15 Dec 2008

Commission takes aim at Air NZ over cargo cartel

9:46 pm on 15 December 2008

The Commerce Commission is taking legal action over an air cargo cartel involving 13 airlines, including Air New Zealand and Qantas.

Qantas and British Airways have already been penalised in Australia.

Seven airline personnel are also accused of involvement in the cartel.

The commission says that airlines throughout the world colluded to raise the price of freight cargo by imposing fuel surcharges for more than seven years.

It says the case potentially involved 60 airlines and many individuals, but it has focused on those parties that have had the most impact in New Zealand.

Commission chairwoman Paula Rebstock says businesses and consumers will have been directly affected by increased air freight costs.

Ms Rebstock says New Zealand is a long way from its overseas markets, making the harm done to the economy and the country's ability to compete internationally greater than in other jurisdictions.

Ms Rebstock says penalties will be substantial if the presecution is successful, but those choosing to co-operate with the commission could have their penalties halved in return.

She says Qantas and British Airways have chosen to take up that option.

Importers Institute spokesperson Daniel Silva says it will support the commission's bid to seek unprecedented fines, if collusion is proven.

Mr Silva says he has suspected price-fixing in New Zealand for some time after numerous other cases overseas.

Air New Zealand denies involvement and says there is no proof that it has any part in the cartel. The airline says attempts to co-operate with the commission were rebuffed.

Air New Zealand's lawyer, John Blair, says the airline has conducted an investigation and found no evidence that it was part of a cartel.

The airline says the commission is grandstanding rather than trying to get to the bottom of things.

The airlines named by the commission are: Qantas Airways, Air New Zealand, British Airways, Cargolux International Airlines S.A, Cathay Pacific Airways, Emirates, PT Garuda Indonesia and Japan Airlines International.

Also named are: Korean Airlines, Malaysian Airline System Berhad Limited, Singapore Airlines Cargo Pte Limited and Singapore Airlines Limited, Thai Airways and United Airlines.

The commission says airlines earn about $NZ400 million a year transporting air cargo to and from New Zealand. It says their total revenue during the seven years under investigation was about $NZ2.9 billion.

Previous penalties

Overseas authorities have also been investigating the air cargo market and Qantas has already been fined in Australia and the United States.

On 11 December, the Federal Court of Australia ordered Qantas to pay $A20 million for breaching price-fixing provisions of the Trade Practices Act.

The airline had agreed to the fine when the Australian Competition and Consumer Commission began legal action in October.

Qantas admitted "understandings" with other airlines on fuel surcharges relating to air cargo between 2002 and early 2006.

The airline said at the time the price fixing did not relate to its passenger service.

On Thursday, the federal court also fined British Airways $A5 million after the airline admitted an illegal arrangement in the airfreight market, during the same time period, with Lufthansa.