Cargolux CEO doin' time

[711]

Cargolux Executives Get 13 Months for Air Cargo Price-Fixing | Journal of Commerce (http://www.joc.com/cargo-airlines/cargolux-executives-get-13-months-air-cargo-price-fixing)

[cargosales]

Apart from the fact that it's old news, your point is?

CS

[Best foot forward]

Seems a bit harsh. I guess it is one way for the us to reduce its deficit.

Will the CEO's of the other airlines do the same ammount of time?

[sunbird123]

About time too.
The airfreight industry is full of corruption.
Mostly by management.

[charter man]

Would you care to justify that sunbird?

[Best foot forward]

The whole world is full of corruption Sunbird, I guess we start with the freight industry and work our way up or down.

[sled dog]

Have they been, or will they be, actually jailed ?

[Pow-wow]

I always struggle to understand this price fixing thing !

Is it not a normal part of everyday business ?!?

I am convinced everyone does it. Your local supermarket will be working hand in hand with it's rivals and partners. One week the butter is on special in one of them and the next the bread is down in price at another. You cant seriously expect them all NOT to be talking to each other to make a fast buck on the consumers. (Was there not an issue with the milk price being driven down by supermarkets in the UK a while ago !?!)

I'm pretty sure this applies to pretty much every industry.

As far as the fining of airlines is concerned, I think its a case of governments jumping on the band wagon, trying to make some more money for themselves at the expense of the airlines, and using the media to make it look like fraud.

Might be completely wrong here, but why are other industries not attacked for this sort of thing too ?

Maybe someone with better knowledge of this can help to explain :ok:

[Pow-wow]

@ sled dog, they will be jailed and do actual time in jail. 3 months I think !?

[Need to Know Basis]

I read that the sentence was 13 months and not 3. I do hope Cargolux guys keeps their jobs and continues to pay their families. After all these guys plus all the others and there are many were just doing their job. As far as I can understand it was all about Fuel Surcharges. Fuel Surcharges were invented after 9/11 if I remember correctly or was that the even more ridiculous War Risk Insurance. I do know insurance rates went up along with the liabilities that were increased after 9/11 but they returned to the pervious 9/11 insurance rates with in 5 years i.e. 2006. Here we are in 2012 and they still charge ! WHAT WAR AND WHERE ? Back to FSC which as far as I can see was a Airline Senior Management telling their Sales Teams that they were not to be trusted and the FSC was a red line to protect the yield. FSC is riduculous. If the price of your main cost goes up i.e. fuel then like any other business. Put your prices up ! or down. It reflects a market driven condition. Anyone else wish to add their feelings as to this ridiculous state we are in when Senior Execs end up in jail. After all there was no personal gain for any of them and 13 months in Jail is just crazy. 13 months is akin to a child molester type crime in my country. It beggars belief. Thank you for letting me rant !

[G&T ice n slice]

The big problem is that there is not 'signalling' on the cargo side.

On the pax side I know of cases where on day (1) competitor dropped prices on a group of destinations. Unfortunately this included one very important city for my pax-colleagues. (think 2 daily for 'us' and 2-weekly for 'them'). On day (2) my pax colleagues dropped prices on every single city where competitor operated 2 or more daily and we operated a lot less than that. on day (3) competitor worked out the message and put the price for 1 city back up again. on day (3) plus a couple of hours all 'our' prices went back up again.

So no 'conversations' all totally open and transparent via all the magic systems that the pax side for getting prices out into the market. So no-one in jail

Now try to think how to do that in real-time on the cargo side. I've tried when a big competitor introduced a service to a city very, very important (think stupidly profitable) to us. His rates were less than 50% of ours. Plane stupid. My answer was to drop all our prices into his 'home' market from all points under my control to less than 50% of his. Result big complaint at very very high level (think at Board-to-Board). Luckily I had run a quick brief all the way up the system. So the response from our side was along the lines of "we cannot discuss pricing in this way, but perhaps you might like to consider what our man in "Xcity" is trying to tell you"

A week later they worked it out and their rates went up to just a teensy bit below ours. everyone happy and making loadsamoney.

But mostly it is impossible to signal in the cargo side

[Flying_Frisbee]

24th Jan 2012 14:37
G&T ice n slice The big problem is that there is not 'signalling' on the cargo side.
Was the problem not that there was too much "signalling"?

[G&T ice n slice]

well, there's signalling and ... nod, nod, wink, wink, "I haven't said this , but..."

In the good old days I used to "drop by" the office of one of my competitors "just for a cup of coffee" and well, goodness me, blow me down with a feather, just about ALL of my different competitors had also "just droppped in for a coffee".

