Virgin tip-off led to BA price fixing probe

A tip-off from Virgin Atlantic led to British Airways being targeted in a price-fixing probe in the UK and the United States, it was confirmed today.

The Office of Fair Trading (OFT) and the United States Department of Justice are understood to have started investigating the pricing of passenger fares and fuel surcharges after receiving detailed information from the national carrier’s rival.

BA announced this week that commercial director Martin George and communications chief Iain Burns had been given “leave of absence” while the inquiry – which also involves other airlines – continues.

If competition laws are found to have been broken, millions of pounds in fines could be imposed.

There is also speculation that BA could lose its dominant position at Heathrow, with lucrative routes to the US potentially being opened up to other carriers.

The allegations are believed to stem from a series of conversations last year between a Virgin executive and a BA counterpart concerning the timing and impact of raising fuel surcharges.

Sources confirmed that Sir Richard Branson’s airline approached the OFT with evidence after realising the discussions could breach competition rules.

A spokesman for Virgin refused to comment on whether it had tipped off the competition authorities.

“We’re assisting the OFT with their inquiries, which are ongoing,” he added.

BA also declined to comment until the probe – which the OFT has said relates to “alleged price co-ordination by airlines in relation to surcharges on long-haul flights to and from the UK” – was complete.

American Airlines confirmed this week that it has received a US federal grand jury subpoena “in connection with a government investigation into alleged price fixing in the air passenger industry”.

But the carrier added that it had been informed that it was “not a target of the investigation”.

If found guilty of operating a price-fixing or market-sharing cartel, airlines can expect to be fined as much as 10% of their worldwide sales.

BA’s latest financial figures showed its worldwide sales amounted to £8.52 billion.

The airline’s improving financial performance has delivered a £48 million bonus for BA’s workers. Chief executive Willie Walsh put the better short-haul results down to a number of factors, including cost-cutting.

In February, European Commission officials raided the premises of BA and other airlines over alleged price fixing.

BA confirmed at the time that it had received a request for information from both the EC and the US Department of Justice “relating to alleged cartel activity involving BA and a number of other airlines and cargo operators”.

The EC said it had carried out “unannounced inspections” at the various premises as it had “reason to believe the companies concerned may have violated Article 81 EC-Treaty, which prohibits practices such as price fixing”.

Other airlines involved in the February investigation are understood to include Japan Airlines, Cathay Pacific, KLM, Air France and Lufthansa.