Daily Management Review

EC fined 11 European air cargo carriers for € 776 million


03/17/2017


The European Commission fined 11 airlines for a total amount of 776.465 million euros for collusion when setting tariffs for air freight in 1999-2006. This decision was made by the regulator for the second time as back in 2010 the EC decision was annulled by the European Court.



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Eluveitie
"Millions of businesses depend on air freight services that provide more than 20% of imports to the EU and about 30% of exports," said Margrethe Vestager, a member of the European Commission on Competition. "Today's decision ensures that companies that were part of the cartel will be punished for their behavior. "

In November 2010, the EC fined 11 airlines - Air Canada, Air France-KLM SA, British Airways, Cargolux Airlines International SA, Cathay Pacific, Japan Airlines Co., LAN Chile, Martinair, Qantas, Scandinavian Airlines System AB and Singapore Airlines for a total amount of about 800 million, accusing them of creating a cartel to fix prices for the transport of goods. The twelfth member of the cartel, Lufthansa and its division, Swiss International Air Lines, were completely exempted from fines, as they revealed the existence of a cartel.

All these airlines, with the exception of Qantas, in 2010 filed suits in the European Court against the EC’s decision. In December 2015, the court annulled it, having discovered procedural errors in this case. Nevertheless, the court did not rule out existence of a cartel. "The EC insists that these air carriers participated in cartel collusion with the aim of fixing prices, and makes a new decision to collect fines," statement of the EC said.

The European Commission notes that the procedural errors have been corrected, while essence of the charges brought by the regulator to the airlines remained unchanged. In particular, the British air carrier British Airways was fined 104 million euros, Air France - by 182.9 million euros. The fine resulted from a lengthy investigation conducted by the EC bodies since 2006 in Europe, the United States and Asia. According to the executive body of the EU, the airlines coordinated their work with regard to mark-ups for fuel surcharges and security fees. This continued from the beginning of 1999 to 2006.

Volume of air freight increased in 2016 and, according to IATA’s forecast, will grow in 2017. The reason for this was favorable conditions and improvement in the economic situation in European countries.

Senior economist at IATA stated that in the past 18 months, the fastest growth rates for air transport rates were noted in October, at 8.2%. George Anjaparidze, a senior economist at IATA, said this at a conference with the media representatives. "By the end of the year, GDP growth was expected to decline due to the stagnation of the global economy, but the situation turned out to be quite different with regard to air transportation," Mr. Anjaparidze said.

IATA expects that air transportation in 2016 will total 53.9 million tons, which is more than a third of the world commodity market and is equivalent to more than 5 trillion dollars. The association forecasts a record volume of traffic, which will amount to 55.7 million tons, considering the growth in demand for 3.5%. Also, IATA believes that the growth trend will continue in 2017. The combined profit of the air freight industry is expected to increase to $ 49.4 billion. Despite this, IATA also noted that this revenue is still significantly lower than the 2010-2014 figure, reaching $ 60 billion. 

source: ft.com






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