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Case Comment: Air Canada/ Porter Airlines Dispute
Published in the July 2010 issue of Transportation Notes - View Article
On July 21, 2010, Justice Hughes of the Federal Court released an important decision in the long standing feud between Air Canada and Porter Airlines over access to Billy Bishop Toronto City Airport (“BBTCA”).
BBTCA is operated by the Toronto Port Authority (previously, the Toronto Harbour Commissioners) (the “TPA”). It is a small airport conveniently located on an island in Lake Ontario very close to the financial centre of Toronto. The runways at BBTCA can accommodate smaller aircraft (such as Dash 8s) that serve cities within approximately two hours flying time. Perhaps the most lucrative destinations for commercial airlines at BBTCA are Toronto-Ottawa and Toronto– Montreal routes, although numerous other markets are accessible, such as cities in the northeastern United States and Chicago.
Air Canada (and its past affiliates) had operated from BBCTA since around 1990 but never to full capacity. By 2002, Air Canada’s operations at that airport had dwindled considerably. According to the Court, over the years, the number of locations served, the frequency of flights and care and attention paid to the facilities diminished considerably. By the end of 2005, Air Canada was only using six slots per day. It operations at BBTCA ceased altogether in 2006 when its lease with the TPA came to the end of its term. A new lease was offered by the TPA, but it was never signed.
While Air Canada was scaling back, Porter Airlines was ramping up. It had obtained the blessing of the Canadian Competition Bureau for a request to take over 143 of the available 167 slots at BBTCA.
Porter began operations in October 2006 with two aircraft flying to Ottawa, Over the last four years it has added many new aircraft to its fleet, and many new destinations in Canada and the United States. It also invested very heavily in constructing modern facilities at BBTCA.
In September 2009, Air Canada wrote to the TPA expressing an interest in re-commencing service from BBTCA in early 2010. In response (and after meeting with Air Canada about the request), TPA met with Transport Canada, which recommended that the TPA contact an IATA slot coordinator to assist in allocating the available slots.
In December 2009, Air Canada requested that the TPA assign it 74 slots.
On Christmas Eve 2009, the TPA released a bulletin announcing that it had completed a capacity assessment for BBTCA and that an additional 42-92 commercial slots would be awarded by an IATA accredited slot co-ordinator. There were prerequisites to being granted slots, though.
Most notably, the TPA announced that “[c]ommercial carriers must also secure appropriate terminal space from the [BBCTA’s] terminal operator — which has the exclusive right and contractual obligation to provide all commercial carriers with access to its new facility once the construction is completed in 2010.”
It is also important to understand that (according to materials filed by Air Canada) the terminal operator was “controlled by one or more of the same individuals who are shareholders, directors or officers of Porter Airlines.”
Air Canada sought a judicial review of the decision that lead to the issuance of the bulletin (the “Slot Control Application”). In short, its position was that it had been unfairly treated by the TPA.
A second bulletin was issued by the TPA in April 2010 which amounted to a Request for Proposals (“RFP”) from additional carriers at BBCTA, indicating that up to 90 additional slots would be available (fewer slots than had been requested by various air carriers). On the same day the TPA entered into a new Commercial Carrier Operating Agreement with Porter, as the previous 2005 agreement had expired.
Air Canada commenced a second application for judicial review challenging the RFP process (the “RFP Application”).
The July 2010 decision dealt with both the Applications. The decision was considered, lengthy and detailed. It the end, both applications were dismissed on the grounds that they were not properly subjected to a judicial review. Many other issues were considered, but due to the limited space available in Transportation Notes, we will focus on this aspect of the decision.
First, a word about judicial reviews.
The Federal Court Act, R.S.C. 1985, c. F-7 provides aggrieved parties with remedies in respect of a decision or order of a “federal board, commission or other tribunal”. The first issue to be decided: Is the TPA a “federal board commission or other tribunal”?
Air Canada argued that it was because it was a Crown agent under ss. 7(1) and 28(2)(a) of the Canada Marine Act, S.C. 1998, c.C.10, which stipulates that where a port authority is engaging in port activities pursuant to its Letters Patent, it does so an agent of Her Majesty. (The TPA’s Letters Patent authorize it to “licence” federal property).
However, as argued by Porter Airlines, the TPA’s Letters Patent (drafted pursuant to the Canada Marine Act) also state that, in accordance with ss. 28(2)(b) of the Canada Marine Act, the following activities were not performed as an agent of the Crown:
… To operate the port, the [TPA] may undertake the following activities which are deemed necessary to support port operations …:
(j) the operation and maintenance of the [BBTCA] in accordance with the Tripartite Agreement between the ... City of Toronto, Her Majesty…, and the [TPA]…”
The “Tripartite Agreement” has been in place since 1983. It amounts to a 50 year lease of the federal lands, with a requirement that the TPA regulate the overall frequency of aircraft movement.
The Court accepted Porter Airlines’ position on the basis that “the normal interpretive rule is that a specific provision must prevail over a general one”.
Secondly, Air Canada argued (relying on a precedent from the Federal Court of Appeal) that the TPA was a “federal board, commission or other tribunal” because it was exercising powers specifically given to it under the Canada Marine Act, as opposed to the private powers of a corporation.
In this regard, the Court found that the TPA’s Letters Patent did not expressly empower it to operate and manage the airport. Rather, it found that doing so was “a normal business activity.”
In so deciding, Justice Hughes relied on Irving Shipbuilding Inc. v. Canada (Attorney General), 2009 FCA 116, where the Federal Court of Appeal warned against judicial interference in normal business activities, even where the Crown is involved.
In the end. Justice Hughes found that, because the TPA was operating and maintaining the airport as an ordinary commercial activity, the Court lacks the jurisdiction to interfere with the processes in issue in the Slot Control Application as well as the RFP Application.
Both applications were dismissed.
Air Canada v. Toronto Port Authority and
Porter Airlines Inc., 2010 FC 774