BA braced for fine

Last Modified: 18 May 2007
By: Bridgid Nzekwu

British Airways has admitted breaking price fixing rules and is bracing itself for a multi-million pound fine.

The airline is being investigated by the Office of Fair Trading in the UK and America's Department of Justice over fuel surcharges on long haul flights.

'I find that very regrettable and completely unacceptable'
Willie Walsh, BA CEO

BA's boss admitted it had been a 'challenging year' - as the airline also reported a drop in its annual profits.

For a company that claimed to be the world's favourite airline, things have fallen a very long way.

BA has effectively admited that it broke the law and is setting aside £350m in expectation of fine.

The OFT and the US Justice Department are still probing allegations that BA and other airlines rigged the price of long-haul flights by fixing the price of fuel surcharges.

In a statement British Airways said: "It has become apparent that there have been breaches, in relation to discussions about these surcharges with competitors. As a result, it is now appropriate for the company to make a provision of £350 million in its full year accounts.

"It has become apparent that there have been breaches, in relation to discussions about these surcharges with competitors. As a result, it is now appropriate for the company to make a provision of £350m in its full year accounts."

Extra charging

Willie Walsh, chief executive, British Airways, said: "it is clear that there were breaches of our very comprehensive competition compliance policy. I find that very regrettable and completely unacceptable."

The OFT won't confirm how far their investigation has got or exactly which other airlines are involved but several companies have admitted assisting with the inquiries into an alleged cartel.

In April last year, two months before the investigation, began BA was charging an extra £70 on transatlantic return flights to cover an increase in fuel costs.

Four weeks beforehand Virgin Atlantic had raised its surcharge to £70. United Airlines was charging £74 last April - and American Airlines put it's surcharge up to £74 at the same time.

Whilst the OFT won't name specific individuals being investigated, two senior executives at British Airways have lost their jobs.

Martin George, formerly Commercial Director and Iain Burns, Head of Communications were sent on leave last June. Both resigned in October.

Today's admission is another major blow for BA in a year where its reputation has been severely damaged.

Today there was a £5m drop in profits announced today partly because of difficulties such as a near strike, security difficulties and a baggage handling fiasco.