Chris Benfield
Allegations that long-distance travellers are being conned into paying over the odds by a price-fixing agreement between airlines are under investigation on both sides of the Atlantic.
British Airways and other airlines are involved
in the inquiry and, if found guilty, could face fines of many millions of pounds.
Two senior BA employees – commercial director Martin George and communications chief Iain Burns – have been "given leave of absence" during the inquiries by the UK's Office of Fair Trading (OFT) and the United States Department of Justice.
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."
In February, the European Commission announced it had raided the premises of air cargo carriers in several EU member states, on suspicion they were part of an illegal agreement to fix cargo prices. That investigation is still continuing.
Yesterday, 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, while major US carrier, American Airlines, said it had received a US federal grand jury subpoena "in connection with a government investigation into alleged price fixing in the air passenger industry". But it added that it had been informed that it was "not a target of the investigation".
Industry analysts say price convergence is not necessarily significant. At the low-budget end of the market, a difference of £20 or £50 between fares is likely to be crucial. On longer flights, the big carriers are more likely to arrive at comparable prices in response to the same market forces.
However, the explosion in fuel prices over the past year might have caused more cut-throat competition than it has. It has forced all airlines to put up prices and most have done so by adding "fuel price surcharges", in keeping with their claims that the rises will be reversed as soon as possible.
Because they can buy fuel all over the world, there might have been an outbreak of competition over these surcharges. But when all the extras – including local taxes and fuel surcharges – are added to basic fares, the results are often very close together.
Last month BA announced better-than-expected annual profits of £620m – 21 per cent up on the previous year. The fuel surcharge component of BA's long-haul fares is about £70 for a return trip and the American Airlines figure is about the same.
A spokesman for low-fare airline Ryanair, said: "British Airways collected more in fuel surcharges than its entire profit after tax last year. It is about time surcharges were investigated."
