A FEW years ago, when the first air cargo cartel pleas and judgments were signed off, many in the industry wondered where it would all end.
Some even suggested that the final reckoning might be decades away and that billions of dollars would change hands en route.
The doomsayers had the right of it. More than a decade into the blitz (although it didn’t bite heavily in Australia and New Zealand until the summer of 2007/2008), the judgments are still coming. Already, judges have levied more than A$1 billion in fines, court costs and civil settlements.
With many investigations still alive and more class actions currently in the system the total for firms in Australia, New Zealand, the United States, Canada and other jurisdictions might eventually reach A$5 billion.
Plus legal and staff utilisation costs.
No doubt about it, cartel actions are a growth industry.
In just one early-August ruling, a federal judge in New York awarded US$54.4 million in third tranche legal fees or a total of US$92.9 million to date.
Those ‘progress payments’ are for a case that has been running since 2006 and still appears to have a long life ahead of it.
The total to be paid by 17 airlines is around US$485 million. Eleven carriers are still facing action.
While these figures sound almost incredible, they are not perceived as such in the United States.
Judge Gleeson, widely respected for his ability to handle such complex litigation, is also presiding over another class action case that could see two credit card companies pay more than US$7 billion in a settlement, plus the plaintiffs’ legal fees which have been estimated by some observers at hundreds of millions – and counting.
More judgments
Meantime, as we have reported in our daily online news service, court settlements continue as regulatory authorities come to agreements with reluctant carriers.
In June, a judgment in Australia’s Federal Court set a new record for the Australian Competition and Consumer Commission (ACCC) when Malaysia Airlines Cargo was fined A$6 million for price fixing.
“This penalty sees the total penalties ordered against this international cartel increase to a record A$58 million,” said Rod Sims, the ACCC chairman. “These penalties are the highest generated by a single ACCC investigation.”
Malaysia Airlines Cargo also was directed to pay A$500,000 towards the ACCC’s costs.
Proceedings continue against several other carriers.
In Canada, the Competition Bureau’s anti-cartel blitz delivered another guilty plea, this time by Korean Air, which took a C$5.5 million hit. That brought the total from this action to around C$22 million.
Unlike civil class actions, these fines are paid into the public purse.
Korean Air and Emirates were the latest to admit liability in the New Zealand Commerce Commission’s carrier cartel investigation, in late July copping fines of NZ$3.5 and NZ$1.5 million respectively, plus costs.
“The commission is pleased to have settled with two more airlines in this significant case,” said Dr Mark Berry, the Commission chair. “We are focused on achieving the most effective resolution of cases. In this instance we have obtained admissions of liability and penalties that should be a deterrent to others who might breach the Commerce Act.”
The High Court rulings, based on agreements between the carriers and the commission, took the New Zealand blitz total (not including the separate freight forwarder action) to more than NZ$21 million.
The remaining carriers, as we have outlined in earlier reports, have resisted plea-bargaining and are strenuously defending their position. The next stage of what has already proved to be a complicated case will be heard by the High Court in March 2013.
With potential appeals likely up to Supreme Court level, a final resolution could be several years away.
Defendant numbers have dwindled slightly. Prior to Korean Air, Japan Airlines also backed down and in late June was fined NZ$2.275 million and costs.
Also proceeding is the Commerce Commission’s case against Kuehne+Nagel International, following a Court of Appeal ruling that the High Court has jurisdiction to hear it. The forwarder had argued that it was a Swiss holding company without involvement in the operation or management of freight forwarding.
The ruling has become something of a precedent for future action in New Zealand against international companies.
All other defendants in this case have settled, incurring penalties of NZ$8.85 million in total.
While little has been reported about action elsewhere involving freight forwarders, anti-cartel action in the United States has contributed to the outflow of funds from our industry.
In fiscal year 2011, for instance, the US Department of Justice shepherded deals through the courts involving US$48.5 million in fines.
