BA And Korean To Pay Huge Fines For Price Fixing

British Airways was yesterday hit with $547 million in combined fines from British and U.K. authorities to settle a long-running price-fixing investigation, although the total so far is lower than the airline had anticipated. Korean Air Lines was also fined by the U.S. for similar violations.

BA agreed to pay the highest fine ever charged by the U.K.'s Office of Fair Trading (OFT), GBP121.5 million ($247 million). Both BA and Korean pleaded guilty to U.S. Justice Dept. charges and will each pay a $300 million fine. BA was accused of conspiring with rivals on fuel surcharges for passengers and cargo, while Korean was implicated in illegal cargo surcharge talks and also fixing certain passenger fares.

Earlier this year, BA admitted to financial analysts that there was a good chance it would have to accept fines (DAILY, May 21), and estimated the total liability to be about GBP350 million ($710 million). However, at the time the carrier said fines from other nations aside from the U.K. and U.S. were possible.

According to the OFT investigation, BA staff discussed planned increases in their fuel surcharges with employees of Virgin Atlantic, either on the phone or by e-mail. BA disclosed in a summary of facts that in most cases the companies ended up raising the surcharge on the same day. As a consequence of the probe, BA last year sent both Commercial Director Martin George and communications head Ian Burns on leaves of absence. Both have since left the company.