CCI imposes penalty on Aviation companies

The Competition Commission of India (CCI) enforced penalties amounting to Rs 258 crore on Jet Airways, IndiGo and SpiceJet. The three carriers found guilty of colluding in fixing fuel surcharge rates for transporting cargo. A penalty of Rs 151.69 crore has been imposed on Jet Airways, the fines levied on InterGlobe and SpiceJet are Rs 63.74 crore and Rs 42.48 crore, respectively.

Earlier, the Express Industry Council of India (EICI) filed a complaint against airlines and in response to the complaint the order was passed. The regulator did not impose any penalty on Air India and GoAir, which were also named in the complaint, as the commission did not find any contraventions against the two.

CCI has penalized for concerted action in fixing and revising Fuel Surcharge (FSC) for transporting cargo. These carriers have also been directed to cease and desist from indulging in anti- competitive practices. Such conduct was found to have resulted in indirectly determining the rates of air cargo transport and thereby contravening Section 3 of the Competition Act. CCI levied fine on airlines at the rate of 1 per cent of their average turnover of the last three financial years on airlines considering the weak financial health of the aviation sector.

According to CCI, the cartels to be broken to grow the the market condition for the aviation sector and more transparency be brought in price fixing by the airlines.The fuel surcharge which was essentially introduced to mitigate the fuel price volatility, will continue to be used as a pricing tool to the detriment of the users who include express companies, freight forwarders and ultimately the end users.

Prompt reaction was seen on the part of the Aviation sector companies to take all sort of legal steps to defend the fine imposed. Jet Airways is not in contravention of the provisions of the Competition Act and it shall pursue all available legal steps to defend its position,according to the company's press release. SpiceJet's management told that they are examining the order and likely to challenge this verdict. IndiGo is studying CCI order and will take legal steps to challenge the order as per company's release.

The share price of the companies Jet Airways, Spicejet and Interglobe aviation 4.29 per cent , 3.65 per cent, 1.94 per cent on bourses in early trades respectively. The stocks are trading at Rs 421.85 ,Rs 49.95 and Rs 1047.5 respectively on intraday basis.