CCI penalises airlines for fixing, revising cargo fuel surcharge

The Competition Commission of India (CCI) imposed penalties upon three airlines for concerted action in fixing and revising fuel surcharge (FSC) - a component of freight charges.

The order was passed based on information filed by Express Industry Council of India against Jet Airways (India) Ltd., InterGlobe Aviation Limited, Spice Jet Limited, Air India Limited and Go Airlines (India) Limited alleging cartelisation.

The CCI, in its order, noted that the aforementioned Airlines had acted in a concerted manner in fixing and revising the FSC rates and thereby contravened the provisions of Section 3 of the Act, which prohibits anti-competitive agreements including cartels.

Accordingly, penalties of Rs. 39.81 crore, Rs. 9.45 crore and Rs. 5.10 crore were imposed upon Jet Airways (India) Ltd., InterGlobe Aviation Limited and Spice Jet Limited respectively. Besides, a cease and desist order was also issued against the 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 the Airlines at the relevant time and noting that FSC constitutes about 20-30 percent of cargo revenue, penalty was imposed by the Commission at three percent of their average relevant turnover of the last three financial years.

The CCI also deprecated the airlines for using FSC as a pricing tool which was essentially introduced to mitigate the fuel price volatility.