CENTURIES before hauling freight by air was even contemplated, the Silk Road was a unique trading route that doubled as a conduit for the spread of civilisation and political power. At least two carriers have - in more recent times - used the name for air cargo services. But now it has a grimmer connotation that is starting to impact on our industry.
The Australian Federal Police (AFP) and Australian Customs and Border Protection Service (CBP) have issued a joint warning about Silk Road and other online marketplaces which facilitate the supply of drugs, weapons and other illegal items.
AFP and CBP intelligence have shown that these e-commerce platforms are being used by Australians to import items illegally, using postal, courier or other air-carried freight pathways.
Their joint statement tells people using, or planning to use, Silk Road and similar websites that their identity will not always remain anonymous. When caught, they warn, prosecution is inevitable.
At least one arrest has already been made, thanks to the agencies’ enhanced intelligence. A Melbourne man faces 10 charges relating to the importation, trafficking and possession of narcotics and prohibited weapons.
Commander Peter Sykora, the AFP’s manager of crime operations, said that while Silk Road was based overseas, Australian users were within reach of the AFP and its partner agencies.
And Alana Sullivan, CBP’s acting national manager cargo and maritime targeting, said that people “who buy or sell through online marketplaces on so-called anonymous networks should understand that they are not guaranteed anonymity”.
As always, those in our industry should be aware of the dangers in processing such consignments and tell AFP or CBP of any suspicions.
TURKEY is a big and booming country, one with which both Australia and New Zealand enjoy strong links – trade, family, shared history...and the enjoyment of Turkish cuisine! Turkish Cargo has not only strengthened its homeland’s Asia Pacific ties but created a strategic hub in Istanbul.
Turkish Cargo has its own fleet of A313F and A332F freighters, as well as the belly-hold capacity of the Turkish Airlines passenger fleet, which features both Airbus and Boeing equipment flying to around 200 international and Turkish cities.
The freighters link stations in Asia, Africa, the Middle East and Europe on scheduled services, also undertaking occasional charters or special flights, including to New York.
2012 has been a good year for Turkish Cargo, which has expanded its freighter network, grown traffic on most routes and extended its inter-linked trucking services.
One of the latest developments has been an agreement with Angel Wing Logistics to expand trucking operations in northern China. This is handled by an extensive truck fleet, including reefer and temperature-controlled units, with both scheduled and ad hoc departures.
An increasing number of trucks operated for Turkish Cargo by contractors now sport the carrier’s distinctive livery. The first US truck, operated by Alliance, was branded earlier this year.
The freighter network started to expand in January, when services began to Mitiga International Airport, Libya. Located about 8km from the Tripoli CBD, Mitiga is a former air force base; until 1970 it was under the aegis of the USAF, as Wheelus Air Base.
Turkish Cargo flies there from Istanbul twice a week, on Wednesdays continuing to Zurich and then Istanbul, and on Sundays to Maastricht and Istanbul.
In late May, Vienna joined the freighter network, with a weekly service from Istanbul and return on Mondays. The same month saw Minsk, Belarus, come on line, with a Wednesday freighter flight.
The rapid growth of Turkish Cargo has been matched within Turkish Airlines overall and the cargo operation has benefited in gaining more frequency and capacity via passenger services. Services to New York JFK, for example, were boosted to three times daily in May, using A330 equipment.
Other developments for Turkish Cargo this year have included opening a new regional headquarters in Frankfurt for central and southern Europe. This is run in association with Celebi Global Cargo.
In Asia, Turkish Cargo flies to Shanghai, Hong Kong, Tbilisi, Mumbai, New Delhi, Almaty, Bishkek and Tashkent.
DOHA-based Qatar Airways Cargo has reported double digit growth as it expands its world-wide freighter network.
The carrier currently operates to 40 freighter destinations using B777 freighters.
