Tags: Air France | BA | Carriers | 1.1 Billion | EU | Fines

EU Fines Air France, BA, Others a Total of $1.1 Billion

Tuesday, 09 November 2010 03:31 PM

Air France-KLM Group and British Airways PLC were among 11 carriers fined a total of 799.4 million euros ($1.1 billion) by European Union regulators for coordinating fuel and security fees following the 2001 terrorist attacks.

Air France and its units got the biggest fine of 339.6 million euros. British Airways was fined 104 million euros and SAS Group AB got a 70.2 million-euros penalty, the European Commission said. Cargolux Airlines International SA, Europe’s third-biggest air-freight carrier, was fined 79.9 million euros.

“It is deplorable that so many major airlines coordinated their pricing,” EU Competition Commissioner Joaquin Almunia said. The extra costs in the aftermath of the attacks on Sept. 11, 2001, weren’t “an acceptable reason to stop competing,” Almunia told reporters.

The EU fines come three years after regulators sent complaints to 26 airlines, following coordinated antitrust raids across the world that led to jail terms for some executives, fines and settlements. U.S. authorities have already fined 18 airlines at least $1.6 billion and filed criminal charges against 14 executives for price-fixing.

Under EU rules, companies can be fined 10 percent of annual sales for antitrust violations. The commission typically opts for a penalty of from 2 percent to 3 percent of sales in cartel cases. Companies may appeal to EU courts.


The fines are “definitely a negative” in a time when “it’s tough being in the airline industry,” said Jacob Pedersen, an analyst with Sydbank A/S in Aabenraa, Denmark.

The global airline industry has lost money in seven of the past nine years, racking up losses of more than $50 billion, according to the International Air Transport Association.

Air France-KLM Group said its combined fine puts its total payout over the provision it set aside to cover the cartel probes. The company said it would appeal the fine.

From 530 million euros set aside as a provision in 2008, Air France-KLM had already paid out almost 330 million euros in fines and class-action awards in the U.S., Canada and Australia, spokeswoman Brigitte Barrand said in a telephone interview.

British Airways said in an e-mailed statement its fine was “within the provision made by the company in its 2006/7 report and accounts.”


The British Airways fine is “manageable” and will have a “modest” impact on the company’s cash balance, which was 1.857 billion pounds on Oct. 29, said Douglas McNeill, an analyst at Charles Stanley Securities in London. McNeill has a “reduce” rating on the carrier’s stock.

SAS, owner of Scandinavia’s biggest airline, said that it will appeal its fine.

“SAS believes that it has not been involved in a global cartel and that therefore, the fines are disproportionate,” it said in a statement to the Stockholm stock exchange today.

Deutsche Lufthansa AG, Europe’s second-largest airline, was not fined because it was the first to inform on the cartel, the EU’s antitrust agency said.

Airlines received reductions in the fines for cooperating with officials, Almunia said. Regulators refused to grant larger reductions to five companies who claimed the penalties could force them into bankruptcy. The EU executive didn’t name those five carriers.

Singapore, Cathay

Cathay Pacific Airways Ltd. was fined 57 million euros and Singapore Airlines Ltd. must pay 74.8 million euros. Air Canada was charged 21 million euros, Chile’s Lan Airlines SA was fined 8 million euros, Japan Airlines Corp. has a fine of 35.7 million euros and Qantas Airways Ltd. got an 8.9 million euros penalty.

Singapore Airlines is disappointed in the decision and “strongly contests” it was involved in fixing prices, it said in an e-mailed statement. It also said it was likely to appeal.

Cathay Pacific, Japan Airlines and Qantas didn’t immediately respond to phone calls seeking comment outside of office hours. Air Canada and its parent, Ace Aviation Holdings Inc., didn’t immediately respond to an e-mail or phone call seeking comment. Cristina Perez, Lan’s corporate affairs manager, wasn’t immediately available to comment.

Almunia said regulators “didn’t find evidence enough” to fine other companies it investigated, including AMR Corp.’s American Airlines, UAL Corp.’s United Airlines, Korean Air Lines Co. Ltd, Nippon Cargo Airlines Co., Alitalia SpA, Air New Zealand Ltd. and South African Airways.

Cargo airlines often work together to carry freight, setting aside as much as 10 percent of space for partners. Carriers’ price structures include surcharges that change depending on reasons such as oil prices and security measures.

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Air France-KLM Group and British Airways PLC were among 11 carriers fined a total of 799.4 million euros ($1.1 billion) by European Union regulators for coordinating fuel and security fees following the 2001 terrorist attacks. Air France and its units got the biggest fine...
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Tuesday, 09 November 2010 03:31 PM
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