The weird thing was that when I got back to the office, well, darn, I seem to have lost my current secret pricelist, but hey! where did all these competitor's secret pricelists come from???

Of course I am just joking, this sort of thing never went on AT ALL and it is exactly the sort of sneaky underhand thing that I frown on severely.

[AirWasp]

A while ago, one of our 'airline' customers very kindly paid for some of our staff to sit with a very expensive outside consultancy company to chew over the issues of 'compliance' and 'competition' .....

One of their questions was "How would you go about deciding your selling rates for a new entrant carrier into a particular market ?"

We replied that we would first evaluate the existing competitor's services based on their cost, service levels, routings and frequency etc, then we would look at what we're selling and compare them, eventually deciding where we (if we were customers) would view/position ourselves ...

Sound reasonable ?

Oh but no good sirs .... we were told, in rather a dismisive way that we could not posible use our competitor's prices as a yardstick and that if we did that we would be in contravention of the regulations !

So how are you supposed to decide your prices without comparing what the others are selling at ?

That's like opening a garage and selling cars for £50k a pop when the place across the street is knocking out exactly the same cars for £10k ! - You ain't gonna sell many !!

Oy vey !!

:ugh:

[Hunter58]

Maritime freight interestingly has a 'maximum price' level set by the world maritime organization. Nobody ever goes below...

But according to the eggheads that is not price fixing because you are allowed to go below, which again, nobody ever does.

In Air Cargo the situation is much more delicate. First, the 'price fixing' was found to be happening in one price component - the fuel surcharge. The result now is that before carriers agreed on how the surcharge was to be calculated. This is apparently price fixing. The rest of other surcharges and the actual rate (which form the end price) are obviously neglected. In the end the result is that before you had transparency on the surcharges and the rest, now you have only an end price for which you have no idea of how it is composed.

Funny enough the ones who complain most about the situation are shippers, the ones who forced the industry to adopt the surcharges in the first place.

Oh, should any egghead read here, just one important piece of information. If you as a carrier want to know what is paid in the market you will within five minuted. The forwarders will put the rate sheets of all your competitor under your nose without you even asking.

So in essence you have some highly paid lawyers and legal institutes of the state showing their power on a purely theoretical exercise with no practical result. Non e of these guys got rich, the industry is not making a plot of money anyway and some people even have to go and spend some time in prison for some tax fed lawyers trying to show-off.

Whow!!!

[lederhosen]

An EU bureaucrat if they found themselves on this site might conclude from some of the posts above that price fixing is considered perfectly normal. Indeed there is some suggestion that there is no other way of doing business.

However just because it has always been so does not mean that something is right. Making a ton of money on certain routes and using your position to control prices is exactly what the competition authorities are supposed to stop. Sending a message that this is unacceptable would seem to be absolutely right.

A big problem would seem to be that the airfreight industry has pretty fixed limits of capacity trying to cope with highly dynamic demand. Prices should fall when demand is lower and vice versa. However given certain important cost components, such as the price of jet fuel or navigation charges, being the same for all airlines, there are bound to be pricing similarities.

The issue would seem to be if there are wide discrepancies in apparent yield between similar routes for no obvious reason other than by inference price fixing. E.G. Europe/China having very different prices than Europe/Africa or Europe/America but remarkably consistent amongst all competitors.

Looking at it from the other direction it is interesting to note who is thriving and who is failing..... Jade cargo shutting up shop versus DHL introducing 18 A300s for instance.

[acmi48]

The whole price fixing issue was a scam, the u s trying to protect its suppliers from aggressive foreign competition, airlines were duped by DLH who turned judas then found themselves in a fix, spiralling oil prices meant competition was harder but airlines sought to keep the playing field playable .. For the market and the well being of their employees and respective countries economies,
The ceo in question was brave enough to stand before uncle sam to argue the case while others more responsable hid and the shareholders washed their hands in true christian style..

[Need to Know Basis]

Lederhosen. Airlines do not pay the same amount for fuel ? There is one Middle eastern carrier I know who does not pay for fuel at its home base. Dont know about the others but I would expect similar treatment. The carrier concerned charges a fuel surcharge to the cargo it flies. Unsure if they charge a FSC at their home base but how many originating exports come from these countries ? None.

[lederhosen]

Well if they put avgas in my jet I would not expect to pay either. But in all seriousness if you are in the know about a middle eastern airline getting their (jet)fuel for free perhaps you could share with us who it is.

[acmi48]

Probably iranair :ok: