BA risks doubling of OFT fine

British Airways could see a doubling of the £121.5m fine imposed on it by the Office of Fair Trading for conspiring to fix fuel surcharges, if the carrier decides to contest the settlement it reached with the watchdog in 2007.

The airline has been reviewing the size of the penalty since the collapse of a related criminal prosecution brought by the OFT against four current and former BA executives last year.

BA reached a settlement to pay the fine in a civil case four years ago, in what remains a record penalty for the OFT, after admitting to colluding with Virgin Atlantic between August 2004 and January 2006 over the size of fuel surcharges added to the ticket prices on longhaul routes.

Virgin Atlantic was granted immunity by the OFT after blowing the whistle on the cartel. The criminal case collapsed, however, after the emergence of thousands of new documents from Virgin Atlantic’s databases during the trial. It cost the taxpayer £1m to bring the case.

The fine is still outstanding as the civil case was put on hold during the criminal investigation. The OFT is set to restart the civil proceedings in the third quarter of the year when it is expected to issue a so-called statement of objections, which will outline its findings.

In the settlement in 2007, BA’s fine was reduced by the OFT because it had offered the watchdog its full co-operation. It is understood if BA challenges the ruling, the watchdog could increase the fine by as much as 50 per cent. The regulator has the power to fine a company as much as 10 per cent of its turnover in the affected markets.

Willie Walsh, International Airlines Group chief executive, signalled BA’s unhappiness with the size of the fine. “We said we needed disclosure of the evidence before we could agree anything with them. But, given the way the criminal trial collapsed, we don’t believe there are any grounds for that level of fine,” he told the Daily Telegraph.

BA, which is part of IAG following the merger with Spain’s Iberia, said on Monday it was “awaiting” the OFT’s statement of objections but declined to comment further. The OFT declined to comment on what Mr Walsh said but confirmed it was planning to lay out its case against BA in the third quarter of the year.

The process has been protracted because of the trial, which was the first contested criminal case that the OFT has prosecuted. The regulator was forced to undertake an internal review in the wake of the trial’s collapse, which found that OFT management should have seized e-mails from the outset of its investigation rather than relying on Virgin Atlantic as a witness to produce them.

Defence lawyers told the court that one March 2005 e-mail undermined the prosecution case because it showed that Virgin Atlantic had decided to increase its fuel surcharge before any of its executives contacted the defendants.