BA was fined a record £121.5m by the Office of Fair Trading and later $300m (£148m) by the United States Department of Justice, decisions that end a 13-month inquiry into fuel surcharges. Virgin Atlantic, which colluded with BA, gets off scot free because it spilled the beans to the OFT.
The £270m total is well within the £350m that BA previously set aside to cover the fines.
The OFT has the power to impose penalties of up to 10% of worldwide turnover for price fixing and other forms of anti-competitive behaviour.
Fuel surcharges, when set independently, do not infringe competition law. Surcharges were first introduced separately by BA and Virgin Airways in May 2004. The earliest evidence of collusion between the companies dates from August 2004.
British Airways admitted collusion over the price of long-haul passenger
fuel surcharges between August 2004 and January 2006. Over that period, the surcharges rose from £5 to £60 per ticket for a typical BA or Virgin Atlantic long-haul return flight.
On at least six occasions, the two companies discussed and/or informed each other about proposed changes to the level of the surcharges, rather than setting levels independently.
A criminal investigation into whether any individuals dishonestly fixed the levels of the surcharges – an offence under the Enterprise Act - continues.
The OFT's investigation was prompted after Virgin Atlantic came forward with information about price fixing with BA over the surcharges. British
Airways has also provided full co-operation with the OFT's investigation under the leniency programme and this is reflected in the penalty, despite the fact that it is the highest ever imposed by the OFT.
British Airways shares fell 11p to 386.75p in early trading but they picked up to 393.5p this afternoon on relief that the outcome was no worse.
They have fallen from a peak of 375p in February so one might have thought that the effects of the fine were already factored in but the renewed surge in oil prices and pressures from the green lobby will not be helping sentiment.
Today’s fall probably owes more the stockmarket sell-off so it could be worth watching for the shares to settle.