Air NZ, Air India last carriers facing multi-billion dollar US civil suit

Thursday 3rd March 2016

Air New Zealand and Air India are the only carriers left defending a multi-billion dollar civil law suit in New York, where 26 airlines have cut settlement deals totalling US$1.19 billion.

The class action's hearing was to have started in January, but several more settlements were reached, leaving just the New Zealand and Indian airlines defending the suit, hearings for which will begin on Sept. 19. Judge Brian Cogan set a new pretrial conference in August and the new trial date in a Feb. 19 judgment.

The claim was filed in 2006 on behalf of six freight forwarders and has been led by global litigation firm Hausfeld. Australia's Qantas Airways is among airlines to have settled, paying US$26.5 million, while Korean Air made the biggest settlement at US$115 million. The plaintiffs estimate damages at about US$2.66 billion, which would triple to as much as US$7.98 billion under US antitrust laws.

"Following additional settlements, at this time only Air New Zealand and Air India remain and face joint and several liability for the billions of dollars in damages (trebled) caused by the airlines’ price-fixing cartel," Hausfeld attorney Brent Landau said in an emailed comment.

Asiana Airlines, Nippon Cargo Airlines and EVA Airways Corp were the latest to settle for US$55 million, US$36.4 million, and US$99 million respectively.

The freight forwarders say the airlines "conspired to develop and implement an industry-wide index for calculating fuel and security surcharges that were applied to thousands of routes flown worldwide by the defendants, including flights to and from the United States", and were able to adjust those rates 28 times between Jan. 1, 2000 and Sept. 30, 2006, according to a report and recommendations by US Magistrate Judge Viktor Pohorelsky in the US District Court in October 2014.

The alleged price-fixing has been the subject of antitrust actions around the globe, with big settlements from multi-national airlines in Europe and the US. In New Zealand, the Commerce Commission reached settlements with 11 carriers, including Air New Zealand, securing penalties totalling $45 million, or about 10 percent of the revenue generated from air freight forwarding services in and out of New Zealand in 2006.

Air New Zealand has avoided prosecution in other jurisdictions, with European and US regulators dropping their claim against the national carrier, while the Australian Federal Court tossed out legal action against the airline in 2014, a decision which is under appeal. The airline was also excluded from a class action settlement in Australia and was successful in clawing back $3.2 million in legal fees.

The airline spent $10 million defending the New Zealand Commerce Commission's claim before cutting a $7.5 million settlement with the regulator but has not divulged its legal bill on the US claim, citing commercial sensitivity.

"Air New Zealand has been cleared by regulators or courts of involvement in cartel conduct in the USA, Europe and Australia," a spokeswoman said in an emailed statement. "We will continue to defend the civil claim."

The airline has been noting the US litigation as a contingent liability in its annual report since 2007.

Air New Zealand's shares were unchanged at $2.86 and have decreased 3.2 percent this year.

BusinessDesk.co.nz

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