IQALUIT - A battle over a five-year $175-million contract for the food mail program is headed to federal appeals court.

The Canadian International Trade Tribunal ruled Wednesday that the Department of Indian Affairs and Northern Development (DIAND) awarded the contract based on factors it didn't disclose in the tender documents.

Families across Nunavut rely on the food mail program to make nutritious food affordable. The program's contract has been disputed over the past several months. - photo courtesy of Ian McIver

The complaint was filed in September when Canadian North airlines alleged DIAND favoured First Air, who already provided food mail service, in the bid process.

"There were certain points that were awarded subjectively for different criteria of this contract but nobody was privy to who was awarding what points to who," Canadian North president Tom Ruth said in an interview.

"We're so pleased that somebody that is independent...would look at the bid process and would rule in our favour."

Jim Ballingall, vice-president of marketing at First Air, said his company won the food mail contract fair and square.

"We won the contract based on a superior proposal and our track record," he said.

The food mail program subsidizes shipping rates for essential nutritious food for customers in 140 remote and mostly Northern communities. Some clothing and household goods are also covered in the program.

At $175 million over five years, it's a lucrative undertaking and one Canadian North had hoped would help it set up shop in more communities, Ruth said.

"Food mail is a large anchor account for any airline," he said. "It gives you an automatic base of revenue which makes it easier to fly into other communities," he said.

Ruth added that opening up food mail to more than one airline at a time could bring down costs.

Resolute Mayor Susan Salluviniq said food mail is an important service for her community and she would welcome another airline in the game.

"If there's competition the other (airline) will lower their rates, whereas if there's no competition they won't do so," she said.

The ruling orders DIAND to retender the contract or pay Canadian North 60 per cent of "reasonable lost profits." And while DIAND is the department named on the front page of the trade tribunal's decision, DIAND spokeswoman Margot Geduld said it's Canada Post's problem.

"Really the food mail program, it's Canada Post that's responsible for providing service, including negotiating contracts with air carriers," she said. "Indian and Northern Affairs is responsible for policy issues related to the program."

But Geduld also said the department, along with Canada Post and First Air, filed the application for judicial review to be heard in court Feb. 26.

Because the dispute is headed to court, both DIAND and Canada Post had little to say on the dispute itself. But Canada Post spokeswoman Nicole Lemire said the Crown corporation is the body that signs food mail contracts with air carriers.

The most recent food mail contract was vetted by a "fairness monitor."

"A report was provided to Canada Post and the findings were positive," she said.

The trade tribunal ruling also ordered DIAND to pay Canadian North $10,000 to cover the cost of preparing the complaint.