CPA sues Continental Airlines

After laying off some workers due to the pullout of Japan Airlines and the imminent expiration of its ground-handling contract with Northwest Airlines, Continental Micronesia now faces a legal obstacle over those ground-handling contracts, which the Commonwealth Ports Authority describes as illegal in the absence of a permit.

The CPA yesterday filed with the Superior Court a civil action against Continental Micronesia over the allegedly unpermitted use of airport facilities for commercial ground handling operations for other airline companies, such as JAL and Northwest.

CPA attorney Robert T. Torres said Continental unjustly enriched itself by engaging in commercial ground handling without a permit from the agency, demanding that the airline company turn over to it the proceeds derived from those airport operations.

“Under the circumstances, Continental should therefore pay over to the Authority all revenues and proceeds derived from the use of the airport property as required by law and regulations, along with reasonable attorney’s fees and costs incurred in prosecuting this action,” Torres said.

Torres alleged that Continental breached its contract with CPA by not paying for ground handling charges since June 1, 2002. As of March 30, 2005, Torres said the outstanding charges had reached $129,834.75.

Continental has been disputing the imposition of ground handling charges on it by the CPA, based on the complaint filed by Torres. Continental has reportedly asserted that the agreement, which it entered into with the CPA on July 1, 2003, allows the company to perform ground-handling services for other airlines.

But Torres asked the Superior Court to declare that the agreement did not extend to performance of commercial baggage handling services for other airlines. The CPA insists that Continental’s ground handling services for other airlines, such as JAL and Northwest, was a separate commercial endeavor.

Torres asked the court to declare that nothing in the agreement permitted Continental to use the airport free of charge and that nothing therein prevented the CPA from charging the airline company to perform a purportedly separate commercial business. The CPA assesses $5,000 per calendar quarter for a ground-handling permit.

The 2003 agreement between Continental and CPA granted the airline company certain rights and privileges in connection with its air transportation services. Torres said the agreement is automatically renewed every two years absent termination in writing by either party before Aug. 31 of any year.

“The agreement invested Continental with the right to exercise any of the rights and privileges set forth in…the agreement for and on behalf of any other air transportation company or by or through a nominee of Continental,” Torres said.

“The agreement made clear, however, that Continental’s right to appoint and use a nominee did not permit Continental to conduct a separate business, but only to conduct its own airport transportation services,” he added.

Torres said Continental expressly acknowledged in the agreement that the CPA is empowered to amend any fee or charge for use of the airport. He said the airline company agreed to pay CPA various service fees, such as departure facility, international arrival, in-transit passenger, among others. The complaint made no mention about Continental’s compliance with paying the first three service fees.

Torres said Continental refused to obtain a ground-handling permit from the CPA despite the agency’s demand. He asked the court to compel Continental to pay the allegedly outstanding ground handling charges plus unspecified damages and costs related to the filing of the suit.