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OFT Cuts British Airways Fine to £58m

British Airways Plane LandingThe Office of Fair Trading (OFT) has cut a £121.5 million fine in half for British Airways. The fine was charged to the carrier for conspiring with Virgin Atlantic to fix fuel surcharges between 2004 and 2006. Now the British airline is being ordered to pay £58.5 million. Although the fine has been cut in half, it’s still a record for the OFT. It reflects new guidelines for financial sanctions and the cooperation the carrier gave during the inquiry, which included arranging interviews with workers and providing telephone records.

The fine won’t have a material impact on British Airways or its parent company, International Airlines Group (IAG), since it’s already booked a charge for it. A spokesperson said in a statement that they are pleased the matter has been settled. Virgin Atlantic wasn’t penalised since it was the one to reveal the collusion. A spokesman said that the carrier regrets its involvement in the price fixing, but it’s pleased the final decision has been made. They reported the matter in 2006 and retained full immunity throughout, he added.

On Thursday, the OFT said that its decision was completely separate from the criminal case. Senior director of cartels and criminal enforcement Ali Nickpay says that the decision brings the investigation to an end and sends a strong message that fixing prices through the exchange of classified information between competitors is illegal. The size of the fine emphasises the importance for companies to ensure that they have an effective compliance culture. The fine would have been more if British Airways hadn’t cooperated throughout their investigation. Without its cooperation and admission to the infringement in 2007, he added, the case would have gone on much longer.

Last year, IAG chief executive Willie Walsh indicated the airline would contest the fine. This followed a related criminal case collapsing, which was due to details emerging that Virgin Atlantic found 70,000 new emails that would have had a big impact on the evidence of a key witness. He said they needed disclosure of the evidence before agreeing to anything. However, they don’t believe there are grounds for that level of fine, considering the way the criminal case collapsed.

Four former and current British Airways executives had been acquitted in the case, which included: then head of sales and now commercial director Andrew Crawley; former head of UK and Ireland sales Alan Burnett; former commercial director Martin George; and former head of media Iain Burns. However, this wasn’t until £1 million in taxpayer funds were used. An internal OFT review discovered that the regulator should have taken the emails at the beginning of the case instead of relying on the cooperation of Virgin.

In a separate lawsuit, firm Hausfeld & Co has raised £8 million in passenger refunds from British Airways and £4 million from Virgin Atlantic. The compensation deadline has been set for the end of this year. The average refund for a family of four is due to be about £80. On to of this, British Airways was fined £100 million by the US Department of Justice for price fixing on transatlantic routes.

Meanwhile, the price fixing case sparked the ongoing dispute between Walsh and Virgin Atlantic founder Sir Richard Branson. Walsh said in January, in reference to Branson, that he wouldn’t forgive anyone for what they did there. He’s made it no secret that he doesn’t like the entrepreneur and thinks the feeling is mutual, he added. Then just earlier this week, he attacked Branson again, calling his opinions irrelevant and saying he has no admiring feelings toward him.

 

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