Jet-fuel surcharges spark U.S., U.K. probes

BUSINESS DIGEST

June 23, 2006|By NEW YORK TIMES NEWS SERVICE

LONDON -- British and American regulators are investigating major airlines that operate long-distance flights to and from Britain, suspecting that they may have illegally conspired to fix the amounts of fuel surcharges they impose on passengers.

Most major carriers flying between the United States and Heathrow, London's main international airport, charge passengers about 35 British pounds ($64) each way in fuel surcharges.

The U.S. Department of Justice and Britain's Office of Fair Trade have contacted British Airways, Virgin Atlantic Airways, United Airlines, American Airlines and possibly other carriers in connection with the investigation, which could lead to criminal charges, civil penalties or both.

The Office of Fair Trade announced the investigation yesterday, but said it was "at an early stage," and that "no assumption should be made that there has been an infringement of competition law."

British Airways acknowledged the investigation in a statement and said it was assisting in the probe. The airline also said that two senior executives - Martin George, the commercial director, and Iain Burns, the chief of communications - had been placed on leaves of absence during the investigation, but it did not elaborate.

American Airlines said it had received a "federal grand jury subpoena in connection with a government investigation into alleged price-fixing in the air passenger industry," but said that it was not a target of the investigation. United said it had received an inquiry and was cooperating with investigators. Virgin said it was "aware of the investigation" and was "assisting."

Many airlines have struggled to make profits in recent years because of high oil prices, and have been trying to recoup by adding fuel surcharges to passenger ticket prices. The cost of jet fuel has risen 21 percent in the past year, according to the International Air Transport Association. So far this year, airlines have spent $22 billion more on fuel than a year ago, the organization said.

Consumer advocates complain that fuel surcharges can be a surreptitious way for airlines to raise fares more than the increase in fuel costs.

In April, British Airways raised its fuel surcharges to $64 on each one-way ticket. Virgin also charges about $64 each way.

United's fuel surcharges to and from Britain vary from flight to flight, and from day to day; for a one-way ticket from John F. Kennedy International Airport in New York to Heathrow on July 6, the surcharge is about $67.

American Airlines charges about $67 on all its flights between the United States and Britain.

Long-established carriers like British Airways and American have been losing customers on short-haul flights to newer discount carriers such as EasyJet and Ryanair in Europe, putting pressure on them to hold down their short-haul prices and make up the difference on fares for longer flights.

The European Union, which joined the Department of Justice in an investigation of price-fixing among air cargo carriers this year, said it was not involved in the fuel-surcharge probe.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.