BA and Virgin to pay out refunds

BA and Virgin to pay out refunds

British Airways and Virgin Atlantic passengers who were cheated in a price-fixing scam will receive $200m (£102m) in compensation after the airlines agreed a legal settlement.

The deal covers 8m airline tickets sold between August 11 2004 and March 23 2006, with passengers who flew between the UK and US with BA or Virgin Atlantic on those dates receiving a refund of £20 per return ticket.

The settlement comes after BA was hit last year by record fines totalling almost £270m from the Office of Fair Trading and the US department of justice for fixing the price of fuel surcharges for long-haul passenger flights and its cargo business.

BA is expected to pay the vast majority of the $200m bill, meaning it has nearly exhausted the contingency of £350m it set aside for the legal consequences of the scandal.

The legal action was brought on behalf of UK and US-based passengers by one of America's top litigators, Michael Hausfeld, who has garnered a fearsome reputation for a string of lawsuits representing native Alaskans affected by the Exxon Valdez oil spill, victims of the Holocaust and victims of apartheid.

"We are delighted to have achieved such a terrific settlement for UK consumers," said Hausfeld. "BA and Virgin overcharged their customers over a period of almost two years. Customers in the UK should claim back what was unlawfully taken from them in order to demonstrate that such behaviour is unacceptable......continued below

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This is the first time non-US citizens have been rewarded on an equal footing to US citizens in a case before the US courts, making this a legal precedent and a significant milestone in both US and UK legal history."

Law firm Cohen, Milstein, Hausfeld & Toll, which brought the action, also confirmed that an agreement had been reached for US passengers.

Cohen Milstein said it expected to sign the settlement agreement today, and to submit it to a US court for approval over the next month. However, BA still faces regulatory fines and legal action for its role in fixing cargo prices. Virgin Atlantic received immunity from the OFT and US justice department probes after its lawyers blew the whistle on the collusion over fuel surcharges - a levy on tickets to cover the rising cost of fuel. BA is paying the majority of the settlement because it did not blow the whistle on the conspiracy.

Two senior BA executives quit the airline following the announcement of the investigations two years ago. The collusion began when the former head of communications at BA, Iain Burns, phoned his counterparts at Virgin Atlantic to discuss surcharge plans - a clear breach of competition law, which prohibits cooperating in the setting of prices.

Burns' immediate boss, former commercial director Martin George, also resigned after admitting illegal conversations had taken place on his watch. Both men are still under scrutiny as the OFT and DoJ continue criminal investigations into price fixing, a crime which carries a five-year jail sentence in the UK.

The US government has also identified 10 current and former BA executives who are liable to possible extradition and criminal prosecution over their alleged involvement in the scandal. The DoJ has singled out 10 individuals as being exempt from a plea bargain granting immunity to prosecution for all other BA directors, officers and employees.