Airlines penalized following anti-cartel probes
June 30, 2011 Category Airlines and airports, Logistics
Airlines in Hong Kong that fixed fuel surcharges on freight in a collusive process supported and approved by the Civil Aviation Department (CAD) have been the subject of investigations by cartel-busters across the globe. The probes, which began in 2006, have resulted so far in USD3 billion in criminal and civil penalties to internation for airlines including Cathay Pacific Airways. Four airline executives have been jailed. Ongoing criminal investigations and civil claims for compensation in North America, Europe, Australasia and Asia could make the final bill much higher. At issue is the way fuel surcharges were assessed and agreed by airlines around the world between 2000 and early 2006. In Hong Kong, the CAD allowed airlines to submit applications collectively through the Board of Airline Representatives. The surcharges were assessed using an aviation fuel index compiled from a basket of fuel oil prices rather than the prices the airlines paid for their fuel. Department Spokeswoman Cherrie Cheung said: “The CAD has approved a mechanism under which airlines operating into and out of Hong Kong may file to levy a cargo fuel surcharge. The mechanism works on the basis that airlines may adjust their fuel surcharges in accordance with the changes of the aviation fuel index based on average weekly spot prices of aviation fuel from published oil industry sources.” The board began submitting filings on behalf of member airlines in early 2000 and continued until mid-2007, when the airlines applied individually to the Department. By then, the U.S. Justice Department and anti-cartel regulators had started investigating airline fuel surcharges. Two former Cathay Pacific Airways executives are among a number of airline managers who have been excluded from a series of plea-bargain agreements between carriers and the U.S. Justice Department to settle allegations of price fixing. Kenny Tang, formerly General Manager for Cathay Pacific Cargo, and Thomas Wong, who was the airline’s head of cargo sales for Hong Kong and China, may now face further charges. Tang is currently COO at Hong Kong Aircraft Engineering, the Swire Pacific aircraft maintenance company, while Wong is Managing Director for Hong Kong and Macao at DHL Supply Chain. Civil claims for compensation potentially worth billions of U.S. dollars are continuing in five countries.
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