Clamping down on unfair business practices in the aviation sector, the Competition Commission of India (CCI) on Tuesday slapped penalties totalling Rs 258 crore on Jet Airways, IndiGo and SpiceJet for cartelisation in fixing fuel surcharge for transporting cargo.
However, it did not impose any penalty on national carrier Air India and private carrier GoAir, which were also named in a complaint filed by Express Industry Council of India.
Of the R251-crore penalty, R40 crore has been levied on SpiceJet, R60 crore on IndiGo and R151 crore on Jet Airways. These carriers have also been directed to cease and desist from indulging in anti-competitive practices.
Though there were no immediate comments from any of the airlines, it is expected that they will challenge it in the Competition Appellate Tribunal.
The regulator found that the three airlines colluded in fixing FSC rates. Such conduct was found to have resulted in indirectly determining the rates of air cargo transport, thereby contravening Section 3 of the Competition Act. This section pertains to anti-competitive agreements, the release said.
“No penalty, however, was imposed upon Air India Ltd as its conduct was not found to be parallel with other airlines,” the CCI release said.
“Similarly, no penalty was imposed upon Go Airlines (India) Ltd as it gave its cargo belly space to third-party vendors with no control on any part of commercial/economic aspects of cargo operations done by vendors including imposition of FSC,” the CCI release added.
Vijay Kumar, COO, Express Industry Council of India, had filed a complaint with the CCI three years ago alleging that airlines companies have come together to form a cartel and have been fixing prices that increase the cost of cargo travel.
“We complained to CCI stating that the airlines have got together to create a cartel in the garb of fuel surcharge. Fuel surcharge was introduced to mitigate the volatility of fuel prices. In effect when the fuel prices comes down, the surcharge should also come down, but that has not happened. Internationally there are benchmarks on fuel surcharge, but here the airline companies have gone ahead and fixed the price,” Kumar said.
According to CCI, such anti-competitive ways in the air cargo industry undermines economic development of the country and ultimately acts to the detriment of end-consumers.
“However, considering the precarious financial position of airlines, the penalty was imposed by the Commission at the rate of 1% of their average turnover of the last three financial years,” the release said.