Capital Markets

FedEx Subpoenaed in Cargo Price-Fixing Probe

The antitrust investigation into the air cargo industry reaches air cargo companies and airlines.
Helen ShawJuly 14, 2006

FedEx has been subpoenaed by a grand jury in an investigation by the U.S. Department of Justice into possible antitrust laws violations in the air cargo transportation industry, according to published reports.

FedEx, which disclosed the subpoena in its 10K filing, stated it does not believe it is a target of the investigation. Its rival, United Parcel Service, has also been contacted about the probe and stated that it is not part of the investigation, Reuters reports.

The investigation began in February 2006 when the DoJ and the European Union’s executive arm raided airlines in Europe and the United States, according to Reuters. The probe — which centers on the surcharges airlines have added for fuel, higher war risk insurance, and security since the September 11, 2001, attacks — is global in reach. Air France, British Airways, Deutsche Lufthansa, Luxembourg-based Cargolux, Scandinavian airline SAS, Air Canada’s parent ACE Aviation Holdings, and others have been contacted as part of the investigation, the wire service reported.

Higher fuel costs have driven airlines to impose fuel surcharges in recent years. In 2005, airlines’ fuel costs rose to almost $100 billion; they were $44 billion in 2003, according to Reuters, which cites the International Air Transport Association. The costs related to war risk insurance on cargo and passenger operations are small compared with airlines’ fuel costs, according to reports.