European Union Fines Airlines $1.1 Billion for Fixing International Cargo Prices

Strategic Insights -

The European Union has imposed hefty fines on 11 airlines, including Air Canada, for engaging in a price-fixing cartel on international cargo shipments between 1999 and 2006. The airlines coordinated surcharges for fuel and security without offering discounts, leading to higher prices for businesses to transport their goods. The fines, totaling nearly $1.1 billion, are a significant blow to the affected carriers, with Air France-KLM receiving the largest penalty. Air Canada, which had already taken a $125-million provision for the investigation in 2008, received a fine of just over 21 million euros ($29.4 million CAD).

Key Takeaways:

  • The European Union fined 11 airlines, including Air Canada, a total of $1.1 billion for engaging in a price-fixing cartel on international cargo shipments between 1999 and 2006.
  • The airlines coordinated surcharges for fuel and security without offering discounts, leading to higher prices for businesses to transport their goods.
  • Air France-KLM received the largest fine, totaling 310.1 million euros, followed closely by British Airways PLC, which was fined 182.9 million euros.
  • Air Canada received the third-highest fine, with 21 million euros ($29.4 million CAD), which is covered by the $125-million provision taken in 2008.
  • The investigation stopped in 2006, when the European Commission found that the airlines had coordinated their actions on surcharges for fuel and security.
  • The commission dropped charges against 11 other carriers and one consultancy due to lack of evidence.
  • Lufthansa escaped a fine because it blew the whistle on the cartel.

Statistics:

  • Total fine: $1.1 billion
  • Number of airlines fined: 11
  • Fines imposed on airlines, in euros: 650.3 million (Air France-KLM), 182.9 million (British Airways PLC), 21 million (Air Canada)
  • Total provisions taken by Air Canada: $125 million
  • Date of start of cartel: December 1999
  • Date of end of cartel: February 2006
  • Increase in prices for businesses due to cartel: Not specified

Sources:

  • The Hamilton Spectator, 2010
  • European Commission