Huge fines for airline cartel

Marion Dakers
ELEVEN airlines including British Airways have been handed massive fines for running a price-fixing cartel on cargo flights, paving the way for a flood of compensation claims against the firms.

The EU competition commission said the cartel was “deplorable” and fined the companies €799m (£688.4m), following a four-year investigation.

The firms illegally fixed surcharges for fuel and security in Europe between 1999 and 2006, the watchdog ruled.

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

Air France-KLM was slapped with the biggest penalty, €340m, while BA was fined €104m. Scandinavian group SAS was fined €70.2m, which the EU said was higher because the company had previously been caught fixing prices.

Other firms involved in the cartel were Singapore Airlines, Cathay Pacific, Qantas, Japan Airlines, LAN Chile, Cargolux and Martinair.

Lufthansa, which blew the whistle on the secret deals, was found guilty of price fixing but was not given a fine.

Air France-KLM and SAS said last night they will fight the EU’s decision, while Air Canada and Cargolux said they were considering appeals.

Air France said it considered the fine disproportionate and that “the actions in question had no detrimental effect on the freight shippers nor the freight forwarders.”

British Airways said it put money aside in 2006 to pay its fine.

Cargolux’s chief financial officer David Arendt said the punishment “does not seem to reflect a discount to take into account the financial turbulences that recently affected cargo carriers generally and Cargolux in particular. When added to fines already due to other anti-trust authorities this seems a very harsh punishment indeed.”

The decision leaves the firms vulnerable to lawsuits from customers. Claims Funding International, which has already filed a €500m group lawsuit against Air France on behalf of affected companies, said hundreds more claimants are likely to emerge.

Five companies, not named by the EU, asked for a reduction to their fine because they could not afford to pay. The watchdog dismissed these claims, but granted all the firms except Singapore Airlines a discount of between 10 and 50 per cent on their penalties for co-operating with the investigation.