British Airways Fined £270 Million in Price Fixing Scheme

British Airways has been socked with fines amounting to about £270 million after admitting collusion in fixing the price of fuel surcharges. The US Department of Justice squeezed BA for $300 million after the British Office of Fair Trading [OFT] slapped it with a fine of £121.5 million. Consumers are now free to sue, so class action suits are almost inevitable, and criminal investigations continue. This is not good news for an airline that yesterday was rated as the “worst performer in Europe.”

BA’s legal woes stem from illegal talks it had with Virgin Atlantic over how much to charge passengers for the rising price of fuel. BA and Virgin colluded on at least six increases between August 2004 and January 2006 according to the OFT. During that time, surcharges rose from £5 to £60 per ticket. Virgin doesn’t seem to face any penalties because it has been given immunity by the OFT for ratting on BA. Virgin may well face lawsuits, though.

BA’s CEO Willie Walsh proved he could waffle with the best of them maintaining that passengers hadn’t been screwed because surcharges are “a legitimate way of recovering costs,” and with the same breath offering no excuse for “anti-competitive conduct” by a “very limited number of individuals.” Logic check: if there was anti-competitive conduct, it is by definition taking advantage of one’s clientele. A surcharge is not legitimate if it is set in an anti-competitive way.

Meanwhile, the Association of European Airlines has issued a report that cites BA as the “worst performer in Europe.” Between April and June, 35.7% of short- or medium-haul flights arrived late, and 32.7% were delayed taking off. On long-haul flights, BA’s performance was worse -- with 44% of these arriving late and 36.6% departing behind schedule. The AEA also found that BA lost 28 bags for every 1,000 passengers traveling during that same period. Air France and Lufthansa did better, but Air Malta topped the list with only 3 lost per 1,000 passengers.

The baggage and delay problems stem, in part, from problems at Heathrow Airport. Simon Evans, the chairman of the Air Transport Users Council, stated, “There is no doubt that Heathrow is a big part of the problem. Questions have to be asked of BA’s management which is squeezing too much out of the airport and those crowded terminals.” Perhaps if they instituted a luggage surcharge . . . .

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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