- The Washington Times - Thursday, August 2, 2007

LONDON (AP) — British Airways was fined almost $550 million yesterday by U.S. and British regulators after the airline acknowledged colluding with rival Virgin Atlantic over fuel surcharges.

The carrier was fined $246 million by Britain’s Office of Fair Trading (OFT) and $300 million by the U.S. Department of Justice after parallel trans-Atlantic investigations.

The Justice Department also levied a $300 million fine on Korean Air Lines Co. Ltd. for colluding with competitors to fix fuel surcharges on cargo shipments to the U.S., and fixing some passenger fares from the United States to Korea.

It said both airlines had agreed to plead guilty to price fixing.

In addition to the fuel surcharge fixing, U.S. officials said British Airways and Korean Air lines were involved in a conspiracy with German carrier Lufthansa AG to fix charges for international cargo shipments.

The Justice Department said Virgin and Lufthansa would not face sanctions because they had come forward to authorities.

“When British Airways, Korean Air and their co-conspirators got together and agreed to raise prices for passenger and air cargo fares, American consumers and businesses ended up picking up the tab for their illegal conduct,” said Acting Associate Attorney General William W. Mercer.

In May, British Airways PLC set aside $710 million in preparation for such penalties from regulators.

In a statement, the airline said between August 2004 and January 2006 it colluded with Virgin Atlantic over the surcharges added to fares in response to rising oil prices. Under the Office of Fair Trading’s leniency policy, Virgin Atlantic is not expected to face a fine because it reported the purported misconduct to authorities.

British Airways Chief Executive Willie Walsh said passengers had not been overcharged. He said a “limited number of individuals” in the company had broken competition rules.

“Anticompetitive behavior is entirely unacceptable and we condemn it unreservedly,” he said.

Authorities in Britain and the United States have been investigating accusations of price-fixing on fuel surcharges since June 2006. A criminal investigation is ongoing.

During the period under investigation, fuel surcharges rose from about $10 to about $120 per ticket for a round-trip long-haul flight on British Airways and Virgin.

Two British Airways executives — commercial director Martin George and head of communications Iain Burns — went on leave after the inquiry began, and later resigned.

OFT Chairman Philip Collins said the fine — the largest ever imposed by Britain’s competition watchdog — “will send an important message to corporate boards and business leaders about our intention to enforce the law, and serves to remind companies of the substantial risks involved if they are found to engage in such behavior.”

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