British Airways Gets Record Fine For Price-Fixing

August 1, 2007

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British Airways revealed the biggest fine in its history on Wednesday as it reached settlements with US and UK authorities for price fixing that could cost it up to GBP350 million pounds (USD$711 million).

Europe's third-largest airline said it had agreed to pay a fine of GBP121.5 million pounds in the UK and expected U. authorities to announce a separate fine later in the day.

Rival Virgin Atlantic Airways blew the whistle on BA after individuals at the two carriers discussed proposed changes to fuel surcharges for long flights.

Virgin won immunity by taking the matter to the UK's Office of Fair Trading (OFT).

"This resolves the OFT's and the DoJ's (US Department of Justice) investigation of British Airways," BA said in a statement to the London Stock Exchange.

The fine, the biggest imposed on BA for any regulatory breach anywhere, would have been higher if the airline had not admitted wrongdoing.

"Had BA not made admissions and cooperated from the outset, they would have been fined many millions of pounds more... tens of millions of pounds," said OFT director of cartel operations Simon Williams.

"This is the largest civil fine ever imposed by the OFT," he said, adding that he hoped it would serve as a deterrent and encourage businesses to come forth with information before their rivals do. "Businesses up and down Britain have to ask themselves some very hard questions."

Two senior BA executives quit last October after being linked to the investigation and in May BA set aside GBP350 million as a provision for possible fines.

BA said it expected that provision to cover the fines and any impact from a separate, widespread probe of the airline industry regarding cargo fuel surcharges which also involve authorities in Europe, Canada, Australia, South Africa and New Zealand.

Analysts said the UK fine was in line with expectations given the provision already taken and noted BA could have fared far worse.

The price fixing related to surcharge increases which took place from 2004 until 2006.

Fuel surcharges soared from five pounds to 60 pounds per ticket on typical BA or Virgin long-haul return flights during the period but BA Chief Executive Willie Walsh defended these rises, which came as crude oil prices surged.

"I want to reassure our passengers that they were not overcharged," he said.

BA said both the OFT and the US Department of Justice would continue with criminal investigations into the conduct of individuals involved.

(Reuters)