British Airways faces cartel probe

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British Airways and other airlines were under investigation today for alleged cartel activity.

BA said the investigation, by the UK's Office of Fair Trading (OFT) and the United States Department of Justice, involved allegations related to "pricing of passenger air transportation, including fuel surcharges".

Sir Richard Branson's airline Virgin Atlantic could not confirm that it was one of the airlines being investigated but added it was helping the OFT and the justice department with its inquiries.

BA said its commercial director Martin George and communications chief Iain Burns had been "given leave of absence during the investigation".

The OFT said: "We can confirm that we are investigating British Airways about alleged price co-ordination by airlines in relation to surcharges on long-haul flights to and from the UK.

"The investigation is at an early stage so no assumption can be made at this stage as to whether there has been an infringement of competition law."

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 - with penalties running into many millions of pounds.

Last month BA announced better-than-expected annual profits of £620 million - 21% up on the previous year. Its fuel surcharge is currently costing passengers £70 on a long-haul return trip.

The airline said its short-haul business had returned to the black for the first time in a decade.

The improving performance 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.

This spring, BA threw down the gauntlet to its low-cost rivals in Europe when it announced plans to cut fares to cities including Berlin, Paris and Barcelona by up to 50%.

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.

The OFT added: "The investigation is being conducted under the OFT's civil powers under the Competition Act 1998 regarding the alleged conduct of British Airways.

"The investigation is also being conducted under the OFT's new criminal powers under the Enterprise Act 2002 and that is in regard to the conduct of certain individuals."