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Published on Friday, June 27, 2008

Cathay Pacific hit with US$60 million fine

WASHNGTON - Five airlines have agreed to pay fines totalling US$504m for conspiring to fix prices for air cargo rates, the US Justice Department says.

The airlines include Air France and KLM, now operated by a single holding company, which is to pay US$350 million.

The other airlines involved are Cathay Pacific, Dutch airline Martinair and Scandinavia's SAS.

The payments come after a wide-ranging inquiry into the air cargo industry by the department's anti-trust division.

A statement by the department said the fine imposed on Air France-KLM was the second highest levied in a criminal anti-trust prosecution to date.

In August 2007, British Airways was fined US$300m after admitting collusion in fixing the price of cargo rates for international air shipments and the rate of passenger fuel surcharges.

Other airlines, including Korean Air Lines, Qantas and JAL, have since suffered similar penalties.

During the period between 15 May 15 2001 and February 2006, the airlines met and agreed cargo shipment rates and levied rates in accordance with those meetings.

The airlines each engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to customers for international air shipments, the department said.

Ultimately, consumers paid higher prices as a result, the department said.

Of the other three airlines involved, Cathay has agreed to pay $60m, Martinair $42m and SAS $52m.

Cathay released a statement saying the US decision “will bring to an end the DOJ investigation of Cathay Pacific Cargo. The fine will be taken into account in the company’s interim results for the six months ending on 30th June 2008 to be announced on 6 August 2008”.

Cathay Pacific chief executive Tony Tyler said, “The company has carefully considered all applicable factors and concluded that entering into this agreement at this time presents the best resolution to the investigation.”

He added, “Cathay Pacific has always endeavored to comply with all Hong Kong laws and those of every jurisdiction in which we operate.

“Unfortunately, in this instance, it transpired that some of our actions relating to shipments from Hong Kong to the United States were in conflict with United States antitrust laws, and we very much regret this.”

Tyler said Cathay Pacific has established a dedicated Competition Compliance Office to ensure that the company’s procedures and policies continue to comply with antitrust and competition laws around the world.

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