Twelve global airlines that ran a cargo price-fixing cartel for years have been hit with fines totalling $1.1-billion by European Union regulators.The European Commission slapped Air Canada (AC.B-T3.43-0.24-6.54%) with the third-smallest fine at €21-million ($29.2-million), but major European carriers received much-larger penalties, led by Air France at €182.9-million, KLM at €127.2-million and British Airways at €104-million.
“It is deplorable that so many major airlines co-ordinated their pricing to the detriment of European businesses and European consumers,” commission vice-president for competition Joaquin Almunia said in a statement Tuesday from Brussels.
Lan Chile had the lowest fine at €8.2-million and Qantas the second-lowest at €8.9-million. Air Canada, Lan Chile and Qantas were given financial leniency “in light of their limited participation in the infringement,” the commission said.
Air Canada acknowledged that European officials had notified the Montreal-based carrier about their decision on the alleged anti-competitive cargo pricing activities.
“The amount of the fine is more than adequately covered by the $125-million provision taken by the company in 2008, and the company is studying the decision and will determine its next steps, including possible appeal,” Air Canada said in a statement Tuesday.
Tuesday’s decision signals the EU will only support further consolidation in the airline industry if it doesn’t produce monopolies or excessive market clout. “We have approved numerous mergers and alliances in the sector. But the existence of an alliance agreement cannot give a blank cheque for naked price co-ordination among the members,” Mr. Almunia said.
Cargo price-fixing investigations have been carried out by regulators in Europe, the United States and Canada. The European Commission and other authorities, including Canada’s Competition Bureau, have been assessing alleged anti-competitive cargo-pricing activities that occurred from late 1999 to early 2006, notably fuel surcharges levied by global carriers and freight companies.
EU regulators detailed the collusion among a dozen carriers, although it classified Air France and KLM as a single corporate entity since the two airlines have the same parent, Air France-KLM, making it a list of 11 cargo entities. Air France-KLM, which also owns Martinair, and Singapore Airlines are among the firms pondering filing appeals.
Air France-KLM said the fines are “disproportionate given the fact that the economic analysis produced within the context of the procedure demonstrated that the actions in question had no detrimental effect on the freight shippers nor the freight forwarders. Moreover, the level of the fines disregards the economic hardship that the air cargo industry has suffered.”
The U.S. Justice Department already has imposed fines of more than $1.6-billion (U.S.) against 18 carriers for conspiring to fix cargo freight rates, including Northwest Airlines, SAS, Cargolux, Japan Airlines and Cathay Pacific Airways.
Germany’s Deutsche Lufthansa AG and its subsidiary, Swiss International Air Lines, received European immunity because the commission credited them for their whistle-blowing roles in exposing the cargo cartel.
“The cartel started with the co-ordination of a fuel surcharge. The co-operation was later extended to cover a security surcharge, introduced after the terrorist attacks of September, 2001, as well as the refusal to pay a commission on these surcharges to freight forwarders,” Mr. Almunia said. “The fact that fuel prices were increasing, or that security costs rose after the 2001 terrorist attacks, is not an acceptable reason to stop competing against each other.”
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