* Legal battle with Porter continues in Federal Court
* Jazz quarterly profit, revenue fall
* Says confident it can reach new labor deals
OTTAWA, Nov 12 (Reuters) - Jazz Air Income Fund JAZ_u.TO said on Friday it continues fighting for access to Toronto's downtown airport, but Air Canada's a ACa.TO regional feeder airline could not point to any progress in its legal action.
A return to Toronto City Centre Airport, where privately held Porter Airlines has had a monopoly since 2006, is seen as significant for Jazz as it seeks to strengthen its business amid difficult market conditions.
Jazz recently dropped its long battle in Ontario Court with Porter and the Toronto Port Authority, which controls the Island airport on Toronto's waterfront, but it is still seeking a remedy in Federal Court, though no appearances are scheduled.
"The bottom line for us continues to be that we're seeking fair and equal access to a federally owned and operated facility," Jazz Chief Executive Joseph Randell said on a conference call with analysts to discuss financial results.
"We are the service provider for Air Canada, and as I've said before under our CPA (capacity purchase agreement) it doesn't matter where we fly, as long as we fly. And we'd like to have the opportunity to fly wherever Air Canada would like us to fly."
City Centre Terminal Corp, controlled by Porter president Robert Deluce, said this week it will offer access to its new C$50 million ($47.6 million) Island terminal in late summer 2010, when construction is completed.
Randell would not comment on any effort to secure slots, saying it would work through Air Canada on the issue.
Halifax, Nova Scotia-based Jazz reported a 21 percent drop in third-quarter adjusted earnings late Thursday. Profit fell to C$33.2 million, or 27 Canadian cents a unit, from C$42.3 million, or 35 Canadian cents a unit, a year earlier.
Revenue fell 13 percent to C$379.7 million.
Analysts had expected, on average, earnings of 21 Canadian cents a unit and revenue of C$392 million, according to Thomson Reuters I/B/E/S.
Jazz said the revenue drop reflected its revised capacity purchase agreement with Air Canada, notably a C$60 million reduction in pass-through costs for expenses such as fuel and landing fees.
Revenue was also hit by a 5.5 percent reduction in billable block hours and a reduction in the markup charged by Jazz to 12.5 percent from 16.7 percent.
Analysts estimate Air Canada will save between C$40 million and C$60 million in 2010 from the deal, amended in July.
Chief Financial Officer Allan Rowe said on Friday that Jazz expects 385,000 to 390,000 billable block hours in 2009 and an operating margin between 10.25 percent and 11.25 percent.
Rowe said the margin forecast is a "tad conservative", but reflects a typically weak fourth quarter.
"The industry is still challenged and we continue to work on contingency plans. We have a healthy company and we want to keep it that way," CEO Randell said.
"We've recently refocused on opportunities to grow and diversify our business and we are experiencing a slight increase in demand for our charter services."
The company also said it is confident that negotiations under way with crew schedulers, flight attendants, pilots and dispatchers will result in new contract agreements.
Jazz units were up 5 Canadian cents at C$4.29 on the Toronto Stock Exchange on Friday. Year-to-date the units have gained about 29 percent.
$1=$1.05 Canadian Reporting by Susan Taylor; editing by Rob Wilson