Member log in

ComCom wants Air NZ to pay $7.5m in price-fixing scandal

Air New Zealand has agreed to pay a penalty of $7.5 million to settle the long-running, multi-airline cargo price-fixing scandal.

The national carrier is the last of 11 airlines to the settlement table in the cartel case, brought by the Commerce Commission in 2008 and which has seen it receive $35 million in penalties so far.

The competition watchdog says Air New Zealand colluded on fixing the prices of fuel and security surcharges for air cargo and also wants the airline to pay as much as $300,000 to cover the costs of its investigation.

The regulator made its request at a penalty hearing at Auckland High Court today, just days after the airline withdrew a court challenge to the settlement deal.

The alleged price-fixing has been the subject of anti-trust process worldwide, with big settlements from multi-national airlines in Europe and the US.

Some of the alleged agreements appear to have been in place since 2001.

Justice Geoff Venning has reserved his decision on how much Air NZ has to pay. The airline wants the decision to remain confidential for three days after it is released.

In 2006, air freight forwarding services to and from New Zealand generated $450 million in revenue.

The Commerce Commission has received penalties from British Airways, Cargolux Airlines, Emirates, Japan Airlines, Korean Air Lines, Qantas Airways, Singapore Airlines Cargo, Cathay Pacific, Thai Airways International and MASkargo System Berhard, which replaced Malaysian Airlines.

The total stands at more than $35 million.

The commission's Queen's counsel, Brendan Brown, said the appropriate starting point for Air NZ's penalt, to be paid to the government, was between $9 million and $9.75 million.

That compares to a starting points of $13 million and $9 million which the commission sought for Qantas and Cargolux, respectively.

Mr Brown said Air NZ was considered to be more culpable than Korean Air Lines and Singapore Airlines Cargo, and the penalty needed to provide an acceptable deterrant to other airlines and reflect Air NZ's position and size in the industry.

Discounts were awarded for the airline's early co-operation with the commisison in the case, the fact it had responded to information requests, agreed the penalty was appropriate and had no previous contravention.

Air NZ's Queen's counsel, Alan Galbraith, said the "appropriate and pragmatic approach" is to accept the penalty.

The agreed settlement is subject to court aproval and a decision is expected within a few weeks.

The settlement was factored into the company's April earnings guidance, avoids further protracted and costly litigation, Air New Zealand said in a statement.  The airline has already spent $10 million defending the litigation.

The regulator dropped proceedings against Garuda Indonesia, United Airlines and six Air NZ executives in 2011 and discontinued against two Qantas executives in February last year.

Shares in Air New Zealand shares - three-quarter owned by the government - are trading at $1.51.

gbond@nbr.co.nz

More by Georgina Bond

Comments and questions
4

Is the deterrent not to punish people who undertake such actions, not the corporate vehicle?

That is why there is a bill before Parliament to criminalise this type of conduct (as it is in the US, UK, Canada, and Australia).

It is only the shareholders who lose out here. Guess what, that is all of us taxpayers, plus any of us silly enough to own more shares. The commission gets to fairly justify their salaries, the lawyers have already benefited $10 million and the Air NZ executives responsible for the decisions get off scot free. Sounds like good justice at work, those that should pay don't.

Where is Fife now?