European Commission fines Cathay Pacific €57m for cargo surcharges

The European Commission has slapped a €57.12 million (HK$476 million) fine on Cathay Pacific Airways, reinstating a penalty seven years ago that was overturned, accusing the carrier, along with 10 peers, of breaching Europe’s competition law with its cargo surcharges.

In a statement on Friday, EU antitrust regulators said they had re-adopted its decision on the 11 carriers, including Air France and British Airways, for “operating a price–fixing cartel”, and imposed fines totaling €776 million.

The cartel consisted of numerous contacts between airlines, at both bilateral and multilateral level to fix the level of fuel and security surcharges.

Cathay shares slid 0.7 per cent to close at HK$11.2 on Monday after revealing the fine at Hong Kong Exchange on Sunday afternoon.

“Cathay Pacific is reviewing the new decision and evaluating its options with its legal advisers,” the carrier said in a statement to the Hong Kong bourse.

The European Commission is one of the agencies that undertook the investigation of the case seven years ago.

It imposed a fine of €57.12 million on Cathay on November, 2010, but the penalty was annulled by the General Court of the European Union in December 2015, refunding the fine to Cathay in February last year.

“Millions of businesses depend on air cargo services, which carry more than 20 per cent of all EU imports and nearly 30 per cent of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission,” Margrethe Vestager, European Commissioner for Competition said in the statement.

“Today’s decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour.”

Cathay was among 11 airlines fined €799 million by the commission in 2010, as they participated in the price-fixing cartel from 1999 to 2006. The fines were unchanged this time for all the airlines, except for Martinair whose turnover dropped sharply from 2009 to 2016.

In 2012, Cathay was also fined A$11.75 million (HK$70.4 million) in an air cargo price-fixing case in Australia, as the Federal Court of Australia approved the settlement between Cathay and the Australian Competition & Consumer Commission.

Cathay Pacific said in Sunday’s statement that it remains committed to its long standing policy of full compliance with all applicable laws and is satisfied that it has taken the best possible measures to remain consistent with this policy.

Last week the carrier reported a 2016 net loss of HK$575 million, a shocking contrast to the HK$369 million profit expected in a Bloomberg survey of 18 analysts. Revenue fell 9 per cent last year to HK$92.75 billion.

It’s now seeking to cut 30 per cent in staff costs at its Hong Kong headquarters.

Chief operating officer Rupert Hogg said in an interview with the South China Morning Post that this year “is going to be a difficult year and current trends won’t stop.”