Asia Guide Tours And Travels: 21 airlines fined for fixing fees

1.

WASHINGTON — Federal prosecutors say a massive price-fixing scheme among international air carriers has cost U.S. consumers and businesses hundreds of millions of dollars.

The airlines allegedly conspired with competitors to inflate passenger and cargo fuel surcharges. Prosecutors say the price-fixing occurred between 2000 and 2006 as airlines tried to make up for lost profits.

Since then, those caught by the Justice Department have paid a hefty price. Twenty-one airlines have paid more than $1.7 billion in fines, and 19 executives have been charged with wrongdoing. Four have gone to prison.

Among those convicted are British Airways, Korean Air, and Air France-KLM. No major U.S. carriers have been charged.

It’s one of the largest criminal antitrust cases in U.S. history, and it’s not over. Federal prosecutors and investigators say they won’t discuss details of the cases because they are still investigating.

2. Airline pretzels no longer free on Continental

It’s been decades since airline travel was fun, but the downward spiral seems to have speeded up lately.

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First, airlines started charging for checked bags. Then, the federal government expanded the use of those intrusive all-body scanners. This week, Continental Airlines eliminated the free pretzels and cookies it used to hand out on flights.

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With the average price of a domestic ticket somewhere north of $340, doing away with a dime’s worth of twisty munchables per customer is not going to make Continental an economic powerhouse. The airline estimates the move could save it only about $2.5 million a year. It says it’s making the move to bring itself in line with its merger partner, United, which doesn’t serve free snacks either.

You can call this the logic of the market. In three decades, as consumers repeatedly rewarded low fares over service, Continental has moved from an airline that prided itself on serving complimentary meals on real plates with metal flatware to serving no free food at all. (Beverages are still free.)

But a funny thing happened on the way to that free market in the sky. The airlines still serving free food are low-cost upstarts like Air Tran and Southwest. Of the old-line so-called legacy airlines, only Delta still offers free snacks.

Apparently, these companies haven’t forgotten that taking care of customers is still important in a low-fare world.

3. Alaska Airlines testing iPads in cockpits

The iPad is taking off with more than just consumers. Airline pilots could soon be using it to carry the navigational information they need instead of reams of paper charts or a cumbersome laptop.

Alaska Airlines is evaluating Apple's iPad with "a select group of pilots," says spokeswoman Maryanne Lindsay. "We're hoping to hear in the next week or two" whether they'd like to go further with their testing, she adds, declining to go into details.

Last month, Executive Jet Management, a unit of NetJets that flies small chartered jets, became the first commercial operator authorized by the Federal Aviation Administration to use the lightweight tablet computers as the sole source of reference info while on the runway and in the air.

Navigational-data supplier Jeppesen, a Boeing subsidiary, makes the iPad app used by both Alaska and Executive Jet.

"The pilots are absolutely in love with this device — they are clamoring to get this," says Rick Ellerbrock, Jeppesen's chief strategist for aviation.

FAA spokeswoman Laura Brown says Southwest is using iPads for ground operations such as maintenance, and the agency expects to hear from more airlines about taking the tablets aloft.

Rather than have pilots toting briefcases full of charts, airlines increasingly have shifted toward so-called "electronic flight bag" systems where the data are stored electronically. But that still means lugging around a laptop.

The iPad appeals because "it's so light, so thin. It's very conducive to the small amount of real estate you have on the flight deck," says Jeppesen director Tim Huegel. The company is working on an app for tablets running the Android operating system, too.

Executive Jet has its iPads strapped to a "kneeboard" secured on the pilot's upper leg with an elastic band, while "Alaska is looking to mount it in the airplane itself," Ellerbrock says. Due to possible electronic interference, the FAA must approve exactly how the device is used in the cabin.

Not surprisingly, there's concern pilots could become distracted by their carry-on gadgets — remember the Northwest Airlines pilots who overshot Minneapolis by 150 miles because they were engrossed in something on their laptop? The FAA last April warned that "any cockpit distraction that diverts attention from required duties can constitute a safety risk, and that includes the use of personal electronic devices for activities unrelated to flight."

Things not to worry about: Airlines won't be relying on the iPad's GPS to figure out the plane's location — that's still up to the aircraft's navigational system. Also, tests conducted by Jeppesen confirm that if there's a sudden loss of air pressure at altitudes up to 51,000 feet, the iPad will continue working.

4. Airline executives get millions of dollars in mergers
CLEVELAND, Ohio -- U.S. airline executives who have guided their companies through the last three giant mergers stand to collect tens of millions of dollars.
In the latest consolidation -- Southwest Airlines' pending acquisition of AirTran Airways -- AirTran Chief Executive Robert Fornaro will receive $5.7 million in benefits if the deal is finalized.
In the Continental-United marriage that preceded it, CEO Jeff Smisek is in line for a $4 million merger bonus if he reaches certain goals, yet to be established by a compensation committee. And when Delta and Northwest combined two years ago, Northwest CEO Douglas Steenland received an $18.3 million payout.
Compensation experts say market forces are driving the pay and that the executives are getting packages no more generous than their peers. They also say the mergers have left one CEO in each pair out of a job -- justifying the departing executives' golden parachutes.

AirTran Airways Chief Executive Bob Fornaro, left, receives a scale model of a Southwest Airlines passenger jet from Southwest CEO Gary Kelly on Sept. 27, the day they announced Southwest would buy AirTran.
But others say the performance incentives are out of touch with the economic arguments made in support of the deals -- that the carriers needed to combine to survive and prosper in the face of rising fuel costs and fierce competition.
Michelle Leder, author of footnoted.org, said there is a disconnect between combining to protect the health of companies and hefty bonuses.
"Of course the companies would argue otherwise -- that they're doing the best to protect as many jobs as they can and that the executives should be rewarded for this. Plus, they'd probably add that it's not all that easy to run an airline these days," Leder wrote in an e-mail.
Capt. Jay Pierce, head of the Continental unit of the Air Line Pilots Association, finds the pay of airline executives unfathomable given the industry's chronic woes. U.S. carriers made about $4 billion combined last year but are climbing out of a deep hole. Losses for the previous nine years totaled $58 billion, the Air Transport Association said.
"There is just something inherently wrong with the fact that people running airlines today, their children and grandchildren will never have to work," Pierce said. "Yet the companies they're running haven't proven to be viable companies, when you look at it with an economic microscope."

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Asia Guide Tours And Travels

Monday, March 7, 2011

21 airlines fined for fixing fees

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