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BA hit by $300m price-fixing fine

23/08/2007

British Airways (BA) has been handed a $300 million fine by a US court after pleading guilty to price-fixing charges.

The Washington court approved the fine recommended by the US department of justice at the beginning of the month, leaving BA open to separate law suits being filed by US consumers over claims BA overcharged them.

The fine against BA follows a separate £121.5 million penalty already imposed on the carrier by the UK's Office of Fair Trading (OFT).

While bad news for the company's profits, observers say BA escaped a much worse penalty because of its guilty plea and extensive cooperation with US authorities over the issue.

"As a foreign corporation with headquarters outside the United States, BA could have retained highly relevant documents in its foreign offices and refused to cooperate," the Associated Press quoted prosecutors as saying.

"It chose, however, to assist the United States early in its investigation in a highly significant and useful way."

Officials in both the US and the UK had announced the fines after completing parallel investigations into claims BA colluded with rival airline Virgin Atlantic to fix the price of fuel surcharges on long-haul passenger flights.

BA admitted it did collude with its competitor in adding the charges to ticket prices in response to rising fuel costs.

Investigators found the surcharges rose from £5 to £60 per ticket for a typical BA or Virgin Atlantic long-haul return flight during the period between August 2004 and January 2006, when the anti-competitive behaviour is said to have occurred.

However, unlike BA, Virgin Atlantic was not penalised for its actions as it blew the whistle on the price-fixing scandal and so was granted leniency by the OFT.

In a statement issued on August 1st, the day the US and UK fines against BA were announced, OFT chairman Philip Collins said the action demonstrated "the benefits of international cooperation between competition authorities".

BA chief executive Willie Walsh responded by insisting that the airline's passengers had not been overcharged, but admitted that his remarks "did not, in any way, excuse the anti-competitive conduct by a very limited number of individuals" within the company.