggest challenges that you face when gaming regulatory approval know where to start on that one there were we stop calling them challenges at Porter we now call them speed bumps and there’s you know it’s sort of all from the perspective of glass half-full as opposed to half empty and a speed bump is something in our view it would just sort of navigate around and find a solution for challenges sometimes can be considered insurmountable or without without solutions but the speed bump so we faced have been interesting the debate that we had over the whole bridge issue was one that initially could have been conceived to be a setback but in actual fact i think it probably in many respects was a bit of a blessing because it gave us extra time to probably put in place more significant equity raise that it probably gave us more time to be selective about our initial group that came on board including a very experienced management team to attract people right from the beginning including our chairman Don cardi so that was you know that was called a challenge or speed bump but that bridge issue turned out to be one of those things that initially you might regard as being a bit of a lemon boot in fact we turned it into a lemonade by finding a different solution in terms of access to the airport now there have been a number of other things that have come along some regulatory some that were in the category of either you know swine flu the economic downturn more recently those sort of things all take a lot of you have to be pretty nimble and you have to be prepared to be you know quite flexible and to refocus your activity but you know I think it’s part and parcel what what makes being in any new business or any entrepreneurial business quite interesting and and and it keeps everybody’s attention always there’s never any days where you’re kind of have your feet up in the hammock mid-afternoon or anything like that it just doesn’t happen in the airline sector thank you just listening to a story I have an impression that you guys were very focused in a vision and I imagined the starting on your airline you know is probably knows no small feat and certain small task how did you focus on what’s really important in that vision and then how do you stay true to that over time well I think it started with having quite a focused business plan and well thought through visit plan we mean we did have lots of time to develop that business plan so I can tell you that there were many renditions of it before we finally settled on what we

thought was the best way to go about it when when you couple that was some good experience in previous airline operations prior to Porter I think it was helpful but having said that it’s easy in any business to sort of be a little looking for the right word I mean it it’s easy to if you’re enjoying some success to start popping buttons and thinking that you you know you really got this thing sort of nailed down and I think we always tried to come back to the basic plan that was very focused in quite Toronto centric and we had identified a number of cities that really could support high frequency service to and from Toronto and largely that’s what we have continued to concentrate on and that’s despite the fact that we have had lots of approaches right from BC to you know to a Newfoundland from pretty much every major airport and a good number of them across the border in the u.s. you know right from Austin Texas to you name it to Naples Florida that want you know our type of service so you can kind of get carried away and you can lose your focus but we know that Toronto City Airport gives us some advantage we also know that that the q400 is designed for a certain mission so we’re and it is short haul in regional and we’re again we’re recognizing that that that’s probably where we ought to stay focus especially at this very early stage and that’s what we’ve been doing thank you I have I have two questions what’s the most important skill in being a CEO in your opinion and what do you think is the biggest challenge facing the airline industry over the long term you know everyone has her own style in terms of CEO you know the things that work for you in a particular position but I think that being approachable open and listening is is quite essential and you know you can learn so much from your passengers you learn so much from those who are involved in the airline at a frontline or in any capacity and if you sort of lose sight of that everyone’s why I have to give myself a little pinch because enjoy the advantage of being able to ride any passenger can do it but in my case my office is at the airport and I have parking as does of management and a good number of others wait on the island so we can go across in the ferry you know what I can you know now you can’t use your blackberry when you’re at red red lights I can still use it what I’m going across the ferry so I can get caught up on that and I can do a lot of other things but what I miss out on is the opportunity to interact with with passengers that are either on our shuttle bus from the Royal York or that are on the ferry or that are just in the lobby of the you know the check-in area so and and the same thing goes with the opportunity to interact with a good number of our team members who are using the same mode of transportation that i’m using so instead of getting too cozy in that car in driving all the way down it’s not very far i could leave my house near roseville a subway station and most mornings if I’m timing it right I can be down in about ten minutes including going across the Furious is pretty short but in you know 30 minutes i can i can take and actually be there by using the subway in using our shuttle and and and then having the ability to interact the passengers so you know so being open and listening it’s a bit of a long-winded question of a bit of a long-winded answer to your question the other the other one I’m not sure I’m the most qualified individual to to say what is out there and facing the airline industry sort of globally the most challenging thing I think there are there are you know different issues that come up from time to time you know that the range rate from you know the the volatility of fuel pricing the the the changing FX rate you model things based on a 90 cent dollar and lo and behold it’s you know it’s 82 standards where