In recent months it has added three new destinations: Seoul (Korea), Johannesburg (South Africa) and Muscat (Oman) and has re-introduced freighter services to Karachi (Pakistan). A new weekly freighter service to Erbil commenced on July 12 and a twice weekly freighter service to Budapest in Hungary commenced on June 30.
QR Cargo also has revamped its charter product to cater for an increasing demand for special consignments ranging from horses, bank notes, oversized oil and gas items and humanitarian cargo.
The QCharter product enables agents, brokers and forwarders to book special loads on any of the company’s four B777 freighters or three A300-600 freighters. In-house specialists guide clients through the entire process of arranging a charter flight.
VIRGIN Atlantic Cargo has reported a record increase in revenue for the 2011/12 financial year, despite difficult trading conditions.
The seven per cent year-on-year growth to GBP239.6 million was the best-ever financial performance by the cargo division in its 28-year history.
The result was driven by an increase in yield of 12 per cent, with overall tonnage down by five per cent year-on-year. Virgin says performance was strong both in Europe, Middle East and Africa (EMEA) and the Americas, with increases in revenue of 13 per cent and 15 per cent respectively.
However, given the challenging market conditions and lack of a traditional peak season in some Far East markets, revenues from the Asia-Pacific region declined by seven per cent compared to the previous year.
The carrier’s revenue from joint venture partners, notably its partnership with Virgin Australia, continued to perform strongly, up by 25 per cent thanks to significant increases in tonnage and yield. Freight volumes on Virgin Australia’s transpacific operations from the United States to Australia contributed to the performance.
John Lloyd, director of Virgin Atlantic Cargo, said: “What marks this result as particularly significant is that it was achieved in the context of both a marginal decline in our share of capacity and in a year when total market volumes failed to grow. At the root of our second successive year of record cargo revenues was a series of internal initiatives designed to improve our efficiency. A five per cent increase in our yield premium and substantial improvements in our cost base represent the fruits of our efforts.”
Steve Ridgway, chief executive Virgin Atlantic added: “I am extremely proud of the Virgin Atlantic Cargo team for delivering another great contribution to the airline in what is a very difficult and challenging market.”
AUSTRALIA is currently undertaking a massive project to update bio-security laws and develop quarantine facilities that are likely to be amongst the most impressive – and, more importantly, the most effective – in the world.
Bio-security is not a sexy topic for most people and yet it is of vital importance to us because a failure of the bio-security structure, even on quite a small scale, can disrupt cargo flows drastically and trigger long-term bans or restrictions that have an ongoing effect.
The government has gone to great lengths to invite trade and public input for the new legislation, welcoming submissions and organising consultation meetings. A dedicated interactive blog was launched by DAFF (Department of Agriculture, Fisheries and Forestry) and updates on the proposed legislative changes were offered via Twitter.
“Australia’s bio-security system is world-class,” said Senator Joe Ludwig, the federal minister for agriculture, fisheries and forestry. “We need to update our legislation and create a flexible operating environment to make sure that remains the case into the future.
“Our current Quarantine Act is a century old and, while it has served us well, this new legislation is needed to support safe and seamless transition of goods and services across Australia’s borders.”
The rewritten legislation will take a risk-based approach to bio-security management.
The proposed legislation has for some time been a work in progress, with chapters released for consultation as they were signed off by the drafting team.
Dr Conall O’Connell, DAFF’s secretary, said it was a big job but it was important that stakeholders had the information as early as possible, to facilitate informed feedback.
Submissions have also been sought on Australia’s import policy for dogs and cats.
The significance of this to the air cargo business was signalled by DAFF illustrating its web site call for input with a photograph showing domestic animals awaiting transport by air.
In line with all the proposed legislative changes, the review is based on a rigorous, science-based risk assessment and international experience with bio-security measures, including the use of the rabies vaccine, approved treatments and laboratory testing.
The review process will determine whether changes to the current import policy for dogs and cats will be implemented.
