British Airways fined $546 million for price fixing
British Airways fined $546 million for price fixing
By Barbara De Lollis, USA TODAY
WASHINGTON — British Airways and Korean Air agreed to plead guilty and pay $300 million apiece for their roles in price-fixing conspiracies that illegally raised travel costs, U.S. Justice Department officials said Wednesday.
Between 2004 and 2006, British Airways — the largest airline between the U.S. and United Kingdom — raised its fuel surcharge four times to about $110 round trip, up from about $10. The airline now admits it colluded with London-based Virgin Atlantic.
The price of oil during that time had risen about 55%. BA also raised surcharges on cargo shipments more than 20 times between 2002 and 2006.
Korean Air agreed to plead guilty for participating in a conspiracy with unnamed competitors to fix travel prices for passengers, travel agents and shippers for U.S.-Korea flights between 2000 and 2006.
Korean is the largest airline between the U.S. and Korea, and the second-largest carrier between the U.S. and Asia. In a statement, Korean Air said it "has worked hard to cooperate" and is "pleased to be among the first airlines to have reached a full resolution of the matter."
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Earlier on Wednesday, the U.K.'s anti-trust regulator, the Office of Fair Trading, said that BA agreed to pay about $246 million as a fine to that government for its role in conspiring to fix fuel surcharges with Virgin Atlantic.
The price fixing was still going on when FBI agents executed search warrants at the airlines last year, Justice officials said. It is not clear whether the price fixing is still going on today, but the investigation continues and srucharges haven't been rolled back. The airline is not required to lower the fees, Hammond said.
Virgin Atlantic first alerted authorities to the collusion in 2006. German carrier Lufthansa also went forward to authorities about its participation. Because they'd admitted participation, Virgin Atlantic and Lufhansa have been spared fines and criminal prosecution, said Scott Hammond, one of the Justice department officials who announced the pleas.
The two carriers will be obligated to pay restitution to their U.S. passengers, Justice Department officals say.
It was not immediately clear after the press conference where Justice Department officials announced their actions how or whether British Airways or Korean Air passengers will be able to seek reimbursement.
In a statement, BA CEO Willie Walsh acknowledged collusion but denied that passengers were overcharged.
"Fuel surcharges are a legitimate way of recovering costs," said Walsh, blaming the illegal conduct on "a very limited number of individuals within British Airways."
The department did not estimate how much extra airline passengers and companies have paid as a result of the schemes, because it's unknown what the market would have dictated had executives not colluded, said Hammond.
Justice officials did not rule out the possibility of jail sentences for executives who carried out the conspiracy.
The $600 million in criminal penalties levied on Korean Air and British Airways from the USA's Justice Department are subject to court approval. The fines would have been heavier had BA and Korean not agreed to cooperate in the investigation, Hammond said.