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Business News/ Politics / Policy/  Jet Airways, IndiGo, SpiceJet fined for fixing fuel surcharges in cargo transport
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Jet Airways, IndiGo, SpiceJet fined for fixing fuel surcharges in cargo transport

CCI imposed a penalty of Rs151.69 crore on Jet Airways, Rs63.74 crore on IndiGo and Rs42.48 crore on SpiceJet for cartelization

Photo: Ramesh Pathania/MintPremium
Photo: Ramesh Pathania/Mint

Mumbai: India’s antitrust regulator on Tuesday said it has imposed penalties on Jet Airways (India) Ltd, IndiGo and SpiceJet Ltd after investigating a complaint over the fixing of fuel surcharges in cargo transport.

The Competition Commission of India (CCI) imposed a penalty of 151.69 crore on Jet Airways, 63.74 crore on IndiGo and 42.48 crore on SpiceJet for cartelization. The fine corresponds to 1% of the annual turnover of the companies.

The complaint was filed by the Express Industry Council of India, an association of 29 parcel transportation firms, against Jet Airways, IndiGo, SpiceJet, Air India and GoAir. No penalty was imposed on GoAir and Air India.

CCI said it looked into allegations of “connivance" by airline companies to introduce a fuel surcharge (FSC) without any legal basis and had concluded that the penalties were warranted.

In its order, CCI observed that the cargo revenue ranged from 20-30% of the overall revenue of the airlines and so cartelization could not be ruled out.

All the airlines had levied FSC at a uniform rate from the same date, which constitutes an act of cartelization under the Competition Act, 2002. Subsequently, the airlines raised FSC at the same time without any corresponding increase in fuel prices.

Initially, the inquiry conducted by the director-general of CCI found no collusion or anti-competitive practice by the airlines in 2008-2013. (The report submitted by the director-general is akin to a charge sheet in a regular investigation.)

The airline firms had argued the fuel surcharge is not solely dependent on aviation turbine fuel (ATF) prices but on the overall operating costs as well as the overall market scenario—a stance rejected by the competition regulator.

“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 antitrust regulator said.

“Jet Airways is not in contravention of the Competition Act and shall pursue all avaliable legal steps to defend its position," a Jet Airway spokesperson said.

“The company is studying the CCI order and will take legal steps to challenge the order in the appropriate forum. The company has been legally advised that it is not in contravention of the provisions of the Competition Act, 2002," IndiGo said in a statement.

A SpiceJet spokesperson said the airline is examining the order and is likely to challenge it in court.

Vijay Kumar, chief operating officer, Express Industry Council of India, said the order vindicated its stand that airlines had behaved as a cartel. “Customer is the loser in any cartelization," Kumar said.

Fuel surcharge on shipments is levied on a per kilogram basis and was introduced in May 2008.

Currently, airlines charge 13 to 16.50 per kg as fuel surcharge.

Jet fuel price in May 2008 was 58,387 per kilolitre (referenced to Delhi Airport) and the FSC was fixed by airlines at 5/kg for cargo shipments.

The current jet fuel price is 43,052 per kilolitre.

Tarun Shukla contributed to this story.

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Published: 17 Nov 2015, 06:31 PM IST
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