A FEW years ago, when the first air cargo cartel pleas and judgments were signed off, many in the industry wondered where it would all end.
Some even suggested that the final reckoning might be decades away and that billions of dollars would change hands en route.
The doomsayers had the right of it. More than a decade into the blitz (although it didn’t bite heavily in Australia and New Zealand until the summer of 2007/2008), the judgments are still coming. Already, judges have levied more than A$1 billion in fines, court costs and civil settlements.
With many investigations still alive and more class actions currently in the system the total for firms in Australia, New Zealand, the United States, Canada and other jurisdictions might eventually reach A$5 billion.
Plus legal and staff utilisation costs.
No doubt about it, cartel actions are a growth industry.
In just one early-August ruling, a federal judge in New York awarded US$54.4 million in third tranche legal fees or a total of US$92.9 million to date.
Those ‘progress payments’ are for a case that has been running since 2006 and still appears to have a long life ahead of it.
The total to be paid by 17 airlines is around US$485 million. Eleven carriers are still facing action.
While these figures sound almost incredible, they are not perceived as such in the United States.
Judge Gleeson, widely respected for his ability to handle such complex litigation, is also presiding over another class action case that could see two credit card companies pay more than US$7 billion in a settlement, plus the plaintiffs’ legal fees which have been estimated by some observers at hundreds of millions – and counting.
More judgments
Meantime, as we have reported in our daily online news service, court settlements continue as regulatory authorities come to agreements with reluctant carriers.
In June, a judgment in Australia’s Federal Court set a new record for the Australian Competition and Consumer Commission (ACCC) when Malaysia Airlines Cargo was fined A$6 million for price fixing.
“This penalty sees the total penalties ordered against this international cartel increase to a record A$58 million,” said Rod Sims, the ACCC chairman. “These penalties are the highest generated by a single ACCC investigation.”
Malaysia Airlines Cargo also was directed to pay A$500,000 towards the ACCC’s costs.
Proceedings continue against several other carriers.
In Canada, the Competition Bureau’s anti-cartel blitz delivered another guilty plea, this time by Korean Air, which took a C$5.5 million hit. That brought the total from this action to around C$22 million.
Unlike civil class actions, these fines are paid into the public purse.
Korean Air and Emirates were the latest to admit liability in the New Zealand Commerce Commission’s carrier cartel investigation, in late July copping fines of NZ$3.5 and NZ$1.5 million respectively, plus costs.
“The commission is pleased to have settled with two more airlines in this significant case,” said Dr Mark Berry, the Commission chair. “We are focused on achieving the most effective resolution of cases. In this instance we have obtained admissions of liability and penalties that should be a deterrent to others who might breach the Commerce Act.”
The High Court rulings, based on agreements between the carriers and the commission, took the New Zealand blitz total (not including the separate freight forwarder action) to more than NZ$21 million.
The remaining carriers, as we have outlined in earlier reports, have resisted plea-bargaining and are strenuously defending their position. The next stage of what has already proved to be a complicated case will be heard by the High Court in March 2013.
With potential appeals likely up to Supreme Court level, a final resolution could be several years away.
Defendant numbers have dwindled slightly. Prior to Korean Air, Japan Airlines also backed down and in late June was fined NZ$2.275 million and costs.
Also proceeding is the Commerce Commission’s case against Kuehne+Nagel International, following a Court of Appeal ruling that the High Court has jurisdiction to hear it. The forwarder had argued that it was a Swiss holding company without involvement in the operation or management of freight forwarding.
The ruling has become something of a precedent for future action in New Zealand against international companies.
All other defendants in this case have settled, incurring penalties of NZ$8.85 million in total.
While little has been reported about action elsewhere involving freight forwarders, anti-cartel action in the United States has contributed to the outflow of funds from our industry.
In fiscal year 2011, for instance, the US Department of Justice shepherded deals through the courts involving US$48.5 million in fines.
