Air NZ to defend US class action over air cargo cartel claim

Air New Zealand [NZX: AIR], the national carrier, will defend a multi-billion dollar class action in the US that it colluded to fix prices on international air freight services after a New York court set a trial date for the claim.

The Auckland-based airline, Air China and Air China Cargo, Air India and Polar Air Cargo and its parent Atlas Air Worldwide, failed in an application to end the claim on Monday after a hearing in the US District Court for the Eastern District of New York, in Brooklyn. Judge John Gleeson set a final pre-trial hearing for January 8, 2016, with jury selection and the trial to start on January 25.

The claim was filed in 2006 on behalf of six freight forwarders and has been led by global litigation firm Hausfeld. The law firm has reached settlements worth almost $US1.04 billion with 27 airlines, including Qantas Airways, which paid $US26.5 million. The biggest settlement was $US115 million with Korean Air. The plaintiffs estimate damages at about $US2.66 billion, which would treble to as much as $US7.98 billion under US antitrust laws.

"Any defendants found liable would be jointly and severally responsible for the full amounts, plus fees and costs, less settlements received from other defendants," Hausfeld attorney Brent Laundau said in an emailed comment.

The freight forwarders allege 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 US" and were able to adjust those rates 28 times between January 1, 2000 and September 30, 2006, according to a report and recommendations by US Magistrate Judge Viktor Pohorelsky in the US District Court in October last year.

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 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 last year, a decision which is under appeal. The airline was also excluded from a class action settlement in Australia and was successful in clawing back legal fees.

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

Judge Pohorelsky's 2014 report and recommendations approved the freight forwarders' motion for class certification, and ruled on the admissibility of certain expert evidence. Among those recommendations, the plaintiffs lost a bid to toss out airline-commissioned analysis on Air New Zealand and Singapore Air's total fuel and security surcharges.

"The questions presented – whether there is sufficient data to calculate Singapore Air's surcharges and whether Air New Zealand subsumed surcharges in its base rates – go precisely to the facts of this case, and ought to be determined based on record evidence by the fact finder," the judge said.

The airlines lost an attempt to throw out analysis showing the air freight industry was structured to allow price-fixing, which the judge said was supported by other evidence such as an "email from an Air New Zealand executive explaining that the fuel surcharge 'is an industry driven exercise.' Collectively the airlines had more strength and agents/shippers just had to accept (it)."

(BusinessDesk)