it’s a dollar to depending on which way it’s swinging that can be an advantage or disadvantage there’s always the unpredictable you know economic climate as we’ve experienced more recently who don cardi our Chairman who would look at it probably differently for me with his broader experience on sort of a more international basis would give you probably a different answer but that’s the best answer I can give you hello could you please talk a little bit about the risks involved in basing your entire business on one aircraft model and you know I think back to it I think maybe about 18 months ago there were some issues in the news about landings in Europe which caused some trouble for the q45 and then you know a year ago last February’s that tragic incident in Buffalo which was not related to the aircraft but just just a little bit about the thinking involved in running one type of aircraft well it’s a great question and there are many positive things about having a single type fleet there are some negatives and you’ve hit on a few of them that would give you wouldn’t save give you cardiac arrest and it would certainly give you a couple of good gulps if you were in the early stages of anything involving anything from an undercarriage issue to the more tragic and unfortunate accident that happened in Buffalo just back a little over a year ago so when you happen to be operating the kind of aircraft that somebody else is operating and that has had some issue or difficulty with that always his cause for sober reflection and requires a very focused effort to ensure that you have the the latest information the full story and you can make an intelligent decision with respect to whether to pull an aircraft out of service as for a very brief moment in time we had contemplated with respect to the Buffalo accident there were probably a two or three hour time period where we didn’t have enough information and I was prior to her first flight that morning but that happened at about nine something 927 on a whatever night Thursday night or something and and I can tell you that everyone was in high gear within our company by shortly afterwards and my associate Brad cicero’s here with me tonight and he and I were having quite lengthy conversations there at I hate to say it but probably three o’clock in the morning or so and and so you know what are the risks the risks are that you picked a done in terms of an airplane or one that has developed some issues that you weren’t aware of I think the important thing when you’re selecting an airplane in the first place is to go to a manufacturer that has a really good reputation that is that has a track record over a period of time I think it’s also useful to have the airplane in service for a little while you know that’s always handy before you not actually become a big user of the aircraft if that’s your lifeline if you will so on the positive side and I’d like to dwell on that for a bit is the fact that you know when you do have a single type fleet it really does help in terms of your operating efficiency and in terms of of your costs and your ability to provide a consistent seamless service all the way around occasionally you can introduce you know a second type particularly if it’s very similar to the first type so different sizes of Boeing 737 s or different sizes of air buses or of em Briers or of or a bombardier product sometimes can be introduced you know without sort of having all your eggs in one basket and still having most of the efficiencies that go with kind of a you know a hybrid of the of the type anyway that’s a lots of decisions to make when you’re selecting an airplane but big a single thing is your crab manufacturer and their reputation their reliability in their track record seems like most people in Toronto and a lot in Ottawa Montreal as well are familiar with Porter and your advertising I’m just wondering if you’ve done any advertising in us markets where you fly yes we have we we hit all the major newspapers in even places like New York it’s not the expensive not inexpensive to do the wall street journal or the wall street journal help me Brad second one here but tu tu main main daily newspapers in New York were in on a very regular basis we

do touch we do some of the radio and other forms of advertising but I think two things to consider here one remember that almost all of our flights are from Toronto to and from Toronto about fifty percent of our takeoffs and landings or departures and arrivals are from Toronto so concentrating on Toronto is pretty essential now depending on the market some of the markets will be tilted in terms of inbound traffic or more traffic starting in Canada and going to the US and returning that’s the case maybe in every market is a little bit different so and how a market is performing often drives how much advertising we do or what level of exposure we need and you know I can tell you to it’s something we review on a very regular basis and if a market needs more effort whether it’s in the US or whether it’s in you know st John’s Newfoundland or thunder bay if you know our loads and our load factors need a bit of simulation then we you know we were very quick to sort of focus some attention and some dollars in some cases quite significant dollars on that market in order to make sure that the porter brand is understood and is out there as strongly as it is in Toronto know we’ve been in Toronto longer than we’ve been elsewhere so we’re more established here and every time we promote another market whether it was Ottawa is the first instance of Montreal or you know Halifax or or wherever anytime we’re promoting that new market we’re also promoting Toronto so Toronto gets it you know sort of in spades but you know that’s part and parcel of being based right here and having it as our most important center from the point of view of what drives most of our traffic at the beginning of your talk you talked about the assumptions you made in your initial business plan and how so many of them have held true I wonder if you could comment a little bit about what you’ve learned both from the assumptions you got right and from the ones that didn’t turn out the way you thought they would and how that’s affected the way you do your business planning today a good question and one that one that Terry we spend a fair bit of time analyzing what does work and what doesn’t work always but maybe I’ll give you a few examples or a few sort of things that we started off in our initial business plan didn’t contemplate hellofax it didn’t count plate rambla we had a whole we had some 17 other destinations identified as being the ones that we thought would work best what we found quite quickly is that our idea our initial concept of having very high frequency to some of those bigger