Michael Harrison's Outlook: More questions than answers are left hanging in the air by BA price-fixing affair

When the OFT has done investigating fuel surcharges, it should turn its attention to a far more blatant conspiracy against the travelling public
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The Independent Online

As for secrecy, far from attempting to impose fuel surcharges by stealth, BA could hardly have been more upfront about them. Before BA first began levying a fuel surcharge two years ago, there was a long debate within the airline's management about whether to incorporate it within the ticket price or identify it separately. In the end, BA chose the latter course, even though it knew that each time the surcharge went up, it would be accompanied by a barrage of negative headlines.

The investigation centres on air routes between Heathrow and the US, which only BA and three other airlines are permitted to fly. Although the other carriers - Virgin Atlantic, United Airlines and American Airlines - have all confirmed that they are co-operating with the Office of Fair Trading and the US Department of Justice, the two US airlines say they are "not a target of the investigation" while Virgin says that, far from joining in the cartel, it was the one that shopped BA to the competition authorities.

If so, then it looks like a case of Virgin having its cake and eating it. On the one hand, its fuel surcharges have miraculously matched BA's, step for step. On the other, Virgin seems to have escaped regulatory sanction by turning Queen's evidence on BA, and in so doing trashing the name of its old adversary. BA has responded by taking the unprecedented and peculiar step of putting two of its executives on enforced leave of absence, as if they had already been judged guilty before the trial has even begun. The men in question are Martin George, BA's commercial director, and Iain Burns, its head of communications. BA might as well have painted white crosses on their backs and led them out of Waterside in manacles.

Along with many other journalists, I know both men well and neither strikes me as stupid or venal - the two reasons executives usually overstep the mark and end up in hot water.

BA has resolutely refused to comment on the affair beyond the terse two-paragraph statement it issued on Thursday. The airline is not even able to say who will take on their duties whilst they are digging the garden. Given that Mr George is one of only three executive directors on the BA board and has a portfolio covering an immense amount of ground, from sales, marketing and public relations to cargo, revenue management, cabin crew and the website, this is a remarkable state of affairs. Surely investors need to know how BA plans to manage its affairs from now on, particularly as the joint OFT/DoJ investigations could last months, if not years.

Meanwhile, the news blackout is allowing plenty of conspiracy theories to flourish. The most popular of these is that BA's new chief executive, Willie Walsh, has used the price-fixing investigation as a handy excuse to remove one of his rivals from the company. Mr George was one of two internal candidates to take over as chief executive last autumn until BA decided to recruit externally. The other internal candidate, the former finance director John Rishton, has already upped sticks and gone off to the Dutch supermarket chain Ahold. Is Mr Walsh now obliterating the remaining traces of opposition on the board? I do not buy this theory. Again, having watched the two men in operation together at close quarters, it is not obvious that they were at daggers drawn. And in any case, if Mr Walsh wanted to get rid of Mr George, why wait for a pretext such as this rather than organise a planned replacement in his own time? BA is entering its busiest period of the year and it needs all the management it can lay its hands on, particularly bearing in mind the calamities which have befallen it for the previous three summers.

On the face of it, it might seem suspicious to the outside world the way BA and Virgin's fuel surcharges have marched hand in hand for two years, Certainly, the OFT seems to think so. But it is a bit like oil companies increasing the price of petrol in unison. The fact that petrol costs more or less the same wherever it is bought could point to competition just as easily as collusion. The OFT was careful to say that its investigation is at an early stage and no assumption should be made that competition law, either civil or criminal, has been infringed. But it would be odd for it to give the airline a clean bill of health, having raided BA's offices and then announced the investigation with such a fanfare.

John Fingleton, the OFT's new chief executive, is out to make a name for himself. When he and his opposite number at the DoJ have done with investigating fuel surcharges, they ought to turn their attention to a far more blatant conspiracy against the travelling public. I refer to the Bermuda 2 agreement itself which restricts transatlantic flights from Heathrow to just four carriers and results in fares being at least a third more expensive than they need be. That is a piece of collusion which BA, Virgin, United and American are allowed to enter into quite legally. By comparison, fuel surcharges are a trivial matter.

Silver lining beckons for EADS

Is a silver lining about to appear from behind the giant cloud which has enveloped EADS in the shape of the Airbus superjumbo crisis? Sometimes, from disaster springs salvation. When Royal Dutch Shell went into meltdown two years ago after admitting that its oil reserves estimates had been concocted, the shock to the business, though traumatic at the time, ultimately proved therapeutic. Faced with its biggest corporate scandal in a century, Shell ditched its twin listing, its dual board, and, along with it, the bureaucratic management structure which had earned the company's South Bank headquarters the title of the Kremlin.

Is a similar epiphany about to happen at EADS? Since its inception a decade ago, the company has laboured with a farcical corporate structure designed to keep the peace between its French and German shareholders. So, the group has two chief executives and two chairmen, one drawn from each camp, and a constitution which allows the French state to nominate its preferred candidate and the core German shareholder, DaimlerChrysler, to do likewise. The wheels very nearly came off a year ago when the time came to find two new co-chief executives. The wrangle left EADS rudderless for several months until Noel Forgeard finally elbowed his way to the top, persuading the board to make him both co-chief executive alongside Tom Enders and Airbus chairman.

M. Forgeard's days are now surely numbered, thanks to the A380 superjumbo fiasco. When he does go, the obvious solution will be to make Mr Enders sole chief executive, reporting to a board led by a single chairman. To save face, that will almost certainly have to be a Frenchman. But it could equally be a Brit, an American or even a Dutchman. EADS prides itself on being an international company. It is high time it began behaving like one.

m.harrison@independent.co.uk

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