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Travel agents in Australia could be set for a financial windfall, following a Federal Court decision stating airlines should be forced to pay millions in additional ticket commissions.
Following a class action involving 1,450 agents last year, the Court has ruled airlines operating out of Australia were not obliged to include fuel surcharges when calculating the commission paid to agents on international ticket sales.
However, this decision was challenged by Leonie’s Travel on behalf of the agents.
Leonie’s reduced the scale of the claim, appealing against Qantas for commissions which should have been paid out on airline tickets sold between 2004 and 2007.
The Federal Court subsequently overturned the previous decision, finding fuel surcharges were not a tax and as such should be made commissionable.
This now leaves airlines – including Air New Zealand, British Airways, Cathay Pacific, Singapore Airlines as well as Malaysia Airline, all of whom were involved in the original case - open to huge liabilities.
Slater and Gordon lawyer Steven Lewis, representing the travel agents, said the case set a precedent and argues the decision could have major implications across the airline industry.
“The court has made a very clear ruling the fuel surcharge is part of the ticket price on which commissions must be paid,” he said.
“The matter was run as a test case to establish the law as it applies to Qantas and the other airlines involved in the class action.
“The time has now come for the airlines, which have been using the fuel surcharge to bolster the bottom line since it was introduced in 2004, to stop fighting the travel agents and resolve this major problem.
Following the decision, Mr Lewis said almost 85 per cent of $16.9 billion in international airline tickets sold in Australia between 2004 and 2006 came through travel agents.
In a statement Qantas said it was “disappointed” but would consider its position.
United Airlines and Continental Airlines are expected to confirm a merger early next week, with the two Boards expected to meet over the weekend.
With only the final details left to negotiate, the merger will create the world’s largest airline – replacing American competitor Delta Air Lines when measured by passengers carried.
The two aviation giants reconvened for talks earlier this month, more than two years after walking away from a similar deal. However, deteriorating economic conditions have bolstered the need for consolidation in the industry.
United’s fortunes have also since improved.
This week, the airline reported its losses had narrowed in the first quarter while revenue jumped 15 per cent.
The company also said it had $4.5 billion in cash.
Under the terms of the deal, United would be the sole brand for the new carrier, which would be based in Chicago.
According to reports, Continental chairman and chief executive, Jeff Smisek, will become chief executive of the merged carrier while Glenn Tilton, United’s chief executive, would be named the non-executive chairman for two years, after which Mr Smisek would take over that role too.
Market sources are expecting a swap of about 1.057 United shares for each share of Continental when the deal is finalised.
As news of the deal spread trading on the Nasdaq saw United shares down 1.3 per cent to $21.47, while Continental shares were up 2.4 per cent to $22.70 at 16:00EDT today.
Etihad Airways, the national airline of the United Arab Emirates (UAE), has commenced non-stop flights from its home base in Abu Dhabi to Baghdad, becoming the first airline in the UAE to operate to the Iraqi capital.
VIP passengers on the inaugural flight, which departed from Abu Dhabi Airport at 10.00 am yesterday (April 26) included the His Excellency Abdullah Ibrahim al-Shehhi, the UAE Ambassador to Iraq, and Dr Abdulelah Al-Jumaili, Cultural Attache and Mr Ahmed Jaber, Acting Charge d’Affairs, of the Embassy of the Republic of Iraq.
Etihad Airways’ Chief Executive Officer, James Hogan, said: “These new services are an important step for Etihad and for the UAE, reflecting a commitment to strengthening ties in the region.
“We believe demand on the route will build quickly, particularly from government and business travellers. We also expect to see strong interest from people from Iraq connecting through Abu Dhabi to Etihad’s extensive global network.”
Etihad operates five return services per week to Baghdad, using two-class Airbus A320 aircraft, and will expand its operation with two additional A320 return services to a second Iraq destination – Erbil – from June 1, subject to government and regulatory approvals.
Etihad’s flight EY555 to Baghdad departs Abu Dhabi on Mondays, Wednesdays, Thursdays, Fridays and Saturdays at 10.00am, arriving at Baghdad’s international airport at 11.25am the same day. The return flight, EY554, departs Baghdad on the same days at 12.30pm, arriving in Abu Dhabi at 3.50pm.
All times quoted are local times.
Troubled carrier Japan Airlines (JAL) has confirmed it will cut a further 15 international routes from its schedule as it seeks to cut costs.
The flag-carrier confirmed vast financial losses earlier this year, with the airline presently being administered by the Japanese government.
Swathes of job cuts – expected to total at least 16,450 staff by March 2011 – have been implemented, while international and domestic passenger capacity is set to fall by 40 and 30 per cent respectively from 2008 levels.
“JAL has restructured its overall network with the clear objective of returning to profitability as swiftly as possible,” the airline said in a statement.
Combined with previously announced route cuts, the airline will stop operating 28 international routes over the coming months, while 50 domestic routes will be shed.
International routes to be closed include flights from Tokyo to Amsterdam, Milan, Rome and Sao Paulo.
The airline is undergoing a major restructuring after filing for bankruptcy protection on January 19th. At the time the airline was declared “hours from bankruptcy” before government support offered a lifeline.
Questions have also been raised over possibly malpractice at the airline before it entered administration.
The trial of three ex-British Airways executives and one current employee on has began in London on accusations of fixing the price of fuel surcharges.
The four defendants agreed with each other along with others at Virgin Atlantic “to make and implement agreements which would lead, and which in fact did lead, to price fixing”, Southwark Crown Court heard today.
The charges relate to price-fixing over a period of 18 months, between 1 July 2004, and 20 April 2006, when fuel surcharges rose from £5 to £60 for a typical long-haul return ticket.
The accused include BA’s current sales and marketing director Andrew Crawley, former head of communications Iain Burns, its former head of sales in the UK and Ireland Alan Burnett, as well as former commercial director Martin George. All four deny a cartel offence under the Enterprise Act 2002.
Richard Latham QC, prosecuting for the Office of Fair Trading, told the jury that the “crucial element” was that of dishonesty in a secret price-fixing arrangement.
“No one complains because no one knew what was going on,” he said. “But every single purchaser is a victim.”
He said the four defendants dishonestly agreed with Virgin Atlantic executives Paul Moore, William Boulter and Steven Ridgway to fix the price of fuel surcharges.
However he said by blowing the whistle on the criminal cartel, the three Virgin executives would be granted immunity from prosecution.
“The situation may arise where the defendants are little more culpable than the prosecution witnesses,” he said.
“But if Virgin executives had not admitted their participation in price-fixing with British Airways the illicit activities would almost certainly have remained hidden to this very day.”
The case continues.