centers meaning Ottawa and Montreal and New York and elsewhere that that was a really good decision most of the time so instead of starting at two return flights which free return flights to Ottawa which it might might have been the approach others would have taken we sort of rationalized we reasoned that in order to be in that market you had to be in there with enough frequency that your time sensitive business passengers if they got done their their business early they could get on an earlier flight and if they got done later they could still get back so that’s fine until you get to sort of Christmas or summer time period in some of those markets we found actually drop off significantly on the co seasonal basis so you know we had to alter we had to alter our plan there and learn from that and realize that like most airlines in the world you’re dependent on seasonal traffic and the way we dealt with the Ottawa drop off because it does drop off by you know maybe a third you know or 30 30 roughly a third of the traffic goes away in the summer months because it’s a lot of government and a lot of businesses government related we do we took some of that capacity out of that market and put it down into Halifax which is very seasonal a lot of tourists in major traffic over the summer months and never enough seats in the same over Christmas and New Year’s every maritime er has to go home to Halifax or st John’s or wherever it’s sort of if they

don’t there’s stricken from the will you know so that you can never get on flights at that time of year and we were able to take some of the flights off montreal in Ottawa put it on Halifax and it worked out very well but I think this moral that story if there is one is sort of you know even if you have a good plan you better sort out every once awhile step back from it and be prepared to think out of the box a little bit and figure out another way of doing or tweaking that what you would plan to do if you just kind of sit there and grind away thinking about sooner or later this is going to work sooner or later is going to work well you know sometimes you have to alter it look at another example that just give you one quick additional one in the case of trauma first year we went into trumbo just two return flights I think one was thursday or friday and the other would sunday and we were able to add those flights without adding one single additional pilot or flight attendant without adding one additional aircraft and all the world where some incremental operating costs associated with one run the airplane the one hour to to trauma on an hour back so it really was a low cost low risk sort of thing and it added extra frequency extra hours on the airplane better productivity out of existing you know base of individuals it really was quite a good winner today we’re operating most of time aight return flights a week to trauma and i would say will be based on how it’s going so far especially since i haven’t been able to book a flight yet to do go skiing in tremblay we’re probably going to be more like 12 so we went from 225 to i think eight this year and i think next year we’ll probably be at you know more like 12 or more and with as many as five return flights a day on sunday alone everybody goes down thursday friday saturday and they all want to come back sunday we don’t have enough capacity so in any in any event the whole morale that story is sort of you’ll be a little flexible as you go along and learn from some of the from some of the things that pop up hi i don’t mean to be cheeky but you have mentioned a couple of times that you are basing everything on toronto toronto city center there’s only a certain number of hours in the day and only a certain number of flights that you can have go out and back in again logistically does that not put an end point to your business plan or are you planning on making a creating another hub you’ve been listening in on some of our meetings and you can tell a good question again the we’re always examining where we might go next in terms of a hub but we are remaining very disciplined in terms of we intend to saturate toronto city airport to the extent that that’s possible at the earliest possible time before we get too carried away anywhere else I think that makes sense because we do have a certain infrastructure base here a lot of what we have going for us exists right at frontal and so that I think that’s the smart thing to do on our part having said that we have experimented with an Ottawa through the Halifax and we have experimented with hellofax who to st John’s and we have found that we actually are able to export the brand and do quite well in those markets where we don’t even touch on Toronto City Airport so it is possible but it is a second priority and there may be opportunities in the future once we r you know once we’ve sort of come as far as we once we’ve gone as far as we can go at a Toronto City Airport to maybe do some things out of auto arm or Montreal or he’ll fax or who knows we’re down to you know whatever destinations but I think we’ll try to stay regional having said that now what’s region army and could be you know Winnipeg to st. John’s I don’t know it’s all kind of regional I think and all within the capabilities of the of the q400 alright when I was I don’t go south very often but I went down friday to Naples and and picked the best time to go down they had didn’t have snow but but it was cool but I every time went down I have people who asked me when we’re going to start flying the day poles well quite frankly

no time soon but but I couldn’t help but I was I was sitting on the airplane and I knew he was going to take three hours to get back the flight was late and i emailed our director of flight operations and i said the fuchsia how many passengers could you take two to naples from toronto city airport and what’s our flight time going to be and and you know their care airplane capable doing that and winter summer you know different conditions we did come back to me and it was more out of curiosity than anything firstly the airplane is very capable of doing say fort myers or Naples and instead of being three hours of flight time the this sort of gives you an idea of the how good a turboprop the q400 actually yet instead of being three hours of flight time it would be three hours and 30 minutes of flight time so you can see that and and and capable of on an almost full load I’m were under most sort of condition so it was quite interesting and it just sort of a was more from my own my own interest there without any serious intent