Air NZ to settle its part in US civil suit with freight forwarders for US$35 mln

Monday 9th May 2016

Air New Zealand has agreed to a US$35 million settlement in a class-action lawsuit in the US taken by freight forwarding companies who claimed airlines colluded over cargo fuel and security surcharges between 2000 and 2006.

The national carrier was one of only two airlines still holding out in the suit, along with Air India, after 26 airlines cut settlement deals totalling US$1.19 billion. Hearings were set to begin in September, having been postponed in January after several airlines settled. Air New Zealand's settlement, reached through mediation on May 7, is subject to approval by a court in New York.

The airline agreed to settle "rather than take the risk of a potentially very material commercial liability by continuing to defend its position," it said in a statement. It hasn't admitted being part of the alleged conspiracy as part of the settlement.

“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 John Blair, Air New Zealand’s general counsel. "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.”

The claim was filed in 2006 on behalf of six freight forwarders and has been led by global litigation firm Hausfeld. Australia's Qantas Airways is among airlines to have settled, paying US$26.5 million, while Korean Air made the biggest settlement at US$115 million. The plaintiffs estimate damages at about US$2.66 billion, which would triple to as much as US$7.98 billion under US antitrust laws.

Asiana Airlines, Nippon Cargo Airlines and EVA Airways Corp were the latest to settle 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 percent of the revenue generated from air freight forwarding services in and out of New Zealand in 2006.

Air New Zealand said the settlement cost wasn't reflected in the company's guidance for 2016 earnings to exceed $800 million.

Its shares fell 0.9 percent to $2.34 and have dropped about 16 percent in the past 12 months.

BusinessDesk.co.nz

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