Price Fixing Probe Scorecard

     Undoubtedly the big story that continues to reverberate around the world is the ongoing price fixing scandal. Already one high profile air cargo executive Bruce McCaffrey of Qantas will take the perp walk into the slammer to do time (eight months) after being convicted in the USA. Here is a scorecard to date and some further thoughts as to what possibly might lie ahead.
One thing is apparent right away.
At a time when aviation is enduring run away oil prices, law enforcement for some reason has descended upon almost every airline and may be checking every airway bill.
     Nobody ever said air cargo was supposed to be easy.

Price Fixing By The Numbers

Ranking*	Airline	Alliance	Price Fixing Status**
1	FedEx
2	UPS
3	Korean	SkyTeam	USD 300 million fine
4	Lufthansa Cargo	Star Alliance	Reported plea deal; immunity and USD 85 million fine
5	Singapore Airlines	Star Alliance	Probe
6	Cathay Pacific	One World	Probe
7	Atlas Air
8	China Airlines
9	Air France	SkyTeam	Probe
10	Eva Air
11	Cargolux		Investigated; took USD 155 Provision
12	Japan Airlines	OneWorld	USD 110 fine
13	British Airways	OneWorld	USD 300 million fine
14	KLM	SkyTeam	Probe
15	Emirates
17	Northwest Airlines
18	American Airlines	OneWorld	Information requested by authorities
20	United Airlines	Star Alliance	Information requested by authorities
21	Polar Air		Information requested by authorities
23	Asiana Airlines	Star Alliance	Probe
25	Qantas	OneWorld	USD 61 million fine; US executive sentenced to jail time and USD 20,000 fine
29	Delta Airlines	SkyTeam
30	Lan Chile	OneWorld	Probe
36	Air Canada	Star Alliance	Investigated; took USD 125 million provision
53	SAS	Star Alliance	Investigated

*   The World's Top 50 Cargo Airlines-Air Cargo World ** According to press reports

Alliance	Members World Cargo Rankings	Total Fines/Provisions
Star Alliance	4; 5; 20; 23; 53; 36 – LH; SQ; UA; OZ; SK; AC	$85 / $125
SkyTeam	3; 9; 14; 17; 29 – KE; AF; KL; NW; DL	$300
OneWorld	6; 12; 13; 18; 25; 30– CX; JL; BA; AA; QF, LA	$471
Non-allied
Cargolux	11 CV	/$155 million

     Star Alliance members seem to have gotten off the cheapest when it comes to actual fines, followed by SkyTeam with 1.5 times the fines plus provision taken and lastly – or actually the top of the heap – OneWorld which has been hit the hardest at 2.25 times the fines compared with the Star Alliance airlines.
     One can only wonder what this means in terms of market share and competition among the alliances and their respective members?
     It is also interesting to look at these airlines in terms of combination carriers, a combination carrier with pure freighters and all-cargo airlines to complete the picture:

Airline	Combination Carrier	Combination Carrier with Freighters	All-Cargo
LH
SQ
UA
OZ
SK
AC
AF
KL
NW
DL
KE
CX
JL
BA
AA
QF
CV

     The equipment used by each category offers clues about the shippers, logistics providers and freight forwarders they serve and the type of cargo each attracts and can best service.
     One question is whether this is a case of over-zealous prosecution by the U.S. and EU authorities similar to how former New York State Governor Elliott Spitzer used to go after Wall Street institutions?
     No one implies total innocence nor should breaking the law be condoned.
     Antitrust is a very serious matter.
     The light top cargo executive attendance list at CNS with many executives obviously refusing to travel to the U.S., could be a sign that right now even non-U.S. airlines’ legal departments are well versed in the provisions of the Sherman Antitrust Act, especially the sentencing fines, 18 U.S.C. §§ and Imprisonment, 18 U.S.C. §§.
     The price fixing matter is so sensitive and toxic and the atmosphere so palpably tenuous that it will not be discussed, on or off the record.
     A reasonable conclusion may be that the matter is far from just going away, in fact currently price fixing is still a rather fluid matter with the second shoe about to drop at any moment.
     Two things come to mind in this context that emphasize how front and center this issue has become.
     Back in the days of government-owned airlines, the playing field wasn’t exactly even – publicly-held airlines had been competing with airlines with access to government funding. The situation evolved over time but it took many years to achieve a balance.
     What is the impact of the fuel surcharge issue on today’s airlines from a competitive perspective?
     Do all airlines pay the same price for fuel?
     If they don’t, there are winners and also rans - to the tune of billions of dollars.
     Is there a level playing field in all of this?
     Web-touring cargo home pages of airlines indicate fuel surcharges are applicable and applied industrywide, whether an airline’s home base is in an oil producing or oil consuming country.
     To make all of these headline-grabbing, price fixing allegations and fines credible and transparent, we imagine it is within the purview of the U.S. DOJ or the EU’s to obtain evidence of actual fuel prices paid in the respective home countries by airlines holding authority to operate into the U.S. and in any EU member country.
     In an atmosphere of uncertainty this kind of transparency would not only lend some credence to all this cloak and dagger stuff going on pertaining to price fixing, it also would put a more realistic light on the anti-trust cause and put the issue into context.
     The other day I received a phone call from a person claiming to be an “investigator for a New York law firm”; I was told the call was because I had worked for IATA and what I knew about its role in price setting.
     Clearly, the uninitiated are getting involved— people who don’t know the first thing about the industry and IATA, and who don’t really care about facts smell blood in the water!
     EU and U.S. authorities vigorously hound airlines alleged to have conspired of fixing fuel surcharges, yet the same level of scrutiny and prosecutorial fervor strangely eludes the world’s most notorious and germane cartel – OPEC.
     So while fuel price fixing by OPEC goes on unfettered with a vastly more devastating global economic impact, going after airlines which are extremely vulnerable to regulatory regimes is all the rage because it’s easier.
     Your move.
Ted Braun info@tedbraun.com.

