Thursday, August 02, 2007

British Airways, Korean Air Agree to Price-Fixing Fines

This posting was written by Sarah Borchersen-Keto, CCH Washington Correspondent.

The U.S. Department of Justice (DOJ) announced that British Airways PLC and Korean Air Lines Co. Ltd. each have agreed to pay separate $300 million criminal fines for their part in fixing the prices of passenger and cargo flights. As a result of plea agreements, both airlines are cooperating with DOJ's ongoing investigation into the air transport industry.

Attorney General Alberto R. Gonzales said the action was brought about through successful coordination with the UK's Office of Fair Trading.

“When British Airways, Korean Air, and their co-conspirators got together and agreed to raise prices for passenger and air cargo fares, American consumers and businesses ended up picking up the tab for their illegal conduct,” said Acting Associate Attorney General William W. Mercer.

Fixing Fuel Surcharges

According to the DOJ, between August 2004 and February 2006, British Airways engaged in a conspiracy to suppress and eliminate competition by fixing the fuel surcharge charged to passengers on long-haul international flights, including flights between the U.S. and the UK. The conspiracy raised the price on virtually every ticket purchased between 2004 and 2006 on long-haul international flights, the DOJ said.

Passengers who flew on British Airways between the UK and U.S. paid a fuel surcharge of about $10 per round-trip ticket in 2004. By 2006, the surcharge had risen to nearly $110 per ticket. As for air cargo, the airline’s fuel surcharge on shipments to the U.S. changed more than 20 times, and increased from four cents per kilogram to as high as 72 cents per kilogram. British Airways' air cargo conspiracy lasted from March 2002 to February 2006.

Passenger Fares, Cargo Charges

Meanwhile, the DOJ charged that Korean Air reached an agreement with its rivals to fix certain passenger fares for flights from the U.S. to Korea during the period from January 2000 to July 2006. The DOJ also charged Korean Air with agreeing with air cargo competitors on rates charged to customers in the U.S. and elsewhere for international air cargo shipments from at least January 2000 to February 2006.

Cooperation of Virgin Atlantic, Lufthansa

Virgin Atlantic and Lufthansa AG have agreed to cooperate in the ongoing investigations. Virgin Atlantic entered the DOJ's Corporate Leniency Program after reporting its participation with British Airways in the passenger fuel surcharge conspiracy. Lufthansa was conditionally accepted into the program after it disclosed its role in the international cargo conspiracy, along with British Airways and Korean Air. Virgin Atlantic and Lufthansa are obligated to pay restitution to the U.S. victims of their conspiracies.

British Airways’ chief executive Willie Walsh said he wanted to reassure the carrier’s passengers that they were not overcharged.

“Fuel surcharges are a legitimate way of recovering costs,” said Walsh. “However this does not in any way excuse the anticompetitive conduct by a very limited number of individuals within British Airways. Anticompetitive behavior is entirely unacceptable and we condemn it unreservedly.”

A press release on the matter appears on the Department of Justice Antitrust Division web site.

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