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(Dec 01, 2010) On November 9, 2010, 11 air cargo carriers were fined by the European Commission for maintaining a six-year cartel over surcharges for fuel and security costs. The airlines involved, Air Canada, Air France, British Airways, Cathay Pacific, Japan Airlines, KLM, LAN-Chile, Martinair, Qantas, SAS, and Singapore Airlines, were fined a total of €799 million (about US$1.1 billion). Information on the cartel was provided to the Commission by Lufthansa and a subsidiary, in exchange for which those airlines were not fined. (Bruce Barnard, EU Fines 11 Airlines $1.1 Billion for Cargo Cartel, THE JOURNAL OF COMMERCE (Nov. 9, 2010), http://www.joc.com/air-expedited/eu-fines-10-airline
s-11-billion-cargo-cartel
; Aoife White, Air France-KLM, BA Among Airlines Fined $1.1 Billion by EU, BLOOMBERG (Nov. 10, 2010), http://www.bloomberg.com/news/2010-11-09/air-france-is-among-11-airlines
-fined-1-11-billion-in-eu-cargo-fee-probe.html
; Simon Taylor, Airlines Fined for Running Cargo Cartel, EUROPEAN VOICE.COM (Nov. 9, 2010), http://www.europeanvoice.com/article/2010/11/airlines-fined-for-running-
cargo-cartel/69371.aspx
.)

The decision to impose the fines was based on a finding that the airlines had fixed the amount for fuel and security surcharges at a flat per kilo rate from December 1999 to February 2006. (Taylor, supra.) The carriers may yet be subject to civil suits from businesses seeking to recover extra costs incurred due to the cartel's actions. (White, supra.)

The United States has already imposed fines of about US$1.6 billion on 18 airlines; 14 individuals are facing criminal charges for alleged price fixing. Joaquin Almunia, the European Union Competition Commissioner, speaking in Brussels on November 9, found it "deplorable that so many major airlines coordinated their pricing" and went on to argue that the increased expenses for security following the terrorist attacks of September 11, 2001, were not "an acceptable reason to stop competing." (Id.)

A number of other companies, including Air New Zealand Ltd, Alitalia SpA, American Airlines, Korean Air Lines Co., Malaysia Airline System Bhd., Nippon Cargo Airlines Co., South African Airways, and United Airlines, were investigated but were not fined as there was insufficient evidence that they had participated in the cartel. (Id.)

The responses of the airlines to the news of the fines have varied greatly. Several had funds set aside for any potential fines. While British Airways stated that the fines would have only a modest impact on its finances, Air France and SAS plan to appeal the decision. Singapore Airlines contests the idea that it was involved in price fixing and is likely to appeal, while Cathy Pacific is also considering what action to take. Qantas, which was fined by Australian antitrust authorities for its participation in the cartel, acknowledged that its freight division had behaved improperly. (Id.)

Author: Constance Johnson More by this author
Topic: Aviation and airports More on this topic
Jurisdiction: European Union More about this jurisdiction

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Last updated: 12/01/2010