Price Fixing Probe Expands

     Many air cargo executives off at a trade show in China and elsewhere around the world awoke to news that Air France/KLM Cargo and others are part of a worldwide investigation connected to price fixing, as a European Commission inquiry into cartel activity in the air cargo business led by Neelie Kroes, Europe’s Competition Commissioner ramped up Wednesday.
     The European Commission raided several air cargo carriers across the European Union countries on suspicion of cartel activity.
     British Airways, Air France/KLM and Cargolux confirmed that they had been asked for information related to alleged cartel activity.
     Recently Ms. Kroes, who once served as advisor to the European Transport Commissioner, has been on a crusade about cartels, describing them as “the most damaging type of anti-competitive practice.”
     "The Commission has reason to believe that the companies concerned may have violated (a European Union) treaty, which prohibits practices such as price fixing," EU Commission said.
     In the USA, FBI confirmed that it is cooperating by probing the air cargo industry for possible anti-competitive behavior and is coordinating activities with European officials.
     According to reports, investigators also have contacted American Airlines, United Airlines, Cathay Pacific, Japan Airlines, LAN and Polar Air Cargo.
     Among possibly other things the EU/FBI investigation involves various surcharges for fuel and for security measures imposed after the Sept. 11, 2001, attacks on the United States.
     We have been thinking about this news since it broke Tuesday.
     Our view is that the entire air cargo industry should be concerned that its image by allegation is taking a hit here.
     This story in the ramped up instant news cyber world might cause many to rush to judgment.
     Right now as the story widens to include some Asian carriers including the biggest air cargo combination airline in the world Korean Air, the point will be brought forward that in a couple world cargo markets some carriers are making more money on fuel and security surcharges than on air cargo rates.
     But that condition has been brought on in part by fuel prices at their highest rate in history, and security demands driven by local and international mandate.
     The rates that cargo companies charge for service are driven by available capacity and we believe by a healthy dose of pretzel logic on the part of some businessmen, rather than surcharge price fixing.
     There is no question that there are some procedures that should be monitored at work today in air cargo, but a multi-continent investigation into alleged cartel activity seems a bit much at a time when enforcement resources might be directed toward the cartel that seems to always get its piece of the action—the mob, and other pressing problems confronting international transportation.
     Sorry, law enforcement.
     Air cargo as a coordinated “cartel” will not fly.
     Maybe some business practices seem a bit strange.
     In front of a detailed report we suppose that it is possible that someone did try and screw the pooch.
     But the notion of a widespread industry "cartel" is misleading.
     Maybe when it comes to pricing in some quarters, air cargo can be described as confused or as “the gang that couldn’t shoot straight”.
     The air cargo industry needs to answer these allegations on principle, and to assure its customers worldwide, as this story continues to unfold.
(Geoffrey Arend)