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Global airlines cargo probe widens

A global probe of airlines suspected of fixing cargo prices widened as authorities searched the offices in Japan, South Korea and Hong Kong.

india Updated: Feb 16, 2006 12:26 IST

A global probe of airlines suspected of fixing cargo prices widened to Asia on Wednesday as authorities searched the offices of some of the world's biggest carriers from Japan, South Korea and Hong Kong.

The European Union's executive arm and the US Justice Department on Tuesday raided a number of airlines on both sides of the Atlantic, while other carriers were asked for information.

Asian local authorities followed suit on Wednesday, though nowhere have charges or arrests been reported.

"We are surprised because this is a very heavy procedure," said Marc Boudier, executive vice president of Air France Cargo, part of the world's largest airline group by revenues, Air France-KLM.

The US Federal Bureau of Investigation (FBI) searched the cargo terminals of Air France and KLM at Chicago's O'Hare airport on Tuesday, an FBI spokesman said.

British Airways' cargo headquarters at Heathrow airport in London and in New York were searched by antitrust officials on Tuesday and again on Wednesday, a source familiar with the situation told Reuters.

BA said the European Commission and US Department of Justice had requested information relating to alleged cartel activity involving it and a number of other airlines and cargo operators.

Germany's Lufthansa, Swiss International, Scandinavian airline SAS and Luxembourg-based Cargolux also said they had been asked about the matter.

Also on Wednesday, US-based cargo giant United Parcel Service Inc. said it had been contacted by US authorities about the investigation but was not part of the probe.

In Montreal, Air Canada parent ACE Aviation Holdings Inc. also said it had been contacted by Canadian antitrust officials about the investigation and was cooperating.

The probe centres on surcharges that airlines have imposed for fuel, added security since the September 11, 2001, hijackings in the United States and higher war risk insurance, according to some of the carriers being questioned.

Fuel costs for airlines rose to nearly $100 billion last year from $44 billion in 2003, according to the International Air Transport Association (IATA), prompting many airlines to impose surcharges on fares.

Insurance industry sources said the cost of war risk insurance on cargo was a fraction of that covering passenger operations, and tiny relative to fuel costs.

Airline shares were mixed on Wednesday, with most in Europe higher as oil prices slipped below $60 to their lowest level this year, easing concerns about fuel costs.

The European Commission said in a statement it had "reason to believe that the companies concerned may have violated (a European Union) treaty, which prohibits practices such as price fixing." The US Justice Department said it was investigating the possibility of anti-competitive practices in air cargo and was coordinating with the EU and other competition authorities.

Top cargo players

US heavyweights American Airlines and United Airlines said they had received inquiries as part of the probe. Delta Air Lines and Northwest Airlines, both bankrupt, each said they had not been contacted.

Korean Air Co, the largest carrier in terms of cargo involved in the probe, said officials from South Korea's Fair Trade Commission had interviewed the company's executives.

Other top Asian cargo players, including Singapore Airlines, Hong Kong's Cathay Pacific Airways and Japan Airlines Corp all confirmed they had been questioned by authorities.

JAL said European authorities had searched its Frankfurt offices, while Cathay said EC and US Justice Department officials had visited the company's offices in Frankfurt, Los Angeles and San Francisco.

South Korea's Asiana Airlines Inc said its offices were searched by Korea's antitrust watchdog.

The case, if fines are levied, could put a brake on profit in the $50 billion global air cargo market, which accounts for about 12 percent of airlines' revenue, according to IATA.

Plane maker Boeing Co has estimated the cargo market will expand by 6.2 per cent a year for the next two decades, exceeding expected growth in passenger traffic and the world economy.

Fedex Corp said it had not contacted about the probe.

Dubai-based Emirates, the largest cargo operator in the Arab Gulf, also said it was not contacted, as did Japan's second-largest carrier, All Nippon Airways Co.