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Continental Cargo Carbon Copy      In a world where many are being judged not by the strength of their character but by the content of their carbon footprint, an airline has taken the unusual position of not being bigger, to be better—rather measured, to be responsible.      Continental Airlines Cargo said that it is the first North American airline with a Cargo Emissions Calculator.      So added to the Breathalyzer on the way home, here comes a way to check out the carbon footprint of shipments.      What’s more, CO Cargo says this innovative tool that the airline is introducing with Sustainable Travel International (STI) “provides easy origin and destination entry, and the voluntary option to contribute to carbon offsets for the itinerary by enabling forwarders to quickly determine the greenhouse gas impact of Continental flights, in their logistics chain.”      “Even with the most fuel-efficient fleet among U.S. network carriers, we replaced more than 20 older Classic 737s this year with Next Generation 737-900ERs and 737-800s, said Jack Boisen, Vice President Cargo Division.      “We have more than 100 new advanced-technology, fuel-efficient Boeing aircraft on order. Why hide from carbon issues? We are going to take a leadership position and make it as easy as possible for forwarders to work with us.      “The carbon offsetting option is part of a company-wide commitment to environmental responsibility. “Continental has achieved a 35 percent reduction in greenhouse gas emissions and fuel consumption over the past 10 years, and is the only major U.S. carrier using sustainable biofuels,” Mr. Boisen said.      Now we wonder about airborne-developed green house gasses inside the tube on the main deck?      Stay tuned. Geoffrey

     UPS’ decision of moving its intra-Asia air hub from the Philippines to South China’s Shenzhen rather than Guangzhou, signifies that Shenzhen finally wins a round in the competition with its neighbor.
     Closely located in China’s Pearl River Delta, Shenzhen and Guangzhou “compete against each other intensely, due to the overlap of their location and their positioning in air cargo,” Li Lei, Analyst of CITIC, said to Flying Typers.
     Without UPS’ deal, Shenzhen would have lagged behind Guangzhou in terms of cargo volume as Guangzhou’s cargo volume will be boosted when FedEx plans to open its Asia-Pacific hub there this October.
     According to the agreement signed on May 21 in Shenzhen between UPS and Shenzhen Airport Group, UPS will spend USD$180 million to build a new sorting hub in Shenzhen with five times the capacity of the existing hub in Philippines.
     "Shenzhen's strategic location will provide significant advantages, allowing UPS to better serve the growing Asian markets along these rapidly expanding trade lanes," said Dan Brutto, president, UPS International. "For example, we expect a full day's improvement in transit time on almost 200 city pairs once this hub opens.”
     The Shenzhen hub, expected to total about 89,000 square meters in size (almost 1 million square feet), will include an express customs handling unit, sorting facilities, cargo handling and cargo build-up areas and ramp handling operations. It will be capable initially of processing up to 18,000 pieces per hour - compared to the existing 7,500 pieces per hour in the Philippines - but can be easily expanded to a capacity of 36,000 pieces per hour.
     Mr. Xu Zengheng, Mayor of Shenzhen, states during the signing ceremony: “the modern logistics industry centered on airport and seaport is one of the four Pillar industries of Shenzhen,
     “And Shenzhen Government will provide the utmost support to UPS’ development in Shenzhen.”
     Mr. Huang Chuanqi, President of Shenzhen Airport Group, said: “UPS’ air hub in Shenzhen will effectively connect South China region and Hong Kong through a ground transportation network, developing Shenzhen into a real cargo hub.”
David