BA Hit with Class-Action Suit

British Airways has been hit by a US class-action suit alleging the carrier colluded with Virgin Atlantic to co-ordinate imposing fuel-price surcharges on key transatlantic routes.

The suit, filed in New York on Friday, follows BA's admission last week that antitrust regulators in the US and the UK are probing the carrier's pricing policies on long-haul passenger routes, including the setting of fuel surcharges.

The class-action suit builds on those filed against BA and 15 other carriers in February amid another transatlantic probe into the alleged co-ordination of fuel, security and insurance charges for air cargo.

BA has already placed two senior executives on leave following the opening of probes into the passenger market by the UK's Office of Fair Trading and the US Department of Justice, which is already working with the European Commission on the air cargo complaints.

The airline maintains that it has observed competition law but is co-operating with the authorities, which have also questioned Virgin, American Airlines and United Airlines about the passenger case. The two US carriers maintain they are not the "focus" of the transatlantic probe at this stage, while Virgin said it was "assisting in the inquiries and the inquiries are ongoing."

The ongoing transatlantic cargo investigation has prompted more than 30 class-action suits in the US from disgruntled customers, and lawyers involved in the cases said they had also uncovered evidence of alleged price-fixing in the passenger sector.

"There has apparently been an offshoot of regional cartels," said Michael Hausfeld at Cohen, Milstein, Hausfeld & Toll in Washington, which filed the suit against BA on Friday and has led the airline cargo cases.

"We did a quick study of the various airline rates for the past five years to and from London Heathrow," Mr Hausfeld told the Financial Times on Sunday. "The only two that had 'lock-step' movements were BA and Virgin Atlantic."

Airline experts have cast doubt on the existence of collusion, pointing out that airlines tend to set prices in relation to those charged by rivals, and the relatively higher yields secured by BA and Virgin Atlantic are said to reflect the higher proportion of business passengers they carry.

However, Mr Hausfeld said his analysis pointed to "something that is allowing [BA and Virgin] to charge higher fares" than rivals.

More than 30 suits related to the cargo probe are currently being consolidated into a single suit, and aviation lawyers said the actions are likely to drag on for years.

Virgin Atlantic, the UK long-haul airline controlled by Sir Richard Branson is understood to have helped the OFT with information about BA, the latest twist in the often stormy relationship between the two rivals.

It is understood that Virgin Atlantic passed information to the OFT about an approach made by a BA executive last year about a possible raising of the fuel surcharge.

BA said in a statement on Thursday that it had given "leave of absence during the investigation" to Martin George, commercial director and a member of the BA board, and Iain Burns, head of communications.

Mr Burns was reporting directly to Mr George, whose responsibilities include worldwide sales, marketing, revenue management, worldwide cargo and global public relations. Mr George has normally been responsible for announcing the periodic increases in the fuel surcharge levied by BA on passenger fares since May 2004 to recoup part of its extra costs resulting from the sharp rise in the oil price.

BA and Virgin Atlantic currently impose the same surcharge of GBP35 per individual long-haul flight (GBP70 for a return trip).

While BA has often been among the leaders in raising the fuel surcharge, on some occasions Virgin Atlantic, its main long-haul competitor at Heathrow, has also taken the lead. On most occasions the other airlines have quickly followed the lead of the first mover.

Last September Virgin Atlantic raised the long-haul surcharge from GBP24 to GBP30. It was followed in the same week by BA with the same increase. Virgin lowered the surcharge again in November to GBP25, but BA did not follow the reduction, and in January Virgin Atlantic returned to GBP30. In March Virgin Atlantic raised the levy to GBP35. BA followed to GBP35 in April.

South African Airways was last month fined R55m ($7.5m) by the country's competition commission after admitting it colluded with three domestic airlines to set fuel charges. The fine also covered its admission of colluding with Lufthansa, its alliance partner, to fix ticket prices.

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