Men Who Killed Qantas - Matthew Benns [64]
McCaffrey did not have to wait very long to find out. The next day Qantas in Australia announced that it had been involved in a price-fixing cartel between 2000 and 2006 and agreed to pay a $A68 million fine to the United States authorities. In return for rolling over, the airline secured an agreement with the US Department of Justice not to prosecute company executives or employees. Six employees were exempt from the deal not to pursue a criminal prosecution – one of those was McCaffrey. He was being thrown to the wolves.
‘Maybe I should have seen this coming,’ 65-year-old McCaffrey said in an interview with the US trade journal Air Cargo News before he was jailed:
Qantas management called me six months before I was terminated and offered me a buyout, but I refused. I guess when you look at the landscape of executives in air cargo that are now taking the package and getting out, I should have gotten out then too. As it turns out, now I am retired from Qantas having earned (and fought) for my pension.
I just thought that everything would be OK, even with the ongoing investigations, and I thought that Qantas would handle all the price-fixing allegations. I went about my business as usual, reporting everything just as before.3
McCaffrey, a straight-talking former Vietnam War helicopter pilot, was clear: he had done nothing that the cargo bosses at Qantas in Sydney did not know about. He was just following orders.
The freight cartel had its origins in 1996, when Qantas’s former head of freight, Peter Frampton, flew to Europe for a series of business meetings. The price of jet fuel was jumping and the hot issue of the day was whether to add a surcharge to cargo. If Qantas did and none of the other airlines followed suit, the flying kangaroo would price itself out of business. In Paris Frampton called his secretary and asked her to send him the contact details of all of the Australian airline’s cargo competitors. Shortly after receiving the numbers Frampton confidently informed Qantas’s freight managers that he believed eight other airlines would be imposing a fuel surcharge on cargo.
The following year the International Air Transport Association started to look at some kind of mechanism or index that would give a trigger point for fuel surcharges to be automatically applied by all airlines. It started to publish an index, despite the Association’s lawyers warning that such a fuel surcharge index would be viewed with ‘great suspicion’.4 The lawyers were right. The US authorities rejected the index as ‘fundamentally flawed’ in 2000 and at a meeting of the Association’s air cargo committee they agreed to stop publishing it.5 Frampton, however, was not giving up. He walked out of the meeting with the clear belief that it was alright to consult other airlines about imposing a fuel surcharge, providing the trigger point was measured on an ‘independent fuel index’.6 He clearly missed the point made so strongly by the US authorities. By the end of 2000 Qantas and its competitor airlines agreed to consult each other about imposing a fuel surcharge once fuel had reached a certain price on an index published by German airline Lufthansa. It was a price-fixing deal that would come badly, expensively and very publicly undone for Qantas.
Price-fixing in America, unlike in Australia at the time, is a criminal offence. In 2006 investigators from the Department of Justice raided Bruce McCaffrey’s office at Qantas Freight in Los Angeles and took away paperwork and computers. It is understood they were acting on information passed on by ‘low-level types’ who had been promised immunity.7 McCaffrey believed Qantas bosses in Sydney would take care of it. They did, but they did not take care of him.
The American case was simple. ‘American consumers were forced to pay higher prices on goods they buy every day as a result of the inflated and collusive shipping rates charged by these companies,’ said Scott D. Hammond, Acting Assistant Attorney-General in the US Department of Justice Antitrust Division.8