Australian court fines Qantas Airways and British Airways for cargo price-fixing

The Federal Court of Australia has fined Qantas Airways, Australia’s national airline, Australian $20 million (US $13.1 million) after the airline admit that it engaged in price-fixing linked to international cargo fuel surcharges.

This is the second-biggest fine levied on an individual company by the Australian Competition and Consumer Commission (ACCC) for price-fixing.

The Federal Court of Australia also fined British Airways, the national airline of the United Kingdom, Australian $5 million after it admitted an illegal arrangement in the airfreight market, over the same time period with Lufthansa.

Both Qantas Airways and British Airways had revealed earlier in December 2008 that they were holing preliminary talks about a merger.

The Australian Competition and Consumer Commission, Australia’s national competition watchdog, had instituted proceedings against Qantas Airways in October 2008 alleging that the carrier had reached an understanding with other international airlines relating to the imposition of fuel surcharges on air cargo across its global networks between 2002 and early 2006.

Graeme Samuel, chairman of the Australian Competition and Consumer Commission, said in a statement: “Qantas Airways admitted to making and giving effect to the understanding, repeatedly exchanging assurances among airlines in the implementation of fuel surcharge increases and reaching local agreements in certain Asian countries collectively. The penalty reflects the seriousness of the contraventions and Qantas’ large share of the market. Cartels, particularly those that are engaged in by large businesses with broad application over a period of time, have a significant effect on consumers. ‘They are an unseen fraud on the community that must be uncovered and punished.”

Qantas Airways, Graeme Samuel added, had undertaken an exhaustive investigation of the allegations after being made aware of the conduct.

Qantas also has been restrained from engaging in similar conduct for three years and ordered to pay $200,000 towards the ACCC’s costs.

The Australian Federal Court’s court ruling on December 10, 2008, confirms an agreement reached by Qantas with the ACCC in October 2008. And, this agreement with the ACCC was one of the last acts by Geoff Dixon before he stepped down as head of Qantas Airways.

The deal had ensured that senior executives of Qantas Airways were immune from further prosecution, with only seven former employees and present freight employees of Qantas being excluded from the deal. Bruce McCaffrey, former head of Qantas’ freight operations in the United States, is already serving a jail sentence.

Qantas had argued that its employees – in some cases intentionally – continued to use an industry-wide fuel surcharge chart published by the International Air Transport Association, without the full knowledge that the graph had been outlawed by competition regulators around the world.

British Airways, the national airline of the United Kingdom, also had struck a deal with the Australian Competition and Consumer Commission and admitted its guilt in the price-fixing scandal.

British Airways also admitted its guilt in the United States, where it paid a fine of US $300 million for price-fixing. British Airways had been fined in the United Kingdom for its involvement in fixing air freight and passenger fares.

Other airlines to admit their guilt to either freight or passenger fare price-fixing in the United States include Japan Airlines, Korean Airlines, Lufthansa, and Virgin Atlantic.