BA to plead guilty in U.S. price probe

WASHINGTON (Reuters) - British Airways and Korean Air have agreed to plead guilty and pay separate $300 million (148 million pounds) criminal fines for their roles in conspiracies to fix the prices of passenger and cargo flights, the U.S. Justice Department said on Wednesday

The tail fins of British Airways aeroplanes are seen on the tarmac of London's Heathrow Airport in this January 28, 2007 file photograph. British Airways has been fined 121.5 million pounds for price-fixing by Britain's Office of Fair Trading with a related U.S. Department of Justice fine set to take the total penalties to be paid within 350 million pounds, the firm said on August 1, 2007. REUTERS/Luke Macgregor

UK authorities said earlier on Wednesday that British Airways agreed to pay a separate 121.5 million pound price-fixing fine for discussing fuel surcharges with archrival Virgin Atlantic Airways.

The fines, the biggest in the company’s history, could have been higher if the airline had not admitted wrongdoing, a UK official said.

The plea agreements are the first from a continuing, wide-ranging investigation into the air transport industry by the Justice Department’s antitrust division.

Both British Airways and Korean Air have agreed to cooperate with the investigation, Justice Department officials told a news conference.

The conspiracies were described as among the largest and most far-reaching ever investigated. “In every instance American businesses and consumers ended up paying more because of these crimes,” Acting Associate Attorney General William Mercer said.

Virgin Atlantic and Deutsche Lufthansa earlier agreed to cooperate under a leniency program that allows a company to voluntarily disclose its participation in an antitrust crime and avoid conviction and fines.

Virgin Atlantic and Lufthansa still must pay restitution to the U.S. victims of their conspiracies, the officials said.

The Korean Air conspiracy lasted between January 2000 and July 2006 while the one involving British Airways took place between March 2002 and February 2006, the officials said.

They said passengers who flew on British Airways flights between the United Kingdom and the United States paid more for their tickets as a result of the illegal cartel.

In 2004, British Airways’ fuel surcharge for round-trip passenger tickets was around $10 per ticket. By the time the conspiracy ended in 2006, the surcharge was nearly $110 per ticket, the U.S. officials said.


The officials left open the possibility that individual executives and other airlines could be charged later as the investigation continues.

BA Chief Executive Willie Walsh defended the fuel surcharge increases, which came as crude oil prices surged. “I want to reassure our passengers that they were not overcharged.”

But Deputy Assistant Attorney General Scott Hammond rejected Walsh’s contention, even though it was difficult to know exactly what the prices would have been without the conspiracy.

Hammond asked why a company would risk fines and possible jail time for executives to participate for a lengthy period in a conspiracy that had no effect. “I suggest that defies common sense,” he told reporters.

Korean Air said in a statement it has worked hard to cooperate in the Justice Department’s investigation and “is pleased to be among the first airlines to have reached a full resolution of the matter.”

UAL, parent of United Airlines, said it is not the focus of the probe, but has responded to all requests for information from the department. AMR, which owns American Airlines, did not immediately respond to a request for comment.

In February last year U.S. and European officials raided airlines on both sides of the Atlantic as part of the probe into possible price-fixing of freight rates.

Airlines known to have been contacted by officials include: Air France-KLM, Scandinavian airline SAS, Luxembourg-based Cargolux Airlines International and Air Canada’s parent, ACE Aviation Holdings.

FedEx and United Parcel Service Inc have also received requests from antitrust authorities. FedEx has said it does not believe it engaged in any anti-competitive activities. UPS has said it does not believe it is a target of the investigation.

Additional reporting by Peter Kaplan, Kyle Peterson, Marc Jones and Jason Neely, editing by John Wallace