Rs 258-cr penalty slapped on 3 airlines

Leading airlines Jet Airways, IndiGo and SpiceJet were on Tuesday slapped a combined fine of Rs 257.91 crore by the Competition Commission of India (CCI) on charges of cartelisation and overcharging cargo freight in the garb of fuel surcharge.

In a 51-page order that fixed the penalty at one per cent of turnover of each airline, the CCI said the action by these airlines “adversely affect consumers” and “such cartels in the air cargo industry particularly undermine economic development” in a developing country.

“It is important for the growth of the market that these cartels be broken and more transparency be brought in price-fixing by the airlines by taking firms steps in this direction,” the CCI said as it ordered in favour of express companies after they complained that airlines acted in concert to introduce fuel surcharge and increase it uniformly. “Else, the fuel surcharge, which was essentially introduced to mitigate the fuel price volatility, will continue to be used as a pricing tool to the detriment of the users who include express companies, freight forwarders and ultimately the end users and thereby will also harm the competition,” the CCI said.

Jet Airways has been slapped a fine of Rs 151.69 crore while IndiGo Rs 63.74 crore and SpiceJet Rs 42.48 crore. Air India escaped penalty as its conduct was not found to be parallel with other airlines while GoAir escaped punishment as it gave its cargo belly space to third party vendors with no control on any part of commercial or economic aspects of cargo operations. 

The order came in a complaint filed by the Express Industry Council of India, an apex body of leading express companies like Blue Dart, FedEx, DHL and First Flight, against the five airlines.

The council said the introduction of fuel surcharge to mitigate the volatility of fuel prices on a single day and fixing a uniform rate showed that it was an “act of cartelisation”.
It also claimed that although the levy was ostensibly introduced as being an extra charge linked to fuel prices when ATF prices were reduced, there had been no corresponding decrease in the FSC. They also said the surcharge was increased uniformly by airlines later also.

Jet’s reply not taken
When Jet Airways contended that surcharge was increased due to the rise in ATF prices and dollar rates, the CCI asked the airline the reason for not decreasing the surcharge when the jet fuel price and dollar rates were down. The reasoning provided by the airline was that the increase in ATF price and dollar rate in the last few months had a very detrimental effect but the CCI refused to accept it.