BA throw employee / Director to wolves as fuel surcharge scam is exposed by OFT

On 2 June 2006 The Office of Fair Trading announced that it is conducting both a criminal and civil investigation into alleged price coordination by airlines in relation to fuel surcharges for long haul passenger flights to and from the UK.

The OFT's civil investigation is being conducted under the Competition Act 1998 and Article 81 of the EC Treaty and the criminal investigation under the Enterprise Act 2002. It has become known since that this was an understatement as the the US Department of Justice was particpating in the investigation.

Those knowledgeable about the matter say that Sir Richard Branson's airline, Virgin Atlantic, tipped off competition chiefs about the possible fixing of fuel surcharge pricing, arising from alleged conversations between Virgin and BA concerning the timing and impact of raising fuel surcharges.

It was also unkown at the time that 2 British Airways people - commercial director Martin George and communications chief Iain Burns - were put on the quaintly titled 'gardening leave' .

Penalties for an an airline involved in price fixing, can be as much as 10% of its worldwide sales. BA's worldwide sales last year amounted to £8.52bn.

British Airlines today announced that both Martin George and Iain Burns are leaving the company and being replaced by Robert Boyle, (previously Planning Director) had been appointed to take over as Commercial Director and that Thomas Coops, former communications director at Abbey National, had been appointed interim head of corporate and media relations.

In a letter to BA chairman Martin Broughton, Mr George said there may have been "inappropriate conversations" in his office over long-haul fuel surcharges but Mr George said he had 'not been involved in such conversations'. He went on, 'Although the board of BA have not found that I have behaved in a dishonest way, I fully recognise my responsibilities as head of department and as a board director.'

Mr George, who has worked for BA for 19 years, said he was leaving 'with deep regret, while believing that departing is, in these circumstances and for these reasons, nevertheless, the right course'.... and the Board hopes, will save them from a whopping fine.

In Fiscal year ending 31 March,2005, BA posted a profit of £415m on sales of £7.8bn (an 80% jump in annual profits) at the same time as (June 24th 2005) they announced an increase in the fuel surcharge on each long-haul return ticket to £48 ($87) from £32. "We now expect our fuel bill for this financial year to be around £1.6bn," said none other than BA commercial director Martin George to the BBC.ooooooOOOOOOPPPPPPPS!!! BA shares dropped 9.5 p (2.2%) today as the FTSE soared. (Aer Lingus Euro 2.96 , 10 cents above Ryanair offer price)

The OFT enquiry continues.

Last February, BA and a number of other airlines, including Lufthansa, Singapore Airlines and SAS, were investigated by the European Commission and US competition authorities.

That inquiry was believed to focus on the area of fuel surcharges and other levies for cargo handling.

The above graph traces the steps taken to increase the "fuel surcharge" by both BA and Virgin Airlines against the bulk cost of airline fuel stolen from the Daily Telegraph today.

Last week Air France dropped their surcharge from £39 to £35 - roughly the current level of BA and Virgin.