A judge has ordered Porter Airlines and a related leasing company to pay $130 million in damages to the owner of Toronto Island Airport’s passenger terminal, Nieuport Aviation Infrastructures Partners LP, for refused to pay fees during and before the COVID-19 pandemic shut down.
The decision by Justice Peter Cavanagh of the Ontario Superior Court of Justice comes two years after Porter and Nieuport sued over the airline’s decision to give up flight slots and withhold boarding 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 stop payments. Nieuport disagreed and counterattacked.
In a ruling dated October 19, Judge Cavanagh sided with Nieuport, awarding damages for breach of contract.
“Porter is not entitled to relief with respect to the consequences of the COVID-19 pandemic from its obligation under the license agreement to pay the terminal charges at Nieuport as they would otherwise be determined,” said he wrote.
In a 97-page decision, the judge wrote that Porter and Porter Aircraft Leasing had failed to show they were unable to pay terminal fees. He pointed to Porter Aircraft Leasing’s decision to commit to purchasing 30 Embraer aircraft during the pandemic, a “significant capital outlay”.
“Porter does not claim that her financial situation was such that she could not afford the terminal fees. Porter paid other creditors during his suspension of services,” Judge Cavanagh wrote, adding that even if he accepted that Porter was unable to pay the costs, he would still reject the argument that he was contractually entitled to stop payments.
The dispute began in 2018, when Porter informed Nieuport that it planned to stop using unprofitable slots from 2020, a move that would save $12 million a year. Nieuport refused to accept, a decision he made after he was unable to find another buyer for the slot machines, Porter alleged.
Porter’s flights were suspended between March 2020 and September 2021. PortsToronto, the government agency that owns the airport, said it supports Porter’s decision, according to court submissions, and the Border Services Agency of Canada suspended operations at the airport during this period. .
The court heard testimony from Darin Lee, an economist specializing in the airline industry, who described the effects of the pandemic on air travel as a devastating “black swan” event.
PortsToronto continued to charge rent in Nieuport during the pandemic, even though the airport was largely unused.
Nieuport argued in court that Porter was able to continue paying the charges and pointed to the $135 million emergency loan given to the company by a federal government agency.
“Porter may well have acted commercially reasonably in suspending operations,” the judge wrote. “However, Porter has not demonstrated that, for this reason, it was ‘limited’ in performing its payment obligation.”
Nieuport, controlled by New York’s JP Morgan Asset Management Inc., bought the island’s airport terminal from Porter in 2015 for more than $700 million. Prior to the pandemic, Porter accounted for 85% of traffic at the airport and was Nieuwpoort’s main source of revenue.
Brad Cicero, a Porter spokesman, said the airline was “disappointed” with the decision. “We are considering a response and next procedural steps, including our intention to [seek permission to] call,” he said in an email. “Porter Airlines was prepared to move forward based on any outcome and it has no effect on day-to-day operations or business growth plans.”
“As owner and operator of the passenger terminal at Billy Bishop Airport, Nieuport Aviation sees strong demand for this downtown Toronto airport and has always believed that the contractual obligations of our agreements would be met,” Nieuport said. in an email. “Our focus remains on post-pandemic recovery and working with all operators to provide exceptional services to our three million customers a year.”
However, the judge wrote that the sale of the terminal to Nieuport came with a five-year agreement that Porter would pay for 172 slots per day, and Nieuport disagreed that the number could vary. daily.
A terminal slot, which is the right to take off or land within a specified time, costs about $950, plus $85 for ground handling of the plane, according to a Nieuport court filing.
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