Lufthansa to pay $85 million in cargo scandal

Lufthansa to pay $85 million in cargo scandal German airline Lufthansa said it has agreed to pay $85 million to settle class-action lawsuits filed in the United States over alleged price-fixing by its cargo division.
   About 80 parties, mostly believed to be shippers and freight forwarders, joined together this year seeking compensation from Lufthansa and several other airlines. The settlement still must be approved by the judge hearing the case. Lufthansa Cargo AG and Swiss International Air Lines, which is owned by Lufthansa, hope the judge will permit them to be released from the civil class actions.
   The suits stem from an investigation by U.S. and European authorities into charges that several cargo airlines colluded to fix prices on freight shipments. More than a dozen private antitrust suits were filed in the United States after a series of raids Feb. 14 by agents in the United States, Europe and Asia on the offices of major airlines, including American Airlines, United Airlines, British Airways, Japan Airlines, Air France-KLM, Lufthansa, Cathay Pacific, Scandinavian Airlines System, and Cargolux. Competition authorities in other countries are also investigating the matter.
   The U.S. Justice Department, European Commission and other cartel authorities have granted Lufthansa conditional immunity from criminal charges if it testifies against other carriers.
   One of the civil suits, filed by Niagara Frontier Distribution Inc., an air-freight shipper in Lockport, N.Y., alleges that Niagara Frontier was overcharged by nine airlines, all named in the suit, since January 2001. The suit also names the International Air Transport Association as a defendant.
   Niagara Frontier alleges that surcharges common through the $60 billion air cargo industry have risen inexorably and by the same amounts, no matter which airline is used.
   The surcharges in question are intended to recover high fuel costs. Niagara Frontier's lawsuit alleges that the surcharges persist even when fuel prices fall back.
   In 2000, air carriers asked U.S. regulators for permission to impose surcharges on air cargo rates. The request was rejected on grounds that it was basically flawed and unfair to shippers. The government said the airlines had improperly based the surcharges on spot-fuel prices, which fluctuate. Most carriers flatten fuel cost spikes via hedging, in the context of long-term contracts.