OFT/DoJ competition

British Airways PLC
01 August 2007




OFT/DOJ COMPETITION INVESTIGATIONS RESOLVED



British Airways announced today (August 1) that it has agreed a resolution with
the UK Office of Fair Trading (OFT) and entered into a plea agreement with the
United States Department of Justice  (DoJ) on fines relating to anti-competitive
activity in the company's longhaul passenger and cargo businesses.


Under the terms of the agreements, British Airways has agreed to pay a fine of
£121.5 million to the OFT and a DoJ fine which will be announced by the DoJ
early this afternoon. The sum of the combined fine is consistent with our
guidance and provision of £350 million.


This resolves the OFT's and the DoJ's investigation of British Airways.


British Airways' chief executive, Willie Walsh said; 'I want to reassure our
passengers that they were not overcharged.  Fuel surcharges are a legitimate way
of recovering costs.


'However this does not in any way excuse the anti competitive conduct by a very
limited number of individuals within British Airways.


'Anti-competitive behaviour is entirely unacceptable and we condemn it
unreservedly.


'We have a long standing competition compliance policy which requires all staff
to comply with the law at all times.  I am satisfied that we have the right
controls in place. However, it is deeply regrettable that some individuals
ignored our policy.'



The OFT's investigation turned on conversations between individuals at Virgin
Atlantic and British Airways' during which information was exchanged on proposed
changes to their respective longhaul passenger fuel surcharges in response to
fluctuating oil prices.



In 2006 Virgin Atlantic went to the OFT and revealed its part in these
conversations.



As the first applicant under the terms of the OFT's leniency policy, Virgin
Atlantic qualified for conditional immunity and as a result has not been
required to pay any penalty.



British Airways responded swiftly to the investigation co-operating fully with
the OFT and the penalty has been reduced to reflect this.



Fines for breaches of UK competition law are calculated in accordance with the
OFT's Fining Guidelines, and may be up to 10 per cent of a company's worldwide
turnover. The fine based on these Guidelines, represents just over one per cent
of British Airways' group turnover.



In parallel, the US plea agreement with the DOJ brings to an end their
investigations of British Airways with respect to its long haul passenger and
cargo businesses.



The OFT and DoJ continue with their criminal investigation into the conduct of
individuals.


                                      ends



August 1, 2007                       079/KG/07



Note to editors:



The detailed analysis of the fines will be made public by the OFT and DOJ in due
course.



Under the US law, criminal fines for Sherman Act infringements cannot exceed a
sum which is the greater of:



  • $100 million
  • twice the pecuniary gain derived from the violation
  • twice the pecuniary loss suffered by consumers





The OFT's investigation was conducted under the Competition Act 1998 which gives
the OFT the power to impose penalties on companies of up to 10 per cent of their
worldwide turnover for price fixing and other forms of anti competitive
behaviour.



Under IAS 37, the airline made a provision of £350 million for settlement of the
competition investigations in its 2006/7 accounts.



      The provision in respect of competition investigations relates to
potential Government fines in the following jurisdictions in relation to cargo
fuel surcharges: USA, Europe, Australia, Canada, New Zealand and South Africa
and, in relation to long haul passenger fuel surcharges: USA and the UK. It also
relates to civil claims in the USA, Australia and Canada. Under IAS 37 the
provision represents the estimate of the amount to settle competition authority
and civil claims at the Balance Sheet date, but recognises that the final amount
required to pay all claims and fines is subject to uncertainty



Summary Statement of Facts



These are the essential matters admitted by BA as to its infringement of civil
competition law.  Neither the names nor positions of any individuals involved
directly or indirectly in the contacts are or will be disclosed by BA in view of
the OFT's ongoing criminal investigation. Communications were made by a limited
number of individuals.



Introduction of the PFS, May 2004



1.       The introduction by each of BA and VAA of the long-haul passenger fuel
surcharge ('PFS') in May 2004 is not alleged to have been the subject of
collusive contacts.



First Increase, August 2004



2.       BA and VAA exchanged information on Friday 6 August 2004 regarding the
intentions of their respective organisations to increase the PFS. BA told VAA of
BA's intention to increase its PFS to £6.

3.       Thereafter, on Monday 9 August 2004, both BA and VAA announced
increases in their respective PFS to £6, as they had discussed, with effect from
11 August 2004.



Second Increase, October 2004



4.       BA understands that there may have been attempts by VAA to contact BA
prior to the second increase, but these were not successful.

5.       BA announced on 8 October 2004 an increase in its PFS to £10. VAA
announced a corresponding increase in its PFS to £10 on the same date.



Third Increase, March 2005



6.       In two sets of calls on 21 March 2005, BA and VAA exchanged information
concerning proposed increases in their respective organisations' PFS.   BA
informed VAA that BA intended to increase its PFS to £16. VAA confirmed to BA
the timing and amount of the PFS increase which VAA was going to announce.

7.       Later on 21 March 2005 VAA announced to the press an increase in its
PFS to £16 with effect from 24 March, as had been discussed.   On the following
day, BA announced an increase in its PFS by the same amount with effect from 28
March 2005.



Fourth Increase, June 2005



8.       BA informed VAA on 23 June 2005 that BA was going to announce the
following morning an increase in its PFS to £24.

9.       On Friday 24 June 2005 BA announced an increase in its PFS to £24, as
BA had informed VAA, with effect from 27 June 2005.   Later the same day, VAA
announced an identical increase in its PFS to £24.

10.   An email was sent from VAA to BA shortly before VAA's announcement, to
which BA replied early the following morning.



Fifth Increase, September 2005



11.   On 5 September 2005, VAA informed BA during a telephone call that VAA
intended to increase its PFS and to be the first to announce the increase on
this occasion. It is likely that VAA informed BA that VAA would increase its PFS
specifically to £30.

12.   On 6 September 2005 VAA announced an increase in its PFS to £30 with
effect from 7 September, as VAA had informed BA.  On 8 September 2005, BA
announced an increase in its PFS to £30, with effect from 12 September 2005.



VAA Reduction, November 2005



13.   VAA informed BA on 18 November 2005 that VAA was about to announce a
reduction in its PFS to £25.

14.   Shortly afterwards, VAA announced a reduction in its PFS to £25, as VA had
informed BA.

15.   A further contact from VAA to BA relating to this reduction took place
following the announcement.



VAA Increase, January 2006



16.   VAA informed BA on 6 January 2006 that VAA intended to increase its PFS to
£30.

17.   Later that same day VAA announced an increase in its PFS to £30, as VAA
had forewarned BA.   BA did not adjust the level of its PFS in response.

Certain information included in these statements is forward-looking and involves
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied by the forward looking statements.



Forward-looking statements include, without limitation, projections relating to
results of operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation, discussions of
the Company's Business Plan programs, expected future revenues, financing plans
and expected expenditures and divestments. All forward-looking statements in
this report are based upon information known to the Company on the date of this
report. The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.



It is not reasonably possible to itemize all of the many factors and specific
events that could cause the Company's forward looking statements to be incorrect
or that could otherwise have a material adverse effect on the future operations
or results of an airline operating in the global economy. Fuller information on
some factors which could result in material difference to the results is
available in the company's Annual Report for the year ended 31 March 2007, which
is available on www.bashareholders.com.




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