CENTURIES before hauling freight by air was even contemplated, the Silk Road was a unique trading route that doubled as a conduit for the spread of civilisation and political power. At least two carriers have - in more recent times - used the name for air cargo services. But now it has a grimmer connotation that is starting to impact on our industry.
The Australian Federal Police (AFP) and Australian Customs and Border Protection Service (CBP) have issued a joint warning about Silk Road and other online marketplaces which facilitate the supply of drugs, weapons and other illegal items.
AFP and CBP intelligence have shown that these e-commerce platforms are being used by Australians to import items illegally, using postal, courier or other air-carried freight pathways.
Their joint statement tells people using, or planning to use, Silk Road and similar websites that their identity will not always remain anonymous. When caught, they warn, prosecution is inevitable.
At least one arrest has already been made, thanks to the agencies’ enhanced intelligence. A Melbourne man faces 10 charges relating to the importation, trafficking and possession of narcotics and prohibited weapons.
Commander Peter Sykora, the AFP’s manager of crime operations, said that while Silk Road was based overseas, Australian users were within reach of the AFP and its partner agencies.
And Alana Sullivan, CBP’s acting national manager cargo and maritime targeting, said that people “who buy or sell through online marketplaces on so-called anonymous networks should understand that they are not guaranteed anonymity”.
As always, those in our industry should be aware of the dangers in processing such consignments and tell AFP or CBP of any suspicions.
TURKEY is a big and booming country, one with which both Australia and New Zealand enjoy strong links – trade, family, shared history...and the enjoyment of Turkish cuisine! Turkish Cargo has not only strengthened its homeland’s Asia Pacific ties but created a strategic hub in Istanbul.
Turkish Cargo has its own fleet of A313F and A332F freighters, as well as the belly-hold capacity of the Turkish Airlines passenger fleet, which features both Airbus and Boeing equipment flying to around 200 international and Turkish cities.
The freighters link stations in Asia, Africa, the Middle East and Europe on scheduled services, also undertaking occasional charters or special flights, including to New York.
2012 has been a good year for Turkish Cargo, which has expanded its freighter network, grown traffic on most routes and extended its inter-linked trucking services.
One of the latest developments has been an agreement with Angel Wing Logistics to expand trucking operations in northern China. This is handled by an extensive truck fleet, including reefer and temperature-controlled units, with both scheduled and ad hoc departures.
An increasing number of trucks operated for Turkish Cargo by contractors now sport the carrier’s distinctive livery. The first US truck, operated by Alliance, was branded earlier this year.
The freighter network started to expand in January, when services began to Mitiga International Airport, Libya. Located about 8km from the Tripoli CBD, Mitiga is a former air force base; until 1970 it was under the aegis of the USAF, as Wheelus Air Base.
Turkish Cargo flies there from Istanbul twice a week, on Wednesdays continuing to Zurich and then Istanbul, and on Sundays to Maastricht and Istanbul.
In late May, Vienna joined the freighter network, with a weekly service from Istanbul and return on Mondays. The same month saw Minsk, Belarus, come on line, with a Wednesday freighter flight.
The rapid growth of Turkish Cargo has been matched within Turkish Airlines overall and the cargo operation has benefited in gaining more frequency and capacity via passenger services. Services to New York JFK, for example, were boosted to three times daily in May, using A330 equipment.
Other developments for Turkish Cargo this year have included opening a new regional headquarters in Frankfurt for central and southern Europe. This is run in association with Celebi Global Cargo.
In Asia, Turkish Cargo flies to Shanghai, Hong Kong, Tbilisi, Mumbai, New Delhi, Almaty, Bishkek and Tashkent.
DOHA-based Qatar Airways Cargo has reported double digit growth as it expands its world-wide freighter network.
The carrier currently operates to 40 freighter destinations using B777 freighters.
