A NORTH-EAST airport has suffered a crushing blow in a High Court battle to gain £12m damages after a budget airline withdrew its services.

Peel Airports, who own Durham Tees Valley Airport, (DTVA), blamed bmi baby for the shattering losses it suffered after the airline ceased operations from the North-East hub in 2006.

Despite accepting there was a contract, intended to be binding, that obliged the airline to operate two aircraft from DTVA until April 2014, Mr Justice Davis ruled in London's High Court today that "with some reluctance" the terms were too vague to be enforceable.

Judge Davis said bmi baby had taken "a very hard-headed attitude" during the dispute and said: "I suppose that in the commercial world it is in order to consult solely one's own interests without over much concern for the other side's".

DTVA had its damages claim dismissed and is now facing lawyers' bills which could exceed £1m, with bmi baby estimating legal costs of about £700,000.

DTVA has been ordered to pay £125,000 immediately on account of final bills.

However, DTVA was given a glimmer of hope when Judge Davis granted the company permission to challenge his decision in the Court of Appeal. bmi baby was also granted leave to appeal against parts of the judge's ruling.

DTVA's legal team had argued the airline breached a contract, signed in April 2003, which obliged it to fly two of its planes out of the airport for a minimum of ten years.

Mark Brealey QC, told the court the ten-year-deal was specifically requested by bmi baby and was backed up by funding guarantees from the airport and local authorities.

Local authorities were keen to support bmi baby's project to promote the region and the airline was even granted its wish to change the airport's name from Teesside International Airport to include a city name, the court heard.

Mr Brealey said DTVA had problems persuading bmi baby to meet its contractual obligation even before it started North-East operations.

After a series of difficult negotiations, a second contract - known as the "Novation and Variation Agreement" - was signed in late 2005, accompanied by £425,000 in public funding, and £100,000 from Peel Airports.

But the airline continued to make heavy losses at the airport. The company assessed that it would lose £3.2m in 2006 and £2.5m in 2007.

The airline argued it was entitled to make the minimum performance of its contractual obligations and said DTVA's claim the airlines withdrawal will result in a future expected loss of more than £11m was exaggerated.

Mr Justice Davis told the court: "The parties entered into written agreements which they clearly intended to have legal effect and by which, as I have concluded, bmi baby was to base and fly two aircraft from DTVA for a 10-year term.

"Further, it seems to me that throughout bmi baby has adopted a very hard-headed attitude: although I suppose that in the commercial world it is in order to consult solely one's own interests without over much concern for the other side's.

"But, be that as it may, I have decided that it is not legally permissable to imply into the contractual arrangements a term of the kind advanced by the claimant (DTVA)."

Outside the court, Tim Bye, bmi deputy chief executive and legal director, said: "We are delighted with the result of the case, but disappointed that we had to go to court at all and incur the costs and management distraction that litigation involves.

"We were always confident that we had a strong case and we can hopefully now put the matter behind us." The judge has instructed that the majority of the costs be paid by DTVA.