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Air Canada AC.B-T is aiming to lure corporate customers by adding 74 new daily flights in a crucial battleground while trying to thwart fast-growing Porter Airlines Inc.'s expansion plans.

Montreal-based Air Canada launched legal proceedings Wednesday, accusing Porter of having an “improper anti-competitive advantage” at Toronto's downtown island airport. The defendants are Porter and the Toronto Port Authority (TPA), a federal agency that oversees the Billy Bishop Toronto City Airport.

In Air Canada's quest to restore its financial health, the controversy about Porter's monopoly at the island airport has gained added importance. Air Canada, which avoided bankruptcy protection last summer after securing financing and negotiating new pension and labour deals, already has been forced to discount its business-class fares to fill empty seats at the front of its planes during the economic downturn.

The TPA is poised to “grandfather” Porter's stranglehold on 120 daily “slots” – takeoff and landing positions – at the island airport, Air Canada said in legal documents to back its application in the Federal Court of Canada for a judicial review of the TPA's slot distribution process announced late last year.

While the TPA has agreed to finally allow competition, the agency will give 50 per cent of any additional slots to Porter, meaning the Toronto-based airline could nab 46 of an estimated 92 slots expected to be divvied up in future.

The result would be that Air Canada and other carriers would wind up with a total of 46 slots at most. Air Canada counters that it needs 74 daily slots to be viable at Bishop airport, aiming to serve Montreal, Ottawa and Newark, N.J.

“For the past nearly four years, Porter has had exclusive access to slots at the island airport,” said Air Canada, which wants to use its Jazz affiliate to compete against Porter. Jazz filed its own Federal Court lawsuit in 2007 against the TPA and Porter, which have denied any wrongdoing.

Air Canada, in making submissions to have its new case heard, said it is seeking “an injunction to prevent the TPA from proceeding” with its strategy to allocate slots in a manner that still heavily favours Porter and allegedly abuses guidelines under the International Air Transport Association (IATA).

TPA chairman Mark McQueen said in an interview that slots will be distributed fairly.

“The process is wonderfully understood and there's nothing about the process that we're going to deviate from,” Mr. McQueen said. “We have not yet appointed an individual who is an IATA-approved person, but that person will follow the protocols.”

Privately owned Porter has emerged as the No. 2 carrier in the eastern triangle of Toronto, Montreal and Ottawa, surpassing WestJet Airlines Ltd. last year, while making strides in stealing business traffic from Air Canada.

“We're anxious to get into the airport. Our customers want us to do that. It is an opportunity that we need to pursue, and so we'll see what the court says, and we'll take it from there,” Air Canada chief executive officer Calin Rovinescu said during a conference call with analysts yesterday.

Mr. McQueen said Air Canada's latest legal move “is an unnecessary step. We're dancing as fast as we can.”

Air Canada is also concerned that TPA insists that Jazz make leasing arrangements with City Centre Terminal Corp., a company headed by Porter CEO Robert Deluce.

Besides nine Canadian cities in its network, Porter currently serves Newark, Chicago and Boston, and will be adding Myrtle Beach, S.C., at the end of this month. It also aims to serve Washington and Philadelphia by the end of 2010.

Air Canada announced Wednesday that its 2009 loss narrowed to $24-million, helped by foreign-exchange gains. The carrier lost $1.02-billion in 2008. Revenue fell to $9.74-billion last year from $11.08-billion in 2008.

In the fourth quarter, Air Canada lost $56-million, or 26 cents a share, compared with a $727-million loss, or $7.27 a share, in the same quarter of 2008. Revenue in the quarter was $2.35-billion, compared with $2.49-billion.