In recent months it has added three new destinations: Seoul (Korea), Johannesburg (South Africa) and Muscat (Oman) and has re-introduced freighter services to Karachi (Pakistan). A new weekly freighter service to Erbil commenced on July 12 and a twice weekly freighter service to Budapest in Hungary commenced on June 30.
QR Cargo also has revamped its charter product to cater for an increasing demand for special consignments ranging from horses, bank notes, oversized oil and gas items and humanitarian cargo.
The QCharter product enables agents, brokers and forwarders to book special loads on any of the company’s four B777 freighters or three A300-600 freighters. In-house specialists guide clients through the entire process of arranging a charter flight.
VIRGIN Atlantic Cargo has reported a record increase in revenue for the 2011/12 financial year, despite difficult trading conditions.
The seven per cent year-on-year growth to GBP239.6 million was the best-ever financial performance by the cargo division in its 28-year history.
The result was driven by an increase in yield of 12 per cent, with overall tonnage down by five per cent year-on-year. Virgin says performance was strong both in Europe, Middle East and Africa (EMEA) and the Americas, with increases in revenue of 13 per cent and 15 per cent respectively.
However, given the challenging market conditions and lack of a traditional peak season in some Far East markets, revenues from the Asia-Pacific region declined by seven per cent compared to the previous year.
The carrier’s revenue from joint venture partners, notably its partnership with Virgin Australia, continued to perform strongly, up by 25 per cent thanks to significant increases in tonnage and yield. Freight volumes on Virgin Australia’s transpacific operations from the United States to Australia contributed to the performance.
John Lloyd, director of Virgin Atlantic Cargo, said: “What marks this result as particularly significant is that it was achieved in the context of both a marginal decline in our share of capacity and in a year when total market volumes failed to grow. At the root of our second successive year of record cargo revenues was a series of internal initiatives designed to improve our efficiency. A five per cent increase in our yield premium and substantial improvements in our cost base represent the fruits of our efforts.”
Steve Ridgway, chief executive Virgin Atlantic added: “I am extremely proud of the Virgin Atlantic Cargo team for delivering another great contribution to the airline in what is a very difficult and challenging market.”
AUSTRALIA is currently undertaking a massive project to update bio-security laws and develop quarantine facilities that are likely to be amongst the most impressive – and, more importantly, the most effective – in the world.
Bio-security is not a sexy topic for most people and yet it is of vital importance to us because a failure of the bio-security structure, even on quite a small scale, can disrupt cargo flows drastically and trigger long-term bans or restrictions that have an ongoing effect.
The government has gone to great lengths to invite trade and public input for the new legislation, welcoming submissions and organising consultation meetings. A dedicated interactive blog was launched by DAFF (Department of Agriculture, Fisheries and Forestry) and updates on the proposed legislative changes were offered via Twitter.
“Australia’s bio-security system is world-class,” said Senator Joe Ludwig, the federal minister for agriculture, fisheries and forestry. “We need to update our legislation and create a flexible operating environment to make sure that remains the case into the future.
“Our current Quarantine Act is a century old and, while it has served us well, this new legislation is needed to support safe and seamless transition of goods and services across Australia’s borders.”
The rewritten legislation will take a risk-based approach to bio-security management.
The proposed legislation has for some time been a work in progress, with chapters released for consultation as they were signed off by the drafting team.
Dr Conall O’Connell, DAFF’s secretary, said it was a big job but it was important that stakeholders had the information as early as possible, to facilitate informed feedback.
Submissions have also been sought on Australia’s import policy for dogs and cats.
The significance of this to the air cargo business was signalled by DAFF illustrating its web site call for input with a photograph showing domestic animals awaiting transport by air.
In line with all the proposed legislative changes, the review is based on a rigorous, science-based risk assessment and international experience with bio-security measures, including the use of the rabies vaccine, approved treatments and laboratory testing.
The review process will determine whether changes to the current import policy for dogs and cats will be implemented.