to start service to Naples or the fort myers I can assure you at this stage so but the airplane does have good capabilities and you know eventually I think we can do some interesting things with it it’s designed as a shorter hall airplane and definitely is a regional aircraft in every respect but with the high speeds that it enjoys and the you know some of the other attributes you actually if you’re going a short haul like an Ottawa you can definitely get to Ottawa with a shorter block time and then you would on a typical regional jet or an a320 or Boeing 737 when you get out to Montreal or to New York or to Boston then you might be about five minutes behind go to Myrtle Beach you’re going to be 15 minutes behind if you go to Florida as i found out when i asked for the numbers on on sunday when i was coming back you know you’re going to be you’re going to be 30 minutes the further out the less appropriate that airplane is for the mission but it’s still not bad just wanted to first of all say my name is aaron young and thank you for coming and speaking to us i’ll call you mr. Porter Jr because it makes you sound younger but my question is I liken you to the Canadian Howard Hughes one of his one of his famous quotes among many was when hiring an employee that he has he mentioned that he would pay double his base salary but that that employee would be working four times harder so technically he was getting the employee at half price how do you liken that to your company and what’s one tip for maximizing I guess the people and the resources that you have and I have a second question after you answer that suit go ahead well I wouldn’t put myself in the illustrious category of a Howard Hughes or anybody like that of course but but you know we do have a philosophy at Porter that the more involved we can get everyone within the company the you know the better off the individuals are on the better off the company is we try to hit sort of a mid-range with respect to salaries and benefits and whatnot we’re not the lowest we’re not the highest we do employ things like profit sharing employee profit sharing we do have within management employee share options and at the point in time that we go public if and when that happens then we could well introduce and across the company employee share purchase plan so there’s a lot of things that we’re sort of thinking about in terms of how to retain individuals and how to motivate and how to keep you know a certain culture in place that lends itself to to high levels of service with our weather important customers and so in addition to that I mentioned that a you know one of the first questions I think the whole question of are you know the emphasis we place on people on the fact that we have a VP of people and we we try to organize as many events and engagements as we can that involve cross-sections of individuals think all those things sort of you know end up creating an atmosphere if you will where people are there and they’re there because they want to be they’re as opposed to because they were merged with another company or because that’s the only job that was available or you know that sort of thing they’re

generally there because they want to be there I think they enjoy at the feedback we’ve had is that they like their contraire their fellow employees or others other team members and and I know just from my own case I mean I go beadon at this business for a while I date myself a little bit when I tell you maybe that I learned to fly at the Island Airport is a high school student in 1966 so that tells you a little bit about it but I actually go to work every morning enthusiastically and not really thinking of it is being work I’m actually I’m actually having a fair bit of enjoyment doing what I’m doing and I think the majority I won’t say everyone but I think the majority of those who are involved in Porter actually there because they actually enjoy what they’re doing sorry just a second part maybe you’ll appreciate the Canadian comparison this time but I find it is it or sharp like the way that and as opposed to lowering I guess the quality of level of service that you you know provide for your customers you actually improve it during an economic downturn to try and steward those customers can you comment on how those actions have generated success another good question i mean i don’t know that we ever anticipated that what we were doing would be would be viewed as positively as it has been we’ve always sort of regarded herself as providing and not necessarily a business or a first-class product from the point of view of how that’s normally categorized but rather providing something that was still premium regional air service and more refined than what you would get elsewhere and that’s where we’ve tried to differentiate ourselves from everybody else who was out there providing a certain type of service so it’s resulted in things like shuttle bus service and lounges and and some premium snacks and Wi-Fi and you know leather seating and more legroom and that sort of stuff most of these things aren’t all that expensive to provide especially some of the amenities in the premium snack box and that sort of thing more recently I think maybe you know it may be as much I want to delude ourselves and thinking that we really had this figured out ahead of time but what we tried to provide is actually work to our advantage especially with the downturn in the economy in the drop off in some of the premium business travel I think we benefited from that that drop-off in on a year-over-year basis many of our markets are so far ahead of where they were a year ago or two years ago that I think some of it has come at the expense of others so passengers who normally would have enjoyed maybe business type seats on other airlines at business type prices when they had to cut back and they had to refocus on two economy seats lower-priced economy seats many of them chose to go somewhere between economy and business beast we’d like to think that we’re fairly nicely positioned somewhere between economy and business in terms of either the type of seat the legroom the what we provide on board and so I think what we’ve inherited is sort of passengers who really perceive porter to be quite a good value proposition and and that really more recently as the overall high-end premium travel has turned down many of those who might only have traveled that before but now can only travel economy have chosen to fly porter because we’re a more refined type of service and you’d normally get if you were at the back of the airplane