The Brazilian Government has started a formal investigation into allegations that the country's four major airlines were involved in price fixing last year.
"The Justice Ministry has opened a case against the companies and its top officials-on charges of forming a cartel for simultaneous fare hikes," says a statement from the ministry.
Varig, VASP, TAM and Transbrasil could be denied access to government credits if found guilty and, in an extreme case, could face fines totalling up to 30% of their annual revenues. Criminal charges could even be brought against top executives, although this remains an unlikely scenario.
The Justice Ministry says it first suspected foul play in January last year when, so it alleges, the four airlines all reduced the maximum discounts they offer on official domestic fares, which are set by the Civil Aviation Department. The discounts on offer were cut from 60% down to 30%, which the ministry claims effectively constituted a price hike. It further claims that the reduction in discounts all happened on the same day.
It goes on to allege that in August last year the four companies raised their domestic fares by a further 10%, again by reducing discounts. The Justice Ministry says that the uniform increase took place only six days after the presidents of the four airlines had met in a Sao Paulo hotel.
"It was proved that they agreed on a price, which is against the law of competition and indicates the formation of a cartel," says Paulo de Tarso Ramos Ribeiro, secretary of the Economic Law department in the ministry.
The airlines were given until the end of April to present their defence to the ministry. If it decides that they are guilty, then the case will go for judgement before the CADE, Brazil's highest anti-trust body.
The four airlines, which have declined to comment on the investigation, were all hit at the start of last year by an economic recession brought about by a sudden collapse in the country's currency.
Meanwhile, VASP also faced further protests from its employees in April. They claimed that, for the second month in a row, their salaries had not been paid on time. The Brazilian Airline Pilots union has formally asked for government intervention at the carrier, which has been struggling to turn itself around. Earlier this year it was forced to scrap its four weekly flights to New York and Toronto and returned four leased Boeing MD-11s to their owner, Mitsui Leasing of Japan.
The pilots' union was also planning to stage protest marches with VASP employees in both Rio de Janeiro and Sao Paulo. At the same time, Brazilian newspapers have printed interviews with the airline's disgruntled staff. "Everyone's demoralised," says one. "They work one day and skip three."
Source: Airline Business
