February 15, 2006

Global airlines cargo probe widens to Asia

By Sachi Izumi and Jason Neely

TOKYO/LONDON (Reuters) - A global probe of airlines
suspected of fixing prices for cargo widened to Asia on
Wednesday as authorities searched the offices of some of the
world's biggest carriers from Japan, South Korea and Hong Kong.

The European Union's executive arm and the U.S. Justice
Department on Tuesday raided a number of airlines on both sides
of the Atlantic, while other carriers were asked for

Asian local authorities followed suit on Wednesday, though
nowhere have charges or arrests been reported.

"We are surprised because this is a very heavy procedure,"
said Marc Boudier, executive vice president of Air France
Cargo, part of the world's largest airline group by revenues,
Air France-KLM.

The U.S. Federal Bureau of Investigation (FBI) searched the
cargo terminals of Air France and KLM at Chicago's O'Hare
airport on Tuesday, an FBI spokesman said.

British Airways' cargo headquarters at Heathrow airport in
London and in New York were searched by antitrust officials on
Tuesday and again on Wednesday, a source familiar with the
situation told Reuters.

Germany's Lufthansa, Swiss International, Scandinavian
airline SAS and Luxembourg-based Cargolux also said they had
been asked about the matter.

The probe centers on surcharges that airlines have imposed
for fuel, added security and higher war risk insurance since
the September 11, 2001, hijackings in the United States,
according to some of the carriers being questioned.

Airline shares were mixed on Wednesday, with most in Europe
higher as oil prices slipped below $60 to their lowest level
this year, easing concerns about fuel costs.

"The Commission has reason to believe that the companies
concerned may have violated (a European Union) treaty, which
prohibits practices such as price fixing," the European
Commission said in a statement.

The U.S. Justice Department said it was investigating the
possibility of anti-competitive practices in the air cargo
industry and that it was coordinating with the EU and other
foreign competition authorities.


U.S. heavyweights American Airlines and United Airlines
said they had received inquiries as part of the probe.

Korean Air Co. is the largest carrier in terms of cargo
involved in the probe.

Korean Air spokesman Lee Hyoung-woo said officials from
South Korea's Fair Trade Commission had interviewed the
company's executives.

Other top Asian cargo players, including Singapore
Airlines, Hong Kong's Cathay Pacific Airways and Japan Airlines
Corp. all confirmed they had been questioned by authorities.

JAL said European authorities had searched its Frankfurt

Cathay said EC and U.S. Justice Department officials had
visited the company's offices in Frankfurt, Los Angeles and San

South Korea's Asiana Airlines Inc. said its offices were
searched by Korea's antitrust watchdog.

The case could put a brake on recent growth in the $50
billion global air cargo market, which accounts for about 12
percent of airlines' revenue, according to International Air
Transport Association data.

Planemaker Boeing Co. has estimated the cargo market will
expand by 6.2 percent a year for the next two decades,
exceeding expected growth rates for passenger traffic and the
world economy.

Parcel delivery specialists such as Fedex Corp. and United
Parcel Service Inc. said they were not contacted about the

Japan's All Nippon Airways Co. said cargo operations
outsourced to unlisted Nippon Cargo Airlines Co. had not been

(Additional reporting by Annika Breidthardt in Zurich,
Jeremy Pelofsky in Washington, Michael Smith in London, Cheon
Jong-woo in Seoul, Alison Leung and Donny Kwok in Hong Kong and
Jerker Hellstrom in Shanghai)