bunkhog, I'll add some inside info to your arguement. Last year was the first time EVER that the Toronto Port Authority (who runs the island airport) was profitable. This is because in 2006 when Air Canada last operated out of the island, the annual number of passengers was 26,000. In 2009, it was close to 1M, and this year it should be somewhere around 1.6M.
Now, the Port Authority realize that Air Canada is coming to the island for the sole purpose of eliminating Porter. However, Porter makes the Port Authority a lot of money, and the Port Authority has invested a lot of cash in two new ferries and passenger transfer facility. So in an effort to seem not seem monopolistic, the Port Authority has granted 40 slots to Air Canada, but on the condition that they negotiate space in Porter's check-in counter, baggage belt, business lounge, gates, etc. Oh, and Porter owns the fuel farm, fuel trucks, de-ice truck and hangars.
The game is stacked in Porter's favor because the Port Authority will be out a TON of money if Porter fails. SkyRegional is only doing 20 departures to Montreal and thats it. No more slots. In the short run, Porter will loose some passengers, but they will gain fixed revenue from servicing Air Canada, and will get exposure to Air Canada passengers that haven't yet tried flying out of the island. At least some of those will want the same convenience when they need to go to the other 11 destinations Porter serves.
We'll see how long it takes Air Canada to realize that the Island Airport experiment is not winable. Rumor has it that the SkyRegional contract is for 5 years but renewable every 6 months.