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British Airways has conceded that it is almost certain to face civil or criminal proceedings over price-fixing allegations by setting aside £350 million ($946 million) to cover the cost of potential fines and legal costs.
Chief executive Willie Walsh admitted yesterday "there have been breaches" of BA's policy on compliance with competition laws. He warned that the ultimate cost of the breaches could be more than half the value of this year's profits.
The confession follows an 11-month investigation by UK, US and European competition watchdogs into allegations that BA executives tipped off a rival airline over the company's plan to increase the fuel surcharges it levied on long-haul routes.
BA said it had no choice under accounting regulations but to make a provision against potential fines in the US, Europe, Australia, Canada and New Zealand.
The airline has also warned it may face civil litigation in the US, Canada and Australia. It is one of four airlines named in civil proceedings launched in New York last year alleging price-fixing.
Walsh said he personally had no knowledge of the alleged breaches of the law. The company said it would not comment on allegations about individual employees while civil and criminal proceedings continued, though two BA executives caught up in the scandal left the company last October.
The £350 million provision capped a miserable set of results from Britain's national airline. Its annual profits for the March year were £611 million, down more than 13 per cent on last year's figure of £694 million.
Last summer BA had to cancel thousands of flights when stringent airport security measures were introduced after a terrorist alert in the UK. The company was also hit by poor weather over the Christmas period, and had to cancel thousands more flights when cabin crew threatened to strike over terms and conditions. The industrial action was called off, but the damage was already done.
Walsh said: "In the circumstances, these are a very strong set of results."
BA's profits were also damaged by weakness in demand on its transatlantic routes, where the strength of sterling against the US dollar has put off some North American customers. Even so, BA plans to take advantage of the new "open-skies" agreement between the EU and the US. Walsh said BA had applied to the US Department of Transportation "to operate services between any point in the US and any point in the EU".
City analysts said BA's results were broadly in line with expectations, other than the £350 million provision, which was much larger than many had forecast.
- INDEPENDENT
