Air NZ denies Emirates cartel claims

Air New Zealand deputy chief executive Norm Thompson. Photo / Glenn Jeffrey.

Air New Zealand has issued a memo to staff this morning dismissing stories that their deputy CEO was a participant in a trans-Tasman cargo cartel.

Norm Thompson, who joined the airline in 1968 is the airline's deputy chief executive and also the chair of the Tourism Industry Association.

Airlines around the world have been targeted by competition authorities that claim large scale price fixing cartels were operating in the air cargo business. The New Zealand Commerce Commission is prosecuting airlines here, saying that the cartel operated here too.

Air NZ has strongly denied the accusations of price-fixing and so far taken an aggressive approach to the Commerce Commission's prosecution. If the evidence revealed in today's newspaper reports is correct, it may also be used in a New Zealand court.

The penalty for colluding over price and business deals can be high - up to $500,000 for an individual or more than $10 million for a company.

In a memo issued to staff this morning, CEO Rob Fyfe said the Australian ACCC has not filed proceedings alleging any wrongdoing by Air New Zealand or Norm Thompson.

"In fact, our own thorough review of the documents shows that Air New Zealand acted appropriately in all our discussions and communications."

The Melbourne Age says evidence about to be used in a court case in Australia shows Air NZ's Thompson was in contact with a key rival at Emirates - the airline's supposed rival - in attempt to illegally fix air cargo rates across the Tasman.

It says letters, emails and telephone conversations between Air NZ managers and Emirates will be used as evidence in a case brought against the Middle Eastern carrier in the Federal Court by the Australian Competition and Consumer Commission - the equivalent of New Zealand's Commerce Commission.

The paper says Thompson, a 31-year veteran of Air NZ, and an Emirates cargo executive, Ram Menen, allegedly first talked in October 2003 about prices they intended to charge for freight flown between Australia and New Zealand.

Menen gave Thompson, then Air NZ's sales and marketing chief, assurances that Emirates would not undercut Air NZ's or Qantas' freight prices, the Age says court documents show.

It goes on to say Thompson later wrote to Menen to point out that Emirates was undercutting Air NZ despite the earlier guarantee.

"After your comments on Emirate SkyCargo's selling approach, I was interested to hear from our cargo sales people that we lost some of our consolidation cargo from the Brisbane to Auckland service last weekend to Emirates, at, what we are told, rates far more attractive than Air NZ's," he wrote. "Similar activity is also occurring in the Auckland, Sydney and Melbourne markets." the Age quotes.

The Age says that in an email two weeks later, Menen the gave a further assurance that Emirates was not undercutting Air NZ and had no intention of doing so.

He also said that Emirates' local cargo managers in Australia and NZ had been told to contact Qantas and Air NZ's local managers to agree on rates.

"The best would be all parties communicating openly with each other on local basis and create a relationship based on catalyzing the market rather than aim for getting a share of each other's market," he wrote.

Fyfe criticised the media and told staff this morning that quotes made by Thompson "have selectively used".

He said Air New Zealand introduced A320 aircraft onto the Trans-Tasman route, creating a "serious shortage" of Air New Zealand cargo capacity while Emirates had just entered the market bringing overcapacity.

"This was the context of Norm's discussions with Emirates, which after some negotiation, resulted in a cargo Special Prorate Agreement (SPA); a very standard and entirely legal agreement in the airline industry. It records wholesale rates airlines will charge to each other. It does not reflect any agreement on prices to be charged to cargo customers."

He said Air New Zealand does not condone anti-competitive conduct and has cooperated with authorities throughout their investigations.

The ACCC alleges that between 2002 and 2006, Emirates entered into "arrangements or understandings" with other international air cargo carriers - including Air New Zealand - to fix the price of fuel surcharges, security surcharges and rates that were applied to air cargo.

The case is set down to be heard next month and the ACCC is seeking declarations, injunctive relief, pecuniary penalties, and costs.

Emirates is the ninth airline to be caught up in the scandal.

The Australian Federal Court has previously ordered (KLM) to pay A$3 million (NZ$3.6m) in penalties and Martinair Holland NV and Cargolux International Airlines SA to pay $5m (NZ$6.11m).

The court has also ordered Qantas Airways Limited and British Airways to pay penalties of $20m (NZ$24.4m) and $5m (NZ$6.11) respectively on December 11, last year.

The ACCC has also begun proceedings against Singapore Airlines Cargo and Cathay Pacific.



- NZ HERALD STAFF