Porter and the owner of the passenger terminal at Toronto’s island airport, Nieuport, sued each other over the airline’s move to relinquish airplane slots and withhold gate fees.Fred Lum/the Globe and Mail
A judge has ordered Porter Airlines and a related leasing company to pay $130-million in damages to the owner of the passenger terminal at Toronto’s island airport, Nieuport Aviation Infrastructures Partners LP, for refusing to pay fees during and prior to the COVID-19 pandemic shutdown.
The ruling from Justice Peter Cavanagh of the Ontario Superior Court of Justice comes two years after Porter and Nieuport sued each other over the airline’s move to relinquish airplane slots and withhold gate fees. Porter, the main airline at the airport near downtown Toronto, said the pandemic triggered a force majeure, or major event, that contractually allowed it to cease payments. Nieuport disagreed, and countersued.
In a decision dated Oct. 19, Justice Cavanagh sided with Nieuport, awarding breach-of-contract damages.
“Porter is not entitled to relief in relation to the consequences of the COVID-19 pandemic from its obligation under the licence agreement to pay terminal fees to Nieuport as they would otherwise be determined,” he wrote.
In a 97-page ruling, the judge wrote that Porter and Porter Aircraft Leasing did not show they were unable to pay the terminal fees. He pointed to Porter Aircraft Leasing’s move to commit to purchasing 30 Embraer aircraft in the pandemic, a “significant capital expenditure.”
“Porter does not assert that its financial circumstances were such that it could not pay the terminal fees. Porter paid other creditors during its suspension of services,” Justice Cavanagh wrote, adding that even if he accepted Porter was unable to pay the fees, he would still reject the argument it was contractually entitled to halt payments.
The dispute began in 2018, when Porter notified Nieuport it planned to stop using unprofitable slots beginning in 2020, a move that would save $12-million a year. Nieuport refused to agree, a decision it took after being unable to find another buyer for the slots, Porter alleged.
Porter’s flights were suspended between March, 2020, and September, 2021. PortsToronto, the government agency that owns the airport, said it supported Porter’s move, according to court submissions, and the Canada Border Services Agency suspended its operations at the airport during this time.
The court heard evidence from Darin Lee, an economist who specializes in the airline industry, who described the pandemic’s effects on air travel as a devastating “black swan” event.
PortsToronto continued to charge rent to Nieuport during the pandemic, even though the airport was largely unused.
Nieuport argued in court that Porter was able to continue paying fees, and pointed to the company’s $135-million emergency loan from a federal government agency.
“Porter may well have acted in a commercially reasonable way by suspending its operations,” the judge wrote. “However, Porter has not shown that, for this reason, it was ‘restricted’ in fulfilling its payment obligation.”
Nieuport, controlled by J.P. Morgan Asset Management Inc. of New York, bought the island airport terminal from Porter in 2015 for more than $700-million. Prepandemic, Porter accounted for 85 per cent of the traffic at the airport and was Nieuport’s biggest source of revenue.
Brad Cicero, a Porter spokesman, said the airline is “disappointed” by the decision. “We are considering a response and next steps in the proceedings, including our intention to [seek permission to] appeal,” he said in an e-mail. “Porter Airlines was prepared to move ahead based on any outcome and this has no effect on daily operations or plans to grow the business.”
“As the owner and operator of the passenger terminal at Billy Bishop Airport, Nieuport Aviation sees strong demand for this downtown Toronto airport and always believed that the contractual obligations in our agreements would be upheld,” Nieuport said in an e-mail. “Our focus remains on post-pandemic recovery and working with all carriers to deliver exceptional services to our three million customers per year.”
However, the judge wrote that the sale of the terminal to Nieuport came with a five-year agreement Porter would pay for 172 slots a day, and Nieuport disagreed the number could vary daily.
A terminal slot, which is the right to take off or land in a specified time period, costs about $950, plus $85 for ground handling of the aircraft, according to a Nieuport court filing.