UPDATE 2-BA, Virgin settle U.S. fuel surcharge claims

(Recasts; adds Virgin Atlantic statement, background, bylines)

By Mike Elliott and Martha Graybow

LONDON/NEW YORK, Feb 15 (Reuters) - British Airways (BAY.L) and Virgin Atlantic [VA.UL] will together pay about $203 million to settle a lawsuit brought by passengers who said the airlines illegally fixed the price of fuel surcharges on long-haul trips.

The agreement announced on Friday settles a two-year-old case pending in U.S. District Court in the Northern District of California contending that customers overpaid for fuel surcharges, which were meant to help airlines cope with the rising cost of jet fuel.

Under the pact, U.S. ticket purchasers will receive $59 million, while British purchasers will get 73.5 million pounds ($144.4 million) in refunds, according to lawyers representing the plaintiffs.

The agreement, which still requires court approval, covers 8 million passengers in the US and Britain who bought tickets from either BA or Virgin between Aug. 11, 2004, and March 23, 2006. The airlines will pay one-third of the fuel surcharge the passengers paid per ticket.

"As we have previously said, we absolutely condemn any anti-competitive activity by anybody," BA Chief Executive Willie Walsh said in a statement.

"This settlement, which British Airways and Virgin Atlantic have jointly agreed with the lawyers for the plaintiffs, is fair and reasonable," he said.

Virgin said it "deeply regrets its involvement in this matter and believes the provisional settlement reached now draws a line under this episode."

It said that it "quickly began settlement negotiations" after the case involving passenger fuel surcharges came to light.

Last year, BA agreed to pay roughly $247 million in a settlement with British authorities for discussing fuel surcharges with Virgin.

Friday's pact resolves a civil lawsuit, brought in the United States as a class action, that contended that passengers were overcharged on the fuel surcharges and were told that the added fees were necessary to cover the rising cost of fuel, but in reality were used to increase the airlines' profits.

The amount to be refunded to passengers will be up to 10 pounds ($19.65) for each flight segment, according to Washington, DC-based law firm Cohen Milstein Hausfeld & Toll, which represented the plaintiffs along with another firm, Cotchett, Pitre & McCarthy. The exact refund will depend on the amount of the surcharge paid.

BA shares were down 3.7 percent at 279 pence in afternoon trading in London. (Editing by Brian Moss)