After the cargo arm of troubled air carrier SAS was issued with a multi-million dollar fine by US authorities, aviation analysts are warning that the company could be hit by a similar-sized fine by the EU Commission as a sanction against price fixing. The effect of the fine, the company admitted in a June 27 statement, could have a “substantial negative impact” on its financial position.
On June 27, SAS Cargo Group A/S - the cargo subsidiary of the pan-Scandinavian SAS Group - agreed to pay USD 52 million to the US Department of Justice for anti-competitive activities during the period February 2002 through February 2006.
However, SAS Cargo is also being investigated by the European Commission for infringements of EC competition rules during the same period. Although SAS Cargo has already submitted its response to the charges, the Commission's final decision on a suitable punishment is not expected until late in 2008.
Any subsequent fine issued by the EU, aviation analysts say, could impact the annual results of the SAS group. EU competition fines are restricted to ten percent of a company’s annual turnover, but could total 30 percent of turnover in affected areas of business, multiplied by each year the price fixing is said to occur.
To make matters worse for the beleaguered carrier, the EU retains the right to double fines if a company has previously been involved in price fixing activities. In July 2001, SAS was fined EUR 39 million for entering into a route-fixing agreement with the now-defunct Maersk Air. At the time, former President and CEO Jørgen Lindegaard was quoted in a corporate statement as saying that “the most important thing is to… ensure that this will never, ever happen again".
“It is not possible at this time for SAS to predict the outcome [of the EC investigation], but taking the nature of the allegations into account, an adverse outcome is likely to have a substantial negative financial impact on SAS,” a statement issued by SAS Group Corporate Communications read.
According to current SAS Group CEO and President Mats Jansson, the company has now “reinforced its ongoing work on compliance with competition rules in all parts of the organization, through supplementary training for staff and the introduction of more control mechanisms”.
On June 27, SAS Cargo Group A/S - the cargo subsidiary of the pan-Scandinavian SAS Group - agreed to pay USD 52 million to the US Department of Justice for anti-competitive activities during the period February 2002 through February 2006.
However, SAS Cargo is also being investigated by the European Commission for infringements of EC competition rules during the same period. Although SAS Cargo has already submitted its response to the charges, the Commission's final decision on a suitable punishment is not expected until late in 2008.
Any subsequent fine issued by the EU, aviation analysts say, could impact the annual results of the SAS group. EU competition fines are restricted to ten percent of a company’s annual turnover, but could total 30 percent of turnover in affected areas of business, multiplied by each year the price fixing is said to occur.
To make matters worse for the beleaguered carrier, the EU retains the right to double fines if a company has previously been involved in price fixing activities. In July 2001, SAS was fined EUR 39 million for entering into a route-fixing agreement with the now-defunct Maersk Air. At the time, former President and CEO Jørgen Lindegaard was quoted in a corporate statement as saying that “the most important thing is to… ensure that this will never, ever happen again".
“It is not possible at this time for SAS to predict the outcome [of the EC investigation], but taking the nature of the allegations into account, an adverse outcome is likely to have a substantial negative financial impact on SAS,” a statement issued by SAS Group Corporate Communications read.
According to current SAS Group CEO and President Mats Jansson, the company has now “reinforced its ongoing work on compliance with competition rules in all parts of the organization, through supplementary training for staff and the introduction of more control mechanisms”.
