October 2007 issue

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British Airways fined for price-fixing

British Airways has been fined a record UK£270 million (US$544 million) by both the UK and US competition authorities for an infringement of competition law.

The airline has admitted that between August 2004 and January 2006 it colluded with Virgin Atlantic over the additional fuel charges added to tickets on its long-haul flights. During this period, extra charges rose from UK£5 (US$10) to UK£60 (US$121) and BA Chief Executive, Willie Walsh, said that while surcharges are a legitimate way of recovering costs, “this does not in any way, excuse the anti-competitive conduct by a very limited number of individuals within British Airways”.

It is believed that escalating oil prices prompted the two airlines to discuss and inform one another of planned changes in ticket prices, going against the competition regulations that state prices must be set independently.

Both the US Department of Injustice and the Office of Fair Trading (OFT) in the UK have imposed fines of around US$300 million and Philip Collins, Chairman of the OFT, believes such a penalty should deter corporate firms from price-fixing in the future. “This case, and the substantial penalty imposed, will send an important message to corporate boards and business leaders about our intention to enforce the law, and serves to remind companies of the substantial risks involved if they are found to engage in such behaviour”, he said.

Meanwhile, Virgin Atlantic, the other airline involved, qualified for immunity under OFT policy having implicated British Airways in their misconduct. A Virgin Atlantic spokesperson said, “We take complying with competition laws extremely seriously and regret that contacts were made between the two companies.”

British Airways passengers who may have been affected by the inflated surcharges could now seek compensation from the airline.

Carriers vie for Indian student passengers

Several airlines are beginning to cash in on the number of Indian students travelling abroad for higher education purposes, according to preliminary reports, .

Vinay Malhorta, Sales Manager for United Emirates airlines, explained, “Education loans, enhanced exposure, better job prospects and an overall increase in the disposable income of families, have all contributed to a major increase in the number of Indian students travelling overseas for higher studies.”

Student traffic, generated by university admissions in the USA, the UK, Australia, Canada, New Zealand and Europe, has led airlines such as United Emirates, Etihad Airways and Jet Airways to woo student business by offering them lower airfares and/or an increased baggage allowance.

Students travelling with Jet Airways can already benefit from carrying an extra piece of hand luggage on board and last year the carrier raised the total student baggage allowance from 40 kilogrammes to 46 kilogrammes. They are now said to be eyeing up traffic potential for the US east coast.

Meanwhile, Archana Chaudhary from the CampusFrance India Network, said, “Etihad Airlines is offering competitive rates to students going to Paris and many of them have already booked their tickets with this airline.” Virgin Atlantic is also said to be targeting the overseas student market. Neha Lidder Ganju, Marketing Manager for Virgin Atlantic India said, “We have associated and partnered with service provider Study Overseas this year and were part of the pre-departure session in both Delhi and Mumbai where we assisted the students travelling to the UK with their travel-related queries.”

Virgin flies from Australia to the USA

Virgin Blue recently unveiled its new trans-Pacific airline, V Australia, following regulatory approval from Australia’s International Air Services Commission (IASC).

The Australian arm of Virgin Atlantic, hopes to commence its first non-stop, long haul service from the east coast of Australia to the west coast of the USA late next year. However, the new route is still subject to further US regulatory approval.

With Qantas and US carrier United Airlines currently monopolising the trans-Pacific market, V Australia looks set to offer travellers competitive fares on routes such as Sydney to Los Angeles and Sydney to San Francisco. The carrier is also said to be interested in San Francisco’s secondary airport, Oakland.

Brett Godfrey, Chief Executive for Virgin Blue, said, “This is the first time in decades Australia has a start-up long haul international airline and we look forward to bringing competitive air fares and a new style of service to the trans-Pacific market.”

Travel Update

Eurostar’s High Speed 1, the UK’s first 186mph train service, has seen sales rocket after it received over 110,000 bookings for the period between 14 November – when the new terminus St Pancras International opens – and Christmas. Advanced bookings are more than double the sales achieved last year and the first trains to Paris and Brussels have already sold out. The new service will slash journey times by up to 20 minutes and is said to be more eco-friendly. Richard Brown, Eurostar’s Chief Executive, said, “Travellers are realising that going by Eurostar avoids airport delays, fuel surcharges, waiting for baggage, and... getting to and from out-of-town airports.”

The first stage of Malaga’s airport expansion in Spain has been completed. Terminal one, which has been undergoing a US$216 million refurbishment, now houses nine check-in terminals, a new car park – equipped for 1,800 cars – and a new runway. The airport is currently undergoing a e1 billion (US$1.4 billion) face-lift that will enable the airport to handle 27 million passengers per year.

Korean Air has reported a 55 per cent hike in the number of its passengers travelling from the USA to China. With Korea and China gradually opening the skies between their two countries, Korean Air has a distinct advantage over US carriers whose rights to China are more restricted. Korean Air, which flies to more than 20 cities in China, is now set to target the US market more aggressively. John Jackson, Marketing Director for the carrier, said, “We are positioning ourselves as America’s preferred airline to China and provide more access between the two countries than any other airline in the world.”

According to the Singapore Tourism Board, the number of UK tourists visiting Singapore has risen by five per cent. Visitor numbers shot up to 260,000 in the first six months of 2007 and reveals that the country is growing as in popularity as a destination for UK travellers. The nation welcomed 4.9 million visitors in the first half of 2007, an increase of 5.2 per cent on the previous year.

In a report compiled by the Association of European Airlines (AEA), passengers flying with British Airways were deemed most likely to incur a delay. An estimated 35.7 per cent of short- or medium-haul flights arrived late during April and June of this year and 32.7 per cent were said to be delayed upon departure. Meanwhile, long-haul flights fared even worse, with 44 per cent of flights not arriving on time and 36.6 per cent departing later than scheduled.

US carrier, American Airlines, will be offering flights to a third UK hub from October this year. Daily flights between New York JFK and London Stansted will give passengers an alternative route into London and sees the carrier’s daily flight schedule between the UK and USA increase to 20 round trips.

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