The airline's public humiliation has also dismayed ministers and officials at the Department of Transport who had been assured by BA that Virgin's allegations of computer hacking, impersonation, poaching of passengers, document shredding and press smears were an invention.
In particular, ministers are angry that the affair may embarrass John Major and John MacGregor, Secretary of State for Transport, who strongly supported BA in its bid for a stake in USAir.
It was also confirmed that Eric Howe, the Data Protection Registrar, is to investigate Virgin's complaint that BA employees illegally accessed its computer files in order to poach passengers.
Mr Major would have been fully aware of the allegations before he flew to the US last month to try to persuade President George Bush to approve the USAir bid.
Richard Branson, chairman of Virgin, had sent copies of his open letter of 11 December 1991, detailing the dirty tricks campaign, to the then Secretary of State for Transport, Malcolm Rifkind.
In a letter to Mr MacGregor, the Labour transport spokesman, John Prescott, said: 'It is now clear that BA was responsible for a disreputable campaign of deceit, lies and illegal activities.'
Mr Prescott added that the repercussions 'could weaken considerably British aviation interests abroad, especially in the US.
'I believe that at the very least both the chairman, Lord King, and the deputy chairman, Sir Colin Marshall, should resign.'
Malcolm Bruce, the Liberal Democrats' trade and industry spokesman, called for a full investigation of BA by the Monopolies and Mergers Commission.
In a letter to Michael Heseltine, President of the Board of Trade, Mr Bruce said: 'British Airways now has a tarnished reputation and we need to know whether they have been instrumental in destroying other companies. If so, action must surely be taken to deal with the company and to call the management to account for these actions.' A parallel police investigation, conducted by a senior Scotland Yard detective, is also understood to be continuing into 'Operation Covent Garden'.
This is the code name given to an investigation by private investigators paid for by BA and led by Ian Johnson, a security adviser to the airline. According to Mr Branson, the operation involved the targeting of Virgin Atlantic and the theft of refuse bags.
Mr Howe, the Data Protection Registrar, wrote to Mr Branson on Monday asking him for details of allegations that BA staff had accessed confidential information about Virgin passengers stored in space on the BA computer system rented by Virgin.
'The comments in newspapers seemed to indicate to me there may be a problem under the Data Protection Act and I have asked Mr Branson for the facts,' he said.
Under the Data Protection Act, anyone holding personal data on computers must register the information and the uses for which it is intended with the office of the Data Protection Registrar. Failure to do so, or to subsequently use the data for an unregistered purpose, is a criminal offence.
Ultimately, the Data Protection Registrar can prosecute offenders. The penalty is a fine of up to pounds 5,000 in the magistrates court or an unlimited fine in the High Court. However it is likely that the publicity over any breach would be more damaging than any penalty.
Mr Howe also said that he was concerned that there may have been a breach of the Computer Misuse Act, which is intended to prevent hacking into computer systems. Although he has no powers under this Act, he said: 'If I get facts showing there is a hacking issue, I will pass those facts on to the police.'
British Airways said it could not comment. A spokesman said: 'We have nothing to add to the court statement made the other day.'