Airlines fined for price-fixing, $1.7 billion so far

by Chris Owen on
U.S government prosecutors have fined 21 airlines $1.7 billion to date in a price-fixing scheme that has cost America’s flying public and cargo shippers millions in a case that dates back to 2000.

Rather than fix problems plaguing the airline industry a decade ago, executives at global carriers scrambled to find an easy way out and avoid financial ruin reports the Associated Press. Between 2000 and 2006 airlines artificially raised passenger and cargo fuel surcharges to make up for lost profits.

“As an example of the impact of the conspiracy, fuel surcharges imposed by some of the conspirators rose by as much as 1,000 percent during the conspiracy, far outpacing any percentage increases in fuel costs that existed during the same time period,” said former Associate Attorney General Kevin J. O’Connor.

They might have not been caught either had it not been for two airlines coming forward to turn in their conspirators. Admitting their “mistake” allowed Lufthansa and Virgin Atlantic to take advantage of a Justice Department leniency program for helping in the investigation. Still, the two airlines were fined over £120 million after admitting to fixing prices on fuel surcharges.

From fines to prison time for airline executives, penalties vary among individual airlines.

Gadling has been following this story all along and in 2008 told of Qantas airline’s involvement . In the case involving Qantas, the price fixing scheme had a focus on their freight division.


It was the freight division of China Airlines too that earned the airline a $40 million fine in the price fixing conspiracy just last September.

Announcing four guilty pleas in June 2008, O’Connor told the Associated Press that the cases “conservatively, has affected billions of dollars of shipments. Estimates suggest that the harm to American consumers and businesses from this conspiracy is in the hundreds of millions of dollars.”

Airlines fined for price-fixing include British Airways, Korean Air, and Air France-KLM but no major U.S. carriers as the case continues. So far, two former executives have been sentenced to six months in prison and two others were ordered to prison for eight months.

Ongoing charges are pending against 15 executives, nine of whom are considered fugitives.

Flickr photo by BriYYZ

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Alitalia joins Air France, Delta and KLM to form trans-Atlantic joint venture

by Scott Carmichael on

Several of the largest airlines in the world have teamed up to combine routes, creating the world’s largest trans-Atlantic flight network. Alitalia signed an agreement to join Air France, Delta and KLM and share revenue and costs. The new combination will operate 26% of all trans-Atlantic flights, with almost 55,000 seats on 250 flights. The total revenue from this trans-Atlantic capacity is estimated to be more than $10 billion.

Unlike some airline collaborations, this new alliance actually appears to help air passengers by allowing airlines to create new routes they normally may not have considered. The network also allows for seamless ticketing and baggage handling between the U.S. and European gateway airport. Examples of new routes include Delta non-stop flights from Atlanta to London Heathrow and Portland to Amsterdam.

The hub cities for the network are Amsterdam, Atlanta, Detroit, Minneapolis, New York JFK and Paris CDG. Part of the joint venture will include codeshare flights (when allowed). The trans-Atlantic alliance is separate from the already existing Skyteam alliance.

[Image credit: AFP/Getty Images]

KLM and Air France launch Bluenity – their very own social network

by Scott Carmichael on

In what I can only describe as a “me too” move, Dutch Airline KLM and Air France have launched their own social networking site.

Bluenity is aimed at bringing travelers on the 2 airlines together, and offers a simple way of tracking where and when your friends are flying.

Bluenity also offers members the ability to share tips with fellow travelers.

KLM and Air France call Bluenity “the first social network launched by an airline”, conveniently ignoring a similar site launched by Lufthansa 2 months ago.

A spokesperson for Bluenity says the airlines expects around 300,000 people to sign up for the site in its first year.

Personally I don’t think a single-airline social networking site will ever take off. People are simply not that loyal to one airline. There are already much more established travel social networking sites out there, that are not tied to just one carrier.

Dopplr is the most famous example of travel social networking done right; they even offer Facebook and Flickr integration. Dopplr also has mobile access, as well as the ability to add flights to your profile using text messages.