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BA fined 270 mln stg by US Dept of Justice, UK OFT for price fixing

2-Aug-2007

London (AFX) - British Airways PLC has been fined a total of

about 270 mln stg by US and UK competition authorities after it admitted colluding

to fix the prices of fuel surcharges with Korean Air and Virgin Atlantic.

BA confirmed today that it had entered into a plea agreement with the US Department of Justice (DoJ) on fines relating to anti-competitive activity in the company's long-haul passenger and cargo businesses.

The UK flag carrier and Korean Air both agreed to plead guilty and pay separate 300 mln usd criminal fines for conspiring to fix the prices.

Earlier today, the UK's Office of Fair Trading (OFT) said it was fining BA 121.5 mln stg after the airline admitted collusion with Virgin Atlantic over the price of long-haul passenger fuel surcharges.

The US DoJ fined the British carrier for colluding with Korean on how much extra to charge on passenger and cargo flights.

The 300 mln usd fine consisted of 100 mln usd for passenger fuel surcharges and 200 mln usd for cargo.

"BA conducted price fixing operations by phone and through meetings with Korean Air," a spokesman for the DoJ told BBC News.

"BA conducted illegal cartel activity in the US and abroad. The anti-trust division's investigation is ongoing, but it would be inappropriate to comment on investigations underway."

Earlier, the UK OFT said BA had admitted that between Aug 2004 and Jan 2006, it colluded with Virgin Atlantic over the surcharges added to ticket prices in response to rising oil prices.

During that period, the surcharges rose from 5 stg to 60 stg per ticket for a typical BA or Virgin Atlantic long-haul return flight. Under competition law, tipping off a rival about a price change is illegal.

Virgin Atlantic is not expected to pay any penalty as it qualifies for full immunity under the OFT's leniency policy because it tipped off the OFT and helped with the investigation.

In a statement issued after the DoJ's announcement this afternoon, OFT chairman Philip Collins said: "The OFT has worked closely with the DoJ in this matter, which has demonstrated the benefits of international co-operation between competition authorities. Such close co-operation is intended to deal with companies that operate globally and who do not respect competition laws."

BA said in a statement that the sum of the combined fine was consistent with the airline's guidance and provision of 350 mln stg.

Chief executive Willie Walsh said: "Fuel surcharges are a legitimate way of recovering costs and when set independently do not breach competition law.

"I want to reassure our passengers they have not been overcharged. However, this does not in any way excuse the anti-competitive conduct.

"This behaviour is entirely unacceptable and we condemn it unreservedly.

"We have a long standing competition compliance policy which requires all staff to comply with the law at all times.

"I am satisfied we have the right controls in place. However, it is deeply regrettable some individuals ignored our policy."

BA said today's ruling brings to an end the investigations by the DoJ and OFT, but added that the two bodies continue with criminal investigations into the conduct of individuals.

Other airlines are also being investigated, according to the DoJ.

At the close in London, shares in BA were 11 1/2 pence down at 386 1/4 p.

There is still some uncertainty hanging over the airline's shares as a result of the other ongoing investigations, brokers said.

"We note investigations into cargo pricing, covering a large number of airlines, are ongoing in other jurisdictions including Australia, New Zealand and South Africa," said Barclays Wealth equity analyst Peter Caldwell.

"There may also be civil cases outstanding and hence the issue is not entirely closed."


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