Four major airlines fined $504 million for price-fixing of cargo

Air France-KLM, the world’s biggest airline, and three other airlines have been sentenced to pay total fines of US $504 million for having conspired to fix prices of air cargo. The United States District Court in Washington has ordered that Air France-KLM should pay $350 million as fine, Cathay Pacific Airways Limited $60 million, Scandinavian Airlines Systems (SAS) $52 million, and Martinair $42 million.

Air France-KLM, headquartered at Roissy-Charles de Gaulle Airport near Paris, France, is the largest airline company in the world in terms of total operating revenues, and the third largest in the world in terms of passenger-kilometres. It is a member of the SkyTeam airline alliance. Cathay Pacific Airways Limited is the largest airline and flag carrier of Hong Kong.

Scandinavian Airlines System (SAS) is a multi-national airline for Denmark, Norway and Sweden, and the leading carrier in the Scandinavian countries. Based in Stockholm, Sweden, and owned by SAS AB, Scandinavian Airlines System is a founding member of the Star Alliance.

Martinair, based in Amsterdam, the Netherlands, operates passenger and cargo services to over 50 destinations worldwide. Its services are largely scheduled flights; it also operates charter and air taxi services. The airline’s main base is Amsterdam’s Schiphol Airport, with hubs at Hong Kong International Airport and Miami International Airport.

In a statement, the US Department of Justice said: “The airlines each engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to customers for international air shipments. The charged conduct affected billions of dollars of consumer and other goods – including produce, clothing, electronics and medicines – shipped by these airlines and their competitors in the air cargo industry.”

The actions of these airlines resulted in potentially adding over 10% to the costs of the goods.

The US Department of Justice described the total fines of US $504 million imposed on the four airlines as one of the largest anti-trust settlements in the history of the United States. And, the huge fine of $350 million imposed on Air France-KLM is the second biggest imposed by a US court in a cartel case.

The settlement was a part of a wide-ranging investigation of the air cargo industry dating back to 2001 by the antitrust division of the US Justice Department.

In 2007, British Airways, the flag carrier of the United Kingdom, and Korean Air Lines had pleaded guilty and agreed to each pay a $300 million criminal fine for having conspired to fix cargo rates for international air shipments and to fix passenger fuel surcharges or fares for some routes.

Qantas Airways Limited, the national airline of Australia, had, on January 14, 2008, agreed to pay a criminal fine of $61 million for cargo price-fixing.

And, in May 2008, Japan Airlines was sentenced to pay a $110 million criminal fine for price-fixing.

The charges against the four airlines arise from a joint investigation by the United States and the European Commission into the activities of nine airlines, including Qantas.