British Airways / Virgin price fixing - not out of the woods yet

Jeff Randall in today's Daily Telegraph has a typically entertaining view on the corporate shenanigans at British Airways, which resulted in a couple of corporates being thrown off the sleigh this week. He points out that the airlines' fuel surcharges – which are at the heart of US and UK regulators' concerns – had begun to be imposed (almost simultaneously) by BA and Virgin Atlantic in May 2004, long before the sainted Sir Rod Eddington left the business.

"Burns looks like the fall guy." says Mr Randall, "Even if Burns did make a compromising call to Virgin, a tape of which is rumoured to be at the centre of civil and criminal investigations, does anyone really believe that a £75,000-a-year PR man, who spent much of his time organising press jolly-ups, masterminded an alleged multi-million-dollar price-fixing campaign on his own initiative?"

" ...let's not forget that if BA was involved in a conspiracy, it could not conspire on its own."

Three other airlines – American, United and Virgin Atlantic – are being investigated for possible misdemeanours in the passenger market, and no fewer than 15 carriers have been named by the inquiry into the cargo market."

Perhaps whilst all this rather unfortunate washing of linen carries on, might it not be a good time for Mr O'Leary, against whom there is not the slightest whiff of attempting to rig prices or fare structures to get approval for his audacious raid on Aer Lingus ? On April 19th this year Ryanair has reiterated its commitment to low fares by guaranteeing not to introduce fuel surcharges .

Michael O'Leary, accused BA of "gouging passengers" by passing on the cost, pointing out that the latest increase was the 7th fuel surcharge the airline had introduced.

The cocky little Irishman pointed out that the £35 surcharge for a one-way trip is more than Ryanair's average total fare of £28, he added.

"Yet again British Airways go for the soft option," said Ryan at the time. "Over the past two years as oil prices have doubled from $35 to $70 a barrel, British Airways' fuel surcharges have increased fourteen-fold from £2.50 per sector to £35 per sector."

Price fixing is not a victimless crime, nor does it go unpunished - Alfred Taubman, the owner of Sotheby's set up up a cartel with rival auction house, Christie's. He was fined $7m in 2002 and jailed for a year.

After the extradition to the US of the spotless Nat West 3 there might be a few sweaty palms in the airline boardrooms.

CURIOUS COUNCIDENCE ?

On Tuesday British Airways World Cargo (BWAC) announced a reduction in its fuel surcharge. The surcharge will be GBP 0.34kg, US$ 0.50kg, €0.50kg, with effect from 19 October, 2006. Chris Bosworth, general manager commercial development said: "This is the second drop in the fuel surcharge level in as many weeks."