Monday, August 22, 2011

Air Freight Carrier Cartel Problems Continue For Cargo Carriers

Airlines Caught Between Authorities and Customers
Shipping News Feature

WORLDWIDE – With the news in the past week that Saudi Arabian Airlines are prepared to pay $14 million to freight purchasers in reparation for fixing the price of shipping cargo in collusion with competitors, the stories of collusion and corruption rumble on and on. This latest settlement of the class action against the carriers comes despite Saudi denials that they were guilty of anti trust activity in the US from the start of the decade up to 2006.

In the American case fourteen air freight carriers from the twenty or so prosecuted have agreed to settle damages in this latest class action for conspiracy and so far the reported settlement figure exceeds $450 million, with more possibly to come. Saudi executives were no doubt anxious to remove the stain from their character before the proposed privatisation of the Government owned national carrier.

Some of the other carriers have put their hands up and admitted the charges, MAS (Malaysia Airlines) agreed to pay $3.35 last month, thus avoiding higher legal fees and the possibility of trebled damages allowed under US anti trust laws should the company be found guilty by the Court. South African Airways also agreed to pay up $3 million in similar circumstances and these are the lowest figures so far agreed in this case.

What is also striking is the number of carriers and logistics groups who have changed their identity since charges were brought in the various anti trust prosecutions we have witnessed in the past few years. Malaysian Airlines became MASkargo in June. NYK Logistics turned into Yusen in April before announcing their appeal against the anti monopoly suit they, and eleven others, were found guilty of by the Japanese Fair Trade Commission (JFTC) in 2009, for which fines exceeding $113 million were levied. BAX integrated into DB Schenker, EGL became CEVA, Geologistics turned into Agility and so on, all after being charged with a variety of offences.

With many of the companies being naturally reluctant to release full details of their positions we are reliant on drip fed information rarely accompanied by a full and frank statement. Many of the problems the carriers and freight forwarders are encountering are due to the differences in rules applied in different states and markets to what is inevitably a global business. A meeting between executives to position a group of competing carriers over rapidly changing fuel prices for example produces a unified percentage rate which is an easy option for all involved, until that is the results are examined by a regulator months or years later.

For any reader who wants an overview of how some of these anti trust cases have developed globally simply type cartel into the News Search Box at the head of the page.