May 17, 2024
 
 
 
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  title : Justice Dims Volume Charges  
 
Justice Dims Volume Charges

The stormy effort by world commercial airlines to change the formula for volumetric cargo pricing is taking on new dimensions the air carriers never intended. The United States Justice Department dealt a lethal blow to the effort, recommending not only that the price-raising change be rejected but that the Department of Transportation consider withdrawing antitrust immunity for all passenger and air freight rate agreements reached by the International Air Transportation Association.

"Such agreements are contrary to fundamental United States competition policy as set forth in antitrust laws, and any foreign policy or international comity justifications for immunizing such agreements have further eroded as foreign countries increasingly adopt policies more reliant on market competition," the Justice Department wrote.

The opinion gave solid backing to shippers and forwarders who have argued strongly against IATA Resolution 502 since the controversial plan to amend dimensional weight pricing standards surfaced last year.

The written comments filed May 29 were among thousands of pages of responses to the IATA application. The Justice opinion does not carry the force of law but several aviation legal experts in Washington said it would be highly unlikely that the Transportation Department would reject the Justice Department's views unless the comments are dramatically rewritten.

A long parade of shippers and forwarders, from giants such as Nike to small flower shippers, weighed in on what many said was an unfair, unjustified attempt to raise prices across the air shipping industry.

Resolution 502 would change the weight equivalent for volumetric freight. Currently, 6,000 cubic centimeters equal one kilogram. The new IATA dimension weight standard, which airlines hope to take effect Oct. 1, would have 5,000 cubic centimeters equal one kilogram. The idea behind the formula is to charge low-density shipments for the space they occupy. Airlines argue that the change in a standard last changed more than 20 years ago is needed because they can't use the full carrying capacity of newer, more efficient aircraft such as 777s.

Privately, airline officials complain that packaging is part of the problem, with ever-smaller electronic components wrapped in bulky, space-eating padding.

Facing howls of protest around the world, air carriers last year delayed the Oct. 1, 2002 effective date. But many airline cargo officials also stressed that their apologies were over the way Resolution 502 was put forward and not at the reasoning and need for the change.

The Justice Department argues that the change hasn't been justified and that the formula itself is an antitrust problem. "It is clearly a price-fixing agreement among horizontal competitors ¡¦, " the Justice opinion said. "IATA has failed to show why individual airlines should not set their own low-density formulas in a free market environment."

IATA has filed the change in countries around the world but officials say the application in the United States carries extra weight because of the relative importance of shipping in and out of the United States and the reach of American law.