British Airways raided in airline price-fixing probe

British Airways could face a fine of up to £315 million if found guilty. Picture / Reuters

LONDON - UK authorities have raided British Airways as part of a transatlantic investigation into an alleged cartel over airfares and fuel surcharges which saw BA suspend two senior executives.

American Airlines, United Airlines and Richard Branson's Virgin Atlantic said they were also involved in the probe, which is being conducted jointly with US authorities, but were not direct targets.

Those four airlines are the only carriers allowed to fly direct between London's Heathrow Airport and the United States under bilateral treaties.

BA shares, which had been trading at five-year highs, fell around 6 per cent to close at 346 pence.

BA, Europe's third-largest carrier, said the investigation by Britain's Office of Fair Trading and the US Department of Justice related to passenger ticket prices, including fuel surcharges.

All parties declined to comment on whether the investigation was limited to transatlantic airfares or had a wider remit.

The carrier said its commercial director, Martin George, and head of communications, Iain Burns, had been given leave of absence during the investigation.

"We would be very surprised if a specific issue relating to BA's pricing has developed. Unfortunately, though, putting key personnel on leave is a difficult signal for the market to interpret," Deutsche Bank analysts said in a note.

Analysts said the maximum BA could be fined if found guilty was 10 per cent of turnover on the routes involved. UBS said this would amount to a maximum £315 million ($943 million) fine for BA's transatlantic revenues in the last financial year.

"The worst case scenario is that BA is forced to open up Heathrow to additional transatlantic carriers, without having access to the benefits of an EU/US open skies agreement," Exane BNP Paribas analysts said.

The United States and Europe have been in talks aimed at eliminating restrictions on service and routes between the two continents under a so-called open skies deal.

The Office of Fair Trading said it visited BA's offices on June 13 as part of a civil and criminal investigation into alleged price coordination and its probe was "at an early stage".

Other major US and European carriers said they were not involved.

A spokesman for the Oneworld Alliance, of which BA is a member, said the alliance was not the target of the investigation.

BA first introduced a fuel levy in May 2004 which it last raised in April this year after crude oil prices nosed above US$70 a barrel.

Virgin Atlantic also introduced a fuel surcharge at around the same time.

The investigation follows a price-fixing probe involving airlines' cargo charges announced in February which spread to carriers in the United States, Europe and Asia. That investigation is still proceeding.

That probe centred on surcharges that airlines have imposed for fuel, added security since the September 11, 2001, hijackings in the United States, and higher war risk insurance, carriers being questioned said.

BA said in a statement its policy was "to conduct its business in full compliance with all applicable competition laws" but declined to comment further.

- REUTERS