KEY POINTS:
Airlines accused of colluding over freight charges might not be badly affected in their balance sheets by penalties levied in New Zealand but there are concerns about the impact of action in other countries.
What began with raids at European airlines on Valentine's Day nearly three years ago is set to be fought out in New Zealand courts in the country's biggest cartel case to date.
Thirteen airlines are alleged to have colluded over fuel surcharges and a security surcharge. The value of air cargo flown by the airlines totalled $2.9 billion.
Commerce Commission chairwoman Paula Rebstock said the alleged collusion would have caused extensive harm to the New Zealand economy and affected every business and consumer, given our reliance on air freight.
Analysts say any fines imposed here would have little effect on airlines, including Air New Zealand.
"There is no reason to see them as being material," said Forsyth Barr head of research Rob Mercer.
Air New Zealand had consistently denied being involved in any cartel activity but if found liable, the penalty was likely to be around the $4 million to $5 million range, if in line with a A$20 million ($24 million) fine levied on Qantas in Australia, he said.
"For Air New Zealand it's more of a nuisance factor, having to go through the prolonged inquiry."
Centre for Asia Pacific Aviation chairman Peter Harbison said the fines themselves so far had had little effect on the airlines but it was the compound effect of the number of jurisdictions that could damage them.
New Zealand has joined a growing list of countries taking action that already includes the United States, where jail terms can be imposed, and within the European Union where cartel fines can be up to 10 per cent.
"The uncertainty is greater than what the market has latched on to," said Harbison.
Class actions on behalf of affected customers in their early stages in Australia and the US added to uncertainty.
Although Air New Zealand has faced the prospect of Commerce Commission action on top of investigations by European and US authorities, it has made no contingent liability to pay any penalty. The airline earned just under $400 million from its cargo business last year.
The airline yesterday vociferously defended itself against the commission charges.
General counsel John Blair said the airline had never condoned anticompetitive conduct.
Air New Zealand has invested several million dollars over the past three years, analysing over a million documents and speaking to many current and former employees.
"Whilst we have not had access to any of the documents or allegations of wrongdoing from the Commerce Commission, we expect to vigorously defend the proceedings," said Blair.
The airline's chief executive Rob Fyfe said in February this year there were very strong internal protocols against illegal behaviour.
"All our people are aware of their legal responsibilities and I would hope all our employees would have adhered to those protocols. Where people have knowingly breached the law I think it's appropriate that the authorities seek the appropriate remedies."
Qantas and British Airways are co-operating with the commission but other airlines said yesterday that they would defend themselves against the claims.
Emirates, which began flying to New Zealand in 2003, said it was restricted in what it could say given the matter was before the courts.
"Emirates denies the allegations and will be defending the proceedings."
Singapore Airlines Cargo said it was committed to competing within the requirements of the relevant competition law in New Zealand.
Cathay Pacific said it was disappointed the commission had taken action and the airline intends to vigorously defend all allegations.
Air New Zealand shares closed unchanged yesterday at 84c.
CARGO CRACKDOWN
* US courts have already awarded penalties of US$1.2 billion.
* Three airline staff have been jailed in the US.
* Australian courts ordered Qantas to pay A$20m and British Airways A$5m.
* The European Commission has dozens of airlines under investigation.
