The CTA found that Porter's current policy, which contains no requirement to compensate bumped passengers or rebook them on flights of other airlines, is "unreasonable."
Porter is a regional airline with headquarters at Billy Bishop Toronto City Airport on the Toronto Islands.
In February, the CTA ordered Porter to compensate bumped passengers travelling from Canada to the United States. The latest ruling extends that principle to Porter's domestic flights.
The decision follows a complaint filed by GaborLukacs, a Halifax air passenger rights advocate. The decision also orders Porter to revise its policy by July 8.
Advocate opposes $500 goodwill voucher
The airline must provide bumped passengers a free flight back to their point of origin if they no longer want to continue their travel.
The decision will end Porter's practice of providing bumped passengers with a $500 voucher for future travel as a gesture of goodwill, a practice opposed by Lukacs.
"Passengers who pay cash for their tickets must be compensated in cash if they are bumped," he says.
Lukacs has a successful track record when it comes to fighting for passenger rights.
In 2013, the CTA upheld his complaint and ordered Air Canada to pay from $200 to $800 in cash to bumped passengers on domestic flights, depending on the length of the delay.