Durham Tees Valley Airport wins landmark ruling against bmibaby

In 2004 bmibaby signed an agreement with Durham Tees Valley Airport requiring it to base and operate two aircraft at the Airport for a period of ten years. However in late 2006 the airline withdrew both aircraft from the Airport to redeploy them at other UK airports and subsequently cancelled all services without warning and without agreeing with the Airport any terms for its departure.

The Airport Company instigated a claim for breach of contract against the airline claiming damages for lost income it would have received for the remainder of the ten year agreement.

At the High Court in March 2009, Judge Nigel Davis expressed sympathy with Durham Tees Valley Airport, but ruled the contract too uncertain to enable him to award damages to the Airport because the contract did not contain any provisions detailing how many times each aircraft had to fly each day or to which destinations.

Durham Tees Valley Airport was granted leave to appeal as it argued routes, destinations and frequency of flying were matters left to the airline's discretion but their absence should not prevent a Court from determining damages to which the Airport Company is entitled.

A senior panel sitting in the Court of Appeal comprising Lord Justices Mummery, Toulson and Patten have today agreed with the Airport Company and confirmed that bmibaby were clearly in breach of contract in withdrawing all services only two years into a ten year agreement and as such damages should be awarded to the Airport Company. The Court have indicated that the measure of damages should be the money the Airport would have received had the airline remained and operated its normal services for the remaining eight years of the contract.

If the parties now can't agree on the level of damages bmibaby must pay to the Airport, the Court will determine the sum itself in a further hearing.

Hugh Lang, Group Airports Director for the Peel Airports Group commented, "Today's judgement totally vindicates the action we have been pursuing for the last three and a half years. The action of bmibaby in withdrawing their services was totally avoidable and while we found it regrettable to sue our former airline partner they had left us with no alternative. We are very pleased the Court of Appeal has agreed with our interpretation of the contract and that significant damages are now due to the Airport Company to compensate us for our loss".

Mark Whitworth, Chief Executive for the Peel Airports Group added, "The Court of Appeal have today sent out a strong message that commercial contracts are to be honoured and that any failure to do so will result in damages being awarded wherever possible.

I would like to thank our legal team of Mark Brealey QC and Andrew Thomas of Brick Court Chambers, Geraldine Ryan and Christopher Tyrrell of Hill Dickinson solicitors and Peel's own solicitor Neil Hayes, for their dedication and commitment in achieving a successful outcome in this case."

Neil Pakey, Deputy Chief Executive for the Peel Airports also commented, "We believe this case to be unique being the first time a UK airport company has ever taken an airline to Court over its failure to operate services from that airport.

Historically airlines wanted flexible terms from airports so they could move operations between airports at short notice, if they could negotiate better terms elsewhere. However, in recent times where airports have spent large sums of money on improving infrastructure and facilities, airports such as ours require greater security that airlines will operate there for agreed fixed terms. If an airline enters into such a contract, it can't now simply leave on a whim, as we have now established such contracts are enforceable by the Courts".

Geraldine Ryan, Head of Commercial Litigation at Hill Dickinson, commented: "This ruling will have a significant impact on commercial contracts in the future, particularly in the aviation industry. The Court of Appeal has made it clear that bmibaby had a long-term obligation to operate from DTVA and just because the contract did not spell out precisely how it would conduct its operations on a daily basis, that was no reason to render the contract void.

Furthermore, in looking at damages, the Court of Appeal has ruled that bmibaby could not operate in a way that was uncommercial merely to spite DTVA. The ruling is crucial as airports have to be able to rely on the enforceability of their contracts at a time when the airport industry (in common with all industry sectors) is under increasing pressure".