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Cargo Cult
by Karen Donovan
Jun 26 2008
Jun 26 2008
Crackdown on airline price-fixing steps up.
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Summary:
The Company, through its subsidiaries, operates in the airline industry. View More
Airlines and price-fixing sometimes seem to go hand in hand.
In the annals of antitrust enforcement, a great chestnut is the tape-recorded conversation of Robert Crandall, the chief executive of
American Airlines, who, in 1982, infamously told the chief executive of Braniff: "Raise your goddamn fares 20 percent. I'll raise mine the next morning."
The taste for price-fixing seems to extend to rates for air cargo. Today, the Justice Department announced a settlement with five major airlines, which agreed to pay criminal fines totaling $504 million for participating in a multiyear conspiracy to fix prices for air-cargo rates.
Air France-KLM is paying $350 million—the second-highest criminal fine levied in an antitrust prosecution. The other airlines pleading guilty are Cathay Pacific Airways, which is paying $60 million, Martinair Holland N.V., which is paying $42 million, and SAS Cargo Group, which is paying $52 million.
Air cargo may sound like a decidedly unglamorous corner of the airline industry, but the Justice Department prosecutors noted that fixing these prices has a wide impact on the American economy.
"Millions of American consumers and thousands of businesses—from the corner store to the biggest corporation—rely on the transportation industry to provide the products we buy, sell, and use every day. This price-fixing conspiracy undermines our economy and harms the American people who, due to lack of true competition, end up footing the bill," Kevin O'Connor, the associate attorney general, said in a statement announcing the charges.
The conspiracy began as early as January 1, 2000 and continued through February 14, 2006, according to the criminal information filed today.
The guilty pleas are the latest in a continuing investigation of the transportation industry. In August 2007, British Airways and Korean Air pleaded guilty, and each agreed to pay a $300 million fine for fixing cargo rates on international shipments. In January, Qantas Airways pleaded guilty and agreed to pay a $61 million fine. And in May, Japan Airlines pleaded guilty and agreed to pay $110 million.
Last month, Bruce McCaffrey, Qantas' former highest ranking executive in the U.S., pleaded guilty and agreed to serve eight months in jail.
Faced with rising oil prices and falling profits, the airline business is under attack—and transformation.
In the annals of antitrust enforcement, a great chestnut is the tape-recorded conversation of Robert Crandall, the chief executive of
American Airlines, who, in 1982, infamously told the chief executive of Braniff: "Raise your goddamn fares 20 percent. I'll raise mine the next morning."The taste for price-fixing seems to extend to rates for air cargo. Today, the Justice Department announced a settlement with five major airlines, which agreed to pay criminal fines totaling $504 million for participating in a multiyear conspiracy to fix prices for air-cargo rates.
Air France-KLM is paying $350 million—the second-highest criminal fine levied in an antitrust prosecution. The other airlines pleading guilty are Cathay Pacific Airways, which is paying $60 million, Martinair Holland N.V., which is paying $42 million, and SAS Cargo Group, which is paying $52 million.
Air cargo may sound like a decidedly unglamorous corner of the airline industry, but the Justice Department prosecutors noted that fixing these prices has a wide impact on the American economy.
"Millions of American consumers and thousands of businesses—from the corner store to the biggest corporation—rely on the transportation industry to provide the products we buy, sell, and use every day. This price-fixing conspiracy undermines our economy and harms the American people who, due to lack of true competition, end up footing the bill," Kevin O'Connor, the associate attorney general, said in a statement announcing the charges.
The conspiracy began as early as January 1, 2000 and continued through February 14, 2006, according to the criminal information filed today.
The guilty pleas are the latest in a continuing investigation of the transportation industry. In August 2007, British Airways and Korean Air pleaded guilty, and each agreed to pay a $300 million fine for fixing cargo rates on international shipments. In January, Qantas Airways pleaded guilty and agreed to pay a $61 million fine. And in May, Japan Airlines pleaded guilty and agreed to pay $110 million.
Last month, Bruce McCaffrey, Qantas' former highest ranking executive in the U.S., pleaded guilty and agreed to serve eight months in jail.
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Airlines in CrisisFaced with rising oil prices and falling profits, the airline business is under attack—and transformation.
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