Monday, October 26, 2009

Antitrust Is The New Airfreight Buzzword

Confusion Reigns as Past Transgressions Haunt New Alliances
Shipping News Feature

WORLDWIDE – Statements in the Australian Courts last week only serve to promote more consternation and concern amongst the world’s airlines. With $1.6 billion in fines already levied globally for price fixing, all parties are on their toes when it comes to new agreements such as the proposed tie up between American Airlines (AA), British Airways (BA) and Iberia. The response to a statement of objection to the partnership from the EU regulator on the 2nd October saw share prices drop and this weeks comments that the airlines involved may have to forfeit valuable take off and landing slots to allow the alliance to go ahead.

With the unions involved supporting the plan and the US authorities likely to follow suit we may expect a clash between the regulators of the two groups similar to the abrasive comments made by Neelie Kroes, European Union competition commissioner after Microsoft refused to recognise the EU judgement against them in 2007 and were supported by the US regulator.

Meanwhile comments in a Sydney courtroom seem to indicate Australian prosecutors are considering more charges following their victory over Qantas last year which saw the company fined A$20 million a year after handing over $61 million to the US administration. The Australian Competition and Consumer Commission started proceedings against Qantas and other carriers exactly a year ago with regard to fuel surcharges imposed on air cargo routes. Qantas were quick to admit to the charges and promised to assist the investigation of other carriers. This led to a rapid imposition of a reduced fine in December 2008. Cases against Cathay, Garuda Indonesia, Singapore Airlines and Emirates are still ongoing.

Prosecutors face a challenge in proving the current cases. Defence attorneys have stated that the cases cover over a dozen countries with more than a hundred anti competition agreements involved. This means the prosecution must first prove jurisdiction as laws from state to state vary with regard to competition. Qantas have admitted they expect to incur substantial penalties certainly in Europe, but also possibly in Korea and South Africa.

The EU originally issued objections to twenty six airlines in 2007 following global raids on company offices a year previously targeting air freight rates and fuel surcharges on cargo shipment. The talk is now that, with Ms Kroes due to step down in December, her tenure having been extended by two months, many of the cases will not be pursued. This after intensive lobbying from the airlines involved who point out that penalties will not apply to non EU competitors and that some of the carriers involved are “flagged” beyond EU jurisdiction, where rate agreements are perfectly legal.

Competitors will be no doubt viewing Deutsche Lufthansa AG’s behaviour with some dismay as the German airline will apparently avoid any penalty as they were first to admit to an alleged conspiracy.

As anyone who has worked within the freight industry knows, big carriers whether land, sea or air tend to react very swiftly to major competitors price changes resulting in a tendency for their tariffs to mirror each other. The imposition of currency adjustment factors raise few eyeb