BA fined £270 million over price collusionUK and US authorities come down hard on airline

02 August 2007

British Airways has been fined a total of £270 million for colluding over flight pricing.

The UK's Office of Fair Trading (OFT) confirmed BA will be paying a record £121.5 million fine after admitting colluding with rival airline Virgin Atlantic on surcharges on at least six occasions.

The US Department of Justice (DoJ), which had also been investigating the incidents which took place over the period 2004/06, announced it was fining BA $300 million (£150 million).

The OFT fine came after it found that on at least six occasions between August 2004 and January 2006, BA and Virgin discussed and/or informed each other about proposed fuel surcharges on long-haul flights.

Flight surcharges

They did this rather than setting levels independently. During the collusion periods, the surcharges varied between £5 and £60 for a long-haul return flight.

In the late winter of 2006, Virgin effectively blew the whistle on BA by informing the OFT of what had been going on.

Under the OFT's leniency policy, a company involved in cartel conduct and which is the first to give full details is eligible for immunity from penalties. So Virgin is not expected to face any fine.

The DoJ announced that BA and South Korean-based Korean Air Lines Co Ltd have each agreed to plead guilty and pay separate $300 million fines ‘for their roles in conspiracies to fix the prices of passenger and cargo flights’.

Illegal cartel

The DoJ said passengers who flew on BA flights between the UK and the US in the middle part of the decade paid more for their tickets as a result of the illegal cartel.

In 2004, BA's fuel surcharge for round-trip passenger tickets was around $10 per ticket.

The department said that by the time the passenger conspiracy was cracked in 2006, the surcharge was nearly $110 per ticket.

After the OFT fine was announced, BA chief executive Willie Walsh insisted passengers had not been overcharged, but condemned anti-competitive conduct by a ‘limited number of individuals’ in the company.

Anti-competitive

He said: ‘I want to reassure our passengers that they were not overcharged. Fuel surcharges are a legitimate way of recovering costs.

‘However this does not in any way excuse the anti-competitive conduct by a very limited number of individuals within British Airways.’

Mr Walsh went on: 'Anti-competitive behaviour is entirely unacceptable and we condemn it unreservedly.

Virgin Atlantic said today: ‘We informed regulators as soon as our legal team was made aware of the nature of contacts that had occurred between some individuals at British Airways and Virgin Atlantic.

'We take complying with competition laws extremely seriously and regret that contacts were made between the two companies. As a criminal investigation is continuing, we are unable to give further details until the regulators publish their full findings.’

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