Wednesday, November 28, 2007

Qantas - fly the criminal skies

Aaah Qantas - the "spirit of Australia". So long as you mean old fashioned pre-colonial convict spirit of Australia to steal as much as you can from anyone you can. I have been tough on Qantas in the past. Have complained about the rort that is the Pacific Route, the bad customer service and the faulty (now fixed) Video On Demand system. However I have also defended them as one of the best airlines in the world.

But now we have Qantas effectively pleading guilty to a charge of price fixing and agreeing to pay a fine of US$61mm as a result of a US Department of Justice investigation (e-travelblackboard report here). They have settled an action that claimed they colluded with a number of airlines (maybe as many as thirty) to set prices (ie reduce competition) in cargo pricing.

Let's be clear as to what it means to admit to price fixing. This is akin to an admission of criminal behaviour by Qantas. It is a confirmation that Qantas as a company engaged in a criminal act to defraud its customers (cargo in this instance) of money by secretly agreeing with competitors to fix prices. To engage in secretive activity that resulted in customers paying more than they should have. Anti-competitive activity is the same as corporate theft. A class action is already under way in civil court on behalf of the customers that were ripped off by this behaviour.

Qantas CEO Geoff Dixon seemed to indicate it was a few employees not a company in this comment attributed to him
“Qantas takes its obligations to comply with the law very seriously. We have a comprehensive competition compliance program in place, and expect all of our employees to comply with these requirements at all times,”
...and in indicating that two current and four past employees are not part of this plea agreement. In other words that those employees may be subject to separate prosecution.

Whether or not it was rogue employees rather than company policy - this is still a huge slur on Qantas - and whether Qantas likes it or not it places a cloud of suspicion over all of Qantas' activities.

UPDATE - Jan 08 - Qantas has been taking a dive in the stock market and this price fixing issue is part of the reason (according to the Sydney Morning Herald). SMH has also published the names of the executives that were excluded from the deal (four ex and two current employees). They are Qantas's former head of freight Peter Frampton, the airline's head of freight in the US Bruce McCaffrey, Qantas's general manager of freight sales John Cooper, Qantas's country manager for Thailand and former head of freight in Singapore Harold Pang, Qantas's head of commercial freight Stephen Cleary, and another Qantas freight employee Desmond Church.

Qantas has been given two weeks to pay up.


Anonymous said...

Do you really think that Qantas CEo Dixon knew nothing?? He struck a deal to get himself off and let the minions take a fall. He might get off US charges but he's in the frame in Australia. I think the US plea bargain should be opened to see what 20 pieces of silver he got?

Anonymous said...

Why isn't the government or the ACCC investigating price fixing for passenger tickets, especially on the pacific route to the US. I recently did some research on pricing and found that Qantas and American Airlines, both partners of OneWorld airline alliance were charging almost
100% more
for Australians to travel to the US than our American friends travelling to Australia at the same time (MEL to SFO - 1 to 14 August) The competition alliance, with Star Alliance, were charging 30% more (United and Air New Zealand. Is this a coincidence or price fixing that the airlines in the same alliance are charging similar fare prices? and WHY are Australians being charged almost double the ticket price? More competition is needed
and deregulation to stop this unfair price gouging by our own Australian airline. AND, to top it all off, Australians are charged an $18 credit card booking fee, of which Qantas does not charge Americans when they make bookings on their North America Qantas website. Wake up Australia, we are being totally ripped off!

Tim Hughes said...

Absolutely agree. Am convinced that the solution to competition in air in Australia is to give Singapore and Emirates access to the Pacific route. This will take away Qantas' biggest price gouging opportunity - hopefully forcing them to use quality and service rather than protectionism to get, gain and keep customers.