Porter Airlines Inc. warned it was losing millions of dollars and threatened to leave Toronto’s island airport in a dispute with the owner of the terminal more than a year before the pandemic sent the air travel industry into crisis.
The battle with Nieuport Aviation is at the centre of a legal action between the two companies over at least $49-million in fees levied by Nieuport, which owns the terminal at Billy Bishop Toronto City Airport.
The Globe reported in May that Porter was in talks with Toronto Pearson International Airport about obtaining landing rights at the large suburban airport, in addition to slots at other Southern Ontario airports as it prepared to launch a regional jet service. The news came as an airline industry publication reported Porter had bought 30 Embraer passenger jets. Jets are not allowed at the island airport. Porter denied it was moving or that it had placed an order with Embraer.
The revelations of privately held Porter’s financial position and warning it might abandon its home base at Billy Bishop are contained in court filings made by both parties in support of their respective lawsuits.
The dispute began in 2018, when Porter notified Nieuport it would begin to reduce its flights at the airport on certain days. Nieuport refused to reduce Porter’s fees or slot allocations, and said the airline was required to pay for 172 of 202 available daily slots according to the agreement the two sides reached in 2015 when Porter sold the terminal to Nieuport for more than $700-million.
In late 2020, Porter sued Nieuport in Ontario Superior Court of Justice for $21-million for breach of contract, seeking forgiveness of as much as $45-million in fees for unused slots. Nieuport filed a defence and counterclaim in March, 2021, against Porter and Porter Aircraft Leasing Corp., which owns Porter’s planes, seeking $10-million in punitive damages and payment of the disputed fees, which total about $49-million for the 12 months ending in March, 2020. Nieuport is also demanding Porter replenish its security deposit with Nieuport with a letter of credit worth $11-million.
Porter alleges in court documents that Nieuport charges slot fees that are three or four times as expensive as those of Pearson, and that it refused to stop levying the fees during Porter’s shutdown in the pandemic. Porter says it cannot operate profitably at the island airport.
“Porter Airlines repeatedly threatened to cease operating at the airport altogether,” Nieuport said in a court document.
Porter pointed to factors that hurt the competitiveness of its operations at the airport: the launch of the UP Express train between downtown Toronto and Pearson, which reduced Porter’s advantage of being close to downtown; the refusal by the federal government to allow jets to land at the airport, undercutting a main part of Porter’s expansion strategy; a limit on the size of aircraft that can use the airport to no larger than Porter’s Q400 aircraft, limiting Porter’s geographic reach; and delays to the terminal’s expansion and the “overall declines in service,” including the loss of free cappuccino, cookies and newspapers for passengers.
Robert Deluce, Porter’s founder, told Nieuport chief executive officer Neil Pakey in a letter dated Dec. 21, 2018, that the airline was forecast to lose almost $40-million in 2018. Mr. Deluce said Pearson’s yearly fees would amount to $50-million less than those of Nieuport.
“Based on today’s market realities, the terminal fees charged by Nieuport are neither economically viable nor sustainable and must be reduced for carriers to operate profitably from [the island airport],” Mr. Deluce wrote. “Without Nieuport’s agreement in the coming months to significantly reduce the terminal fees from 2018 levels, Porter will take any and all additional steps required to protect its shareholders’ investment. Over the past year Porter has completed extensive analysis to consider alternative business and capital deployment strategies in order to preserve shareholder value. … [A]lternatives under consideration include redeployment of our assets into the regional aircraft leasing market and/or the disposition of assets and return of shareholder capital.”
Porter’s forecast net loss in 2019 was $35-million, Michael Deluce, who replaced his father as Porter CEO, wrote to Mr. Pakey on May 3, 2019. Porter planned a “complete cessation” of flights at the airport by April, 2020, Michael Deluce told Mr. Pakey. He later reversed this plan and continued to request terminal slots.
“This is the first time we have seen cracks in Porter’s determination to impose their will on the island and waterfront community,” said Brian Iler, a lawyer and chair of Community Air, an advocacy group, who for 18 years has worked with groups trying to shut down the airport and turn it into parkland. “For Porter to have threatened to leave the island airport altogether, for Porter to demonstrate financial problems, all says to us that their days at the island airport are numbered.”
Porter halted all flights in March, 2020, because of the pandemic. The airline pointed to government travel restrictions, unsafe pandemic conditions at the terminal and the withdrawal of the Canadian Border Services Agency from the airport.
Nieuport, in court filings, said the terminal remained open for business, and continued to charge Porter for its 172 daily slots at about $1,000 each, which amounts to about $5-million a month.
A Porter Airlines spokesman, Brad Cicero, said Wednesday the airline was profitable in 2019 and the losses cited by the executives were merely forecasts, but declined to provide further information because Porter is a private company. He did not address questions about the reported Embraer jet purchase and Porter’s possible move to Pearson. In May, Mr. Cicero said Porter is “not relocating from Billy Bishop.”
The Ontario Superior Court of Justice has combined the two cases and set Nov. 29 as the date on which the trial will begin in Toronto.
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