Air NZ pays $51m to settle freight cartel lawsuit

Air New Zealand says it has paid $US35 million ($51 million) to settle a long-running lawsuit alleging it took part in a cartel to fix freight fuel and security surcharges.

The company made no admission of wrongdoing.

“This is purely a question of mitigating an unacceptable risk created by the US class action system which creates enormous pressure to settle such matters commercially,” said Air NZ general counsel John Blair.

“There was no credible evidence that any Air New Zealand employee participated in any conspiracy, but the potential for an unexpected verdict was not an acceptable commercial risk for the airline.”

In 2011 Air NZ was released from a criminal investigation by the US Department of Justice.

The class action lawsuit was filed by a group of freight forwarders and freight customers in 2006 and alleged 29 airlines and the International Air Transport Association conspired to “fix, raise, maintain and/or stabilise surcharges.”

Air NZ was added as a defendant after the initial filing and was among the last of the airlines to settle the case. Its payment represents 2.8% of the $US1.223 billion paid by 28 airlines, Air NZ said.

In April Air NZ expressed alarm at the prospect of an advisory jury being appointed for a court hearing. A letter to presiding judge Brian Cogan said Air NZ qualified as an “agency or instrumentality of a foreign state” by virtue of its majority government ownership and was therefore entitled to a bench trial.

“Given the volume of documentary evidence and the complexity of the strongly contested expert economic testimony upon which Plaintiffs’ case depends, it is far from apparent that ‘any significant efficiency or economy gains are likely to be realized by having a jury first render a verdict on issues that ultimately must be decided by the court’,” it said.

Air NZ said the settlement was agreed through mediation on May 7 and is subject to court approval in New York.

It said its previous guidance for the 2016 financial results did not include the settlement.

Australia's Qantas Airways is among airlines to have settled, paying $US26.5 million, while Korean Air made the biggest settlement at $US115 million. The plaintiffs estimate damages at about $US2.66 billion, which would triple to as much as $US7.98 billion under US antitrust laws.

Asiana Airlines, Nippon Cargo Airlines and EVA Airways Corp settled in March for US$55 million, US$36.4 million, and US$99 million respectively.

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% of the revenue generated from air freight forwarding services in and out of New Zealand in 2006.

Air NZ shares rose 3c to $2.39 in early trading.

Additional reporting, Businessdesk