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Airlines face soaring claims over fuel fix

South China Morning Post – 21 July 2011

Freight clients urged to sign up with law firms pursuing airlines for damages after European Commission’s finding of collusion in fuel surcharges

Top Asian and western airlines, including Cathay Pacific Airways (SEHK: 0293), Singapore Airlines Cargo and Korean Airlines, will face further pressure from global criminal and civil action over allegations they colluded to fix fuel surcharges on air cargo shipments between 2000 and 2006.

London-based lawyer Anthony Maton will step up that pressure when he begins a visit to Asia this weekend to persuade exporters and importers to lodge compensation claims against 37 airlines which flew cargo between Asia and Europe. They include 11 carriers who were fined €799.5 million (HK$8.8 billion) by the European Commission last year for fixing airfreight surcharges.

Maton, from Hausfeld & Co LLP, said Asian firms, including mainland cargo owners, undoubtedly suffered losses as a result of what he described as cartel-like behaviour by airlines in fixing fuel surcharges. So far more than 300 firms, who paid freight bills totalling at least US$3 billion, have signed up to Hausfeld’s action, but Maton said these numbers “are increasing all the time”.

“We are steadily signing and then joining in batches further claimants to the action,” he said.

Maton said that while most of the airlines were appealing against the European Commission fines, he doubted this would derail the compensation claims.

This view was shared by Peter Koutsoukis, managing director of Claims Funding International, who has launched a separate compensation claim at a court in Amsterdam in the Netherlands against three airlines – Dutch carriers KLM and Martinair and French partner Air France. Claims Funding International has formed a special company, Equilib, to fight the action on behalf of claimants which total at least 330 mainly European companies which spent around €6 billion on airfreight.

Koutsoukis said the three airlines filed a writ in an Amsterdam court asking that other airlines be joined, either as defendants or third parties to the action. These carriers, including Cathay Pacific Airways, have until August 17 to file a defence saying why they should not be included in the action.

Carriers are also facing a slew of legal action in Asia.

In Australia, nine carriers are being prosecuted by the Australian Competition and Consumer Commission for alleged price fixing after six were fined A$41 million (HK$340.7 million). The carriers, including Cathay Pacific, Emirates Airlines, Thai Airways and Garuda, face the latest in a series of directions hearings at Australia’s federal court on August 5. The full trial against all nine carriers is due to start on July 2 next year and last three months.

In New Zealand, the Commerce Commission is taking action against the same group, although Air New Zealand has replaced Garuda.

Commission communications manager Alanah Kalafatelis said the court proceedings were taking place in two stages. The first stage, which focused on the definition of the air cargo market ended in June. She said the second stage of the trial, which was due to start in July 2012 and last about three months, would “address the price fixing arrangements”.

Australian law firm Maurice Blackburn has also launched a class action, financed by litigation funder IMF (Australia), against seven carriers, again including Cathay Pacific Airways, seeking compensation for alleged price fixing on cargo shipments. All seven airlines have filed defences to the action.

Maurice Blackburn principal Brooke Dellavedova said action was taken against the seven carriers even though the Australian Competition and Consumer Commission prosecuted 15 airlines, because “for the most part, they are the carriers with the most significant presence in Australia”.

She said more than 150 businesses had retained Maurice Blackburn to act for them. “We are unable to comment on the size of any overcharge caused by the alleged cartel at this stage,” she said. “However, we expect damages in this matter to be very significant given the large amount of international airfreight to and from Australia.”

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