Fines bolster class action against Qantas

A report by Steve Creedy in The Australian says that Australian lawyers suing Qantas over allegations that it is part of a global price-fixing cartel believe the massive fines levied last week against two airlines bolster their $200 million class action against the airline.

Four airlines have now admitted their part in the cartel, and two — Qantas partner British Airways and Korean Air Lines — have been fined a total of $US850 million ($991 million) by regulators.

BA and Korean were each fined $US300 million as part of a plea agreement with the US Department of Justice over the price-fixing. BA also copped an additional fine of pound stg. 121.5 million ($289.4 million) from the British Office of Fair Trading.

Two other airlines, Lufthansa and Virgin Atlantic, escaped regulatory action by turning whistleblower against the other carriers.

Melbourne class action specialist Maurice Blackburn Cashman, which is suing Qantas and other airlines over the price-fixing, had known that Lufthansa was helping regulators, but the legal firm was surprised to find Virgin Atlantic had also sought regulatory amnesty.

The firm said yesterday it would use the latest developments to support its case.

“These guilty pleas will certainly be tendered as evidence against the airlines in the class action,” firm principal Kim Parker said yesterday.

“Air freight customers will now have even greater confidence in recovering the hundreds of millions of dollars spent on fuel and other surcharges over the last seven-year period in question.”

Maurice Blackburn Cashman is suing Qantas, BA, Japan Air Lines, Air New Zealand, Cathay Pacific, Singapore Airlines and Lufthansa over allegations that surcharges introduced in 2000 were illegally inflated.

It says these may include fuel, security and war-risk surcharges.

Ms Parker said the case would allege that the airlines followed an index originally set up by Lufthansa and used it as a mechanism to inform each other how and when the surcharges were to be imposed. She noted that Qantas had put out a target’s statement in February during the Airline Partners Australia takeover bid, admitting it was likely to have breached competition laws but had yet to say what the impact would be.

She said lawyers would be closely watching Qantas’s upcoming annual report for developments.

The Australian lawsuit is one of two that Qantas is facing: it has also been named in a US class action estimated to be worth $US1 billion.

The market had been expecting the British Airways fine after the airline said earlier this year it would make a pound stg. 350 million provision for the case. But there has been no indication yet of how much Qantas may lose.

Qantas chief executive Geoff Dixon last week told the National Aviation Press Club that the airline did not know where it stood in terms of liability.

“As you know, we had said there was a potential liability, but we’ve not been able to quantify it as yet and we’re still in discussions with a range of authorities on the issue,” he said.

The issue first came to light after Qantas was served by a DoJ subpoena in May last year requiring it to produce documents relating to its freight surcharges.

The airline subsequently admitted that practices adopted by Qantas Freight, and the cargo industry generally, were likely to have breached competition laws.

The February target’s statement said it would take at least 12 months to quantify “any direct or indirect liability associated with these matters”.

Several other regulators — including the Australian Competition & Consumer Commission — are also looking at the price-fixing allegations.

An ACCC spokeswoman said last week that the regulator was unable to automatically impose fines but had to mount a Federal Court case. She said the ACCC had been looking at the allegations and would mount its own investigation.

It was also unclear whether Qantas was one of several airlines the DoJ officials said it still had in its crosshairs.

The department’s statement on the BA-KAL fines indicated it was concerned mainly with price-fixing affecting US freight. The statement said both airlines participated in meetings, conversations and communications to discuss cargo rates on shipments to and from the US.

It said billions of dollars of consumer and other goods were shipped by BA and its rivals and that the airline had participated in the conspiracy between March 2002 and February 2006.

Report by The Mole