EU fines airlines for cargo cartel

Qantas is one of 11 airlines hit with fines that could allow for private claims against the companies [Reuters]

Europe’s competition watchdog has hit 11 airlines with over a billion dollars in fines for running a global cargo cartel that included Air France-KLM, British Airways and Japan Airlines.

“It is deplorable that so many major airlines coordinated their pricing to the detriment of European businesses and European consumers,” said European competition commissioner Joaquin Almunia on Tuesday.

The fines, totalling $1.1 bn, were slapped on airlines that span the globe, from Air Canada and LAN Chile in the Americas to Cathay Pacific Airways and Singapore Airlines in Asia and Qantas in Australia.

The 11 cargo carriers coordinated their action on surcharges for fuel and security without discounts over a six-year period, between December 1999 and February 2006, the European Commission said.

The cartel covered flights from, to and within the European Economic Area.

The Air France-KLM group was hit with the biggest fine, $432m , of which $255m was for Air France and $177m for KLM. 

Air France-KLM said it plans to appeal the fine.

“The group will file an appeal against the decision in the EU General Court,” it said in statement.

Five airlines applied for a reduction in the fine, claiming they were unable to pay it, but the commission said none of them met the conditions.

Lufthansa and its subsidiary Swiss International Air Lines escaped a fine under the commission’s leniency programme for being the first to provide information about the cartel.

The commission said it dropped charges against another 11 carriers and one consultancy firm which it did not name.

The cartel initially began with contacts between airlines to ensure that worldwide air freight carriers imposed a “flat rate surcharge per kilo for all shipments,” the commission said.

The cooperation expanded with the introduction of a security surcharge. The companies refused to pay a commission on such surcharges to their clients, the regulator said.

“By refusing to pay a commission, the airlines ensured that surcharges did not become subject to competition through the granting of discounts to customers,” the commission said.

SAS also said it would appeal the fine.

“We adamantly maintain that these isolated incidents do not mean that SAS Cargo has been involved in a global cartel,” the airline’s chief legal officer, Mats Loennkvist, said in a statement.

“We are highly disappointed and strongly contest the considerable level of the fines, which we believe to be disproportionate to SAS Cargo’s actions.”