U.S., U.K. Investigate Alleged BA Price Fixing

British Airways revealed today that it is being investigated for potential price fixing on transatlantic and other long-haul passenger services. The revelation follows a similar pattern to February's investigation of several airlines over cargo pricing. BA announced this morning that both the U.S. Department of Justice and the U.K.'s Office of Fair Trading are probing "alleged cartel activity involving British Airways and other airlines in relation to pricing of passenger air transportation, including fuel surcharges."

American Airlines, United Airlines and Virgin Atlantic have said they are cooperating with the inquiry. American said it had "received a United States federal grand jury subpoena in connection with a government investigation into alleged price fixing in the air passenger industry." It added it had been told it was not the subject of the investigation.

A statement from BA said: "British Airways' policy is to conduct its business in full compliance with all applicable competition laws. British Airways is assisting the OFT and DOJ with their investigations." The OFT said: "no assumption should be made that there has been an infringement of competition law" until the investigation is complete. The OFT added that it only has named BA so far because it is the only carrier to have announced it is under investigation.

BA has given leave of absence to two senior executives as a result of the investigation. One is commercial director Martin George, widely regarded as the airline's second in command, and the other is head of communications Iain Burns, formerly American Airlines' head of public relations in Europe. "The situation must be very serious if BA has suspended a board member," said an airline source. "It would not do that lightly."

Today's developments follow a raid on June 13 by the OFT on BA's offices at Heathrow Airport, just outside London. It is believed that an internal investigation team at the airline has been scanning computer and phone records since then.

In February, a whistle-blower from another carrier led officials from the European Commission and the United States to raid the offices of BA and several other airlines regarding fuel surcharges and levies on cargo prices. "When the authorities came to the BA office for cargo, they knew exactly what they were looking for," said the source.

The most recent round of fuel surcharges made by transatlantic carriers came in March and April, when American, Delta, BA and Virgin all announced increases. BA and Virgin both have surcharges of £70 ($128) on return long-haul flights.

Commenting on the possibility that there could be collusion between carriers, another airline source said: "It doesn't come as a surprise to anyone who works in the transatlantic market. They have always tested prices on each other. Price increases can be matched within minutes."