WE MIGHT have guessed. It was Virgin Atlantic that triggered the price-fixing inquiry now under way into British Airways. Sir Richard Branson himself is said to have approved the passing of evidence to the Office of Fair Trading after receiving approaches from BA about fuel surcharges.
As the whistle-blower, Virgin could now get immunity from prosecution, but it won’t end there. Aside from the months-long trauma facing BA, this has evoked memories of the “dirty tricks” campaign of the 1990s when Branson successfully sued BA for trying to undermine his airline by poaching his passengers.
Now the two airlines are again at loggerheads and for BA chief executive Willie Walsh, this just about caps an eventful nine months. Just when it seemed safe to resume normal service its future has been plunged once more into turmoil. As if September 11, industrial action and its bulging pensions deficit were not enough to contend with, the inquiry into alleged price fixing on long-haul flights has put a lid on its shares and opened a wound with an old rival.
While nobody is in a position to pre-judge the guilt of BA, its suspension of two senior managers - Martin George and Iain Burns - was a sure sign to investors that something wasn’t quite right. Whatever the eventual outcome, it is a blow to George, the airline’s commercial director, beaten by Walsh to the top job. George was vocal in his support for fuel surcharges, imposed to cover the rising cost of oil, but he also made great play about BA being “transparent” about the issue.
There continue to be a few missing pieces in this jigsaw. For a cartel to exist there needs to be another party. American Airlines and United Airlines have been subpoenaed to appear before the Federal Grand Jