CCI slaps Rs 54-crore penalty on Jet Airways, IndiGo, SpiceJet for fuel surcharge cartel

New Delhi, March 10, 2018: The Competition Commission of India (CCI) has imposed penalties worth Rs 54 crore upon three airlines for “concerted action in fixing fuel surcharge” (FSC) on cargo transport. The Express Industry Council of India, in a complaint filed with the competition watchdog, had alleged “cartelisation” by five airlines, including Jet Airways, InterGlobe Aviation, Spice Jet, Air India and Go Airlines. The final order passed on March 7 states that Jet Airways, InterGlobe Aviation and SpiceJet contravened the provisions of Section 3 of the Act, which prohibits anti-competitive agreements, including cartels. The FSC is a component of freight charges.

The CCI deprecated the airlines for using the FSC as a pricing tool, which was essentially introduced to mitigate the fuel price volatility. Of the total penalty of Rs 54 crore, Jet Airways will pay Rs 39.81 crore, while InterGlobe Aviation Limited and Spice Jet Limited will pay Rs 9.45 crore and Rs 5.10 crore, respectively. InterGlobe Aviation is the parent of no-frills carrier IndiGo.

 “Jet Airways is yet to receive any formal communication from the concerned authorities regarding the development and is therefore unable to comment on the same,” a Jet Airways spokesperson said, reported PTI. IndiGo and SpiceJet have not commented on the issue as of now.

The penalties translate to three per cent of the respective airlines average turnover earned from levy of FSC (Fuel Surcharge) on the volume of cargo handled for the three-year period — 2010-11, 2011-12 and 2012-13, said the CCI according to

The anti-trust watchdog has also issued a “cease-and-desist order” against the erring airlines. While imposing penalties, the commission applied the principle of relevant turnover and based the penalties on the revenue generated by the airlines from air cargo transport services only. Considering the financial position of airlines at the relevant time and noting that the FSC constitutes about 20-30 per cent of cargo revenue, penalty was imposed by the commission at 3 per cent of their average relevant turnover of the past three financial years, it said.

According to passing an order on the same complaint for the second time in nearly three years, the watchdog has directed the airlines to “cease and desist” from anti-competitive practices. The latest quantum of penalties is much lower than what was imposed in 2015 by the regulator on these carriers. At that time, the total fine was over Rs 257 crore. Then, the fine was higher at Rs 151.69 crore on Jet Airways, Rs 63.74 crore on InterGlobe Aviation and Rs 42.48 crore on SpiceJet, reported PTI. Following appeals, the November 2015 order was set aside by the erstwhile Competition Appellate Tribunal in April 2016 and the matter was remanded back to the CCI.

In its 42-page order on Wednesday, the regulator noted the basic concern is the overcharging of cargo freight in the garb of fuel surcharge by the air cargo transport operators, which adversely affects consumers beside stifling economic development of the country.

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