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Three Airlines Confirm Price Fixing Probe

Feb 16, 2006 | AP

Three more Asian airlines confirmed Thursday they were being probed amid an investigation by U.S., European and Asian regulators into alleged collusion in the air cargo industry to fix prices on surcharges for fuel, security and insurance.

South Korea's Asiana Airlines Inc., Japan's Nippon Cargo Airlines Co. and Singapore Airlines Ltd. all said they had either been visited or contacted by regulators or court officials this week.

Since Tuesday, more than a dozen airlines, including Japan Airlines Corp., Hong Kong's Cathay Pacific Airways Ltd., British Airways PLC and Germany's Lufthansa AG, say American and European authorities have visited their offices or issued subpoenas.

Spokespersons for the European Commission, the U.S. Department of Justice and the Federal Bureau of Investigation refused Wednesday to provide details about the investigation.

But one of the foreign airline's targeted, SAS AB's SAS Cargo in Copenhagen, Denmark, said the EU has alleged that cooperation among airlines began in 2000 and involved agreements about surcharges imposed by airlines to offset certain external costs.

Singapore Airlines said in a statement Thursday that its cargo division had "received requests for information from the U.S. and European authorities, and has provided the information sought. SIA Cargo will cooperate fully with the authorities."

Asiana confirmed its offices in Seoul were visited and documents were inspected by South Korean antitrust authorities on Tuesday, according to spokesman Jason Kim.

Nippon Cargo Airlines said officials from the U.S. District Court of the District of Columbia left papers at the company's office at New York's John F. Kennedy airport Tuesday to appear at the court by April, according to spokesman Yuhei Yamashita. The papers did not say why they were being asked to show up, he said.

Japan Airlines Corp., Nippon Cargo and All Nippon Airways said they have not been contacted by Japanese regulators so far.

Kim Joo-hyuck, a spokesman at the Korea Fair Trade Commission, refused to provide the names of airlines investigated Tuesday in South Korea. The commission released a brief statement on Wednesday saying checks of local and foreign airlines took place in cooperation with similar actions by authorities in the United States and Europe.

Korean Air Co., South Korea's largest airline and the world's biggest international cargo carrier, confirmed Wednesday only that commission officials visited the airline. Calls to the airline's corporate communications department went unanswered all day Thursday.

Japan Airlines spokesman Yoshiteru Suzuki said the airline was searched and questioned Tuesday in Frankfurt and New York by EU antitrust authorities, U.S. Justice Department anti-monopoly officials and the FBI.

The investigation was about cargo operations and seemed to be based on suspicions of a cartel, he said.

For the October-December quarter of 2005, JAL's revenue in international cargo totaled 53.2 billion yen ($451 million) nearly 10 percent of overall revenue for that period.

With details of the probe still unclear, analysts in Asia were reluctant to speculate about what the impact on the industry might be.

"We're not even sure what's prompting the regulators to get upset," said Peter Hilton, regional transport analyst at Credit Suisse in Hong Kong. "It's clearly an issue that warrents monitoring for sure."

Kim Seung-chul, an analyst at Kyobo Securities in Seoul, cautioned, however, that for airlines like Korean Air and Asiana where cargo operations account for a significant amount of total sales, penalties could have an impact on profitability.

The 17-member Association of Asia Pacific Airlines based in Kuala Lumpur, Malaysia, said the regional airlines with the highest percentage of cargo revenue as a portion of total sales in 2004 were Eva Air and China Airlines, both of Taiwan, at 46.6 percent and 43.5 percent, respectively.

They were followed by Korean Air at 32.7 percent, Asiana at 29 percent and Cathay Pacific at 28.5 percent.

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