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UK: Airlines Face Investigation for Price Fixing

by Heather TimmonsThe New York Times
June 22nd, 2006

British and American regulators are investigating major airlines that operate long-distance flights to and from Britain, suspecting that they may have illegally conspired to fix the amounts of fuel surcharges they impose on passengers.

Most major carriers flying between the United States and Heathrow, London's main international airport, charge passengers about 35 British pounds ($64) each way in fuel surcharges.

The United States Department of Justice and Britain's Office of Fair Trade have contacted British Airways, Virgin Atlantic Airways, United Airways, American Airlines and possibly other airlines in connection with the investigation, which could lead to criminal charges, civil penalties or both.

The Office of Fair Trade announced the investigation in a statement today, but said it was "at an early stage," and that "no assumption should be made that there has been an infringement of competition law."

British Airways acknowledged the investigation in a statement and said it was assisting in the investigation. The airline also said that two senior executives Martin George, the commercial director, and Iain Burns, the chief of communications had been placed on a leave of absence during the investigation, but it did not elaborate.

American Airlines said it had received a "federal grand jury subpoena in connection with a government investigation into alleged price fixing in the air passenger industry," but said that it was not a target of the investigation. United Airlines said it had received an inquiry and was cooperating with investigators. Virgin Atlantic said it was "aware of the investigation" and was "assisting."

Many airlines have struggled to make profits in recent years because of high oil prices, and have been trying to recoup by adding fuel surcharges to passenger ticket prices. The cost of jet fuel has risen by 21 percent in the past year, according to figures the International Air Transport Association released on June 16. So far in 2006, airlines spent $22 billion more on fuel than in the same period last year, the organization said.

Consumer advocates complain that so-called fuel surcharges can be a surreptitious way for airlines to raise fares by more than the true added cost of fuel.

In April, British Airways increased its fuel surcharges for long-haul flights by at least $9, in round figures, and as much as $64 on each one way ticket. Virgin Atlantic also charges about $64 each way. United Airlines fuel surcharges to and from Britain vary from flight to flight and from day to day; for a one-way ticket from John F. Kennedy International Airport in New York to Heathrow on July 6, the surcharge is about $67. American Airlines charges about $67 on all its flights between the United States and Britain.

Long-established carriers like British Airways and American Airlines have been losing customers on short-haul flights to newer discount carriers like EasyJet and Ryanair in Europe, putting pressure on them to hold down their short-haul prices and make up the difference on fares for longer flights.

The European Union, which joined the Department of Justice in an investigation of price-fixing among air cargo carriers earlier this year, said it is not involved in the passenger fuel-surcharge investigation.





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