Back in early August I wrote an article on Qantas Airways and their probable collusion on fixing fuel surcharges with other air carriers. This week Qantas paid the US Department of Justice $61 million dollars for fixing cargo prices and fuel surcharges on the lucrative US-Australia trade.
It could have been worse. British Airways got busted by the DoJ and the British Office of Fair Trade for a whopping US $550 million. Other airlines who were found to be in collusion included Korean Airlines. KAL paid approximately US $300 million in fines.
Considering that Qantas booked more than US $600 million in freight during the period under investigation (2000 to 2006), a 10 percent penalty is very modest. The size of the fine is the result of a plea agreement between the US Department of Justice and the airline. As of the original August report Qantas indicated it would accrue US $40 million in anticipation of a fine.
Originally Qantas CEO Geoff Dixon was quoted as expecting the penalty to be substantial but that the impact wouldn't be felt until early 2008. I assume that with the fine being substantially less than that imposed on British Airways, Qantas decided to absorb the cost in their 2007 books. A fine the size of the British Airways penalty however would have put a serious dent in Qantas' earnings and would have had to be managed over a longer period. CEO Dixon also indicated that up to 30 other airlines are under investigation and that the inquiry is still ongoing.
Given the global nature of the multiple airlines involved in the price fixing scandal, A number of large air freight forwarders were also investigated to determine if collusion extended to them. As of this writing, no formal charges have yet been brought against any forwarder/indirect air carrier.
Airlines are not granted anti-trust immunity, therefore they cannot speak to each other, email each other or otherwise communicate relative to pricing or commercial policies. It is legal however to match published tariff rates or to establish tariff rules that are similar in nature. Competition is supposed to drive the market, not collusion.
Eric
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