Korean Air Admits Price Fixing
$300 Million Fine Forces Nation’s Largest Carrier to Post W214 Bil. Net Loss
By Cho Jin-seo
Staff Reporter
Korean Air has admitted in a case brought by the United States Department of Justice that it overcharged customers between 2000 and 2006 by fixing fare and fuel surcharges on international passenger and cargo flights.
South Korea's largest air carrier pleaded guilty and was fined $300 million (279 billion won) said the department, Wednesday (local time).
One method involved the firm and its conspirators increasing their fuel surcharges 18 times during the period, the department said.
The amount of the fine Korean Air received well exceeded the firm's first-half operating profit of 226 billion won. Furthermore, it's possible that more penalties may be levied on the company from criminal and civil suits as regulators in South Korea and Europe are also looking into the case.
``When British Airways, Korean Air and their co-conspirators got together and agreed to raise prices for passenger and air cargo fares, American consumers and businesses ended up picking up the tab for their illegal conduct,'' said William Mercer, acting associate attorney general of the Justice Department in a statement.
A total of 11 airlines, which also included Asiana Airlines and Air France, were suspected of involvement in the conspiracy. The international investigation was launched in March 2006 simultaneously in many countries in Europe, Asia and America.
British Airways was fined the same amount by the U.S. government, Wednesday, while Asiana, another Korean suspect, said it is waiting for a ruling.
``We have provided the requested information to the authorities. We haven't received any notification about it, yet,'' Asiana spokeswoman Lee Cha-youn said.
Considering the two firms' flight volumes, fines on Asiana may amount around 60 percent of that Korean Air has been ordered to pay, according to a report from Samsung Securities.
South Korea's Fair Trade Commission (FTC) refused to give information about its own view on the case. Its public relations officer Na Young-ju said, Thursday, that it is against its policy to comment on an ongoing investigation.
According to the U.S. Justice Department, Korean Air conspired with other firms to fix charges on flights, especially those flying between the United States and South Korea, from January 2000 to July 2006.
Virgin Atlantic and Lufthansa received reduced fines in the same case as they were credited as whistleblowers _ the first to voluntarily disclose their participation in the cartel. The two firms also agreed to pay restitution to the victims of their conspiracies.
Korean Air, however, said that it is to early to specify its position about the compensation of the victims _ whether Korean or American. It fell short of a public apology. The company only issued a statement on Thursday that it was ``sorry that the company has worried shareholders and customers who have trusted and loved Korean Air.''
A lawyer representing the company said a class action suit in the United States involving the case is going on.
"The case is still pending. So, we need to wait," he said.
The $300 million fine forced the company to post a net loss of 214.4 billion won ($232 million) in the second quarter of the year on Thursday, despite making an operating profit of 75.4 billion won, up 9.3 percent from the same quarter last year.
Sales also increased by 8.9 percent to 2.1 trillion won, thanks to an increasing number of overseas travelers.
Korean Air shares closed down 2.9 percent at 67,000 won on Thursday, while the benchmark KOSPI closed down 0.18 percent at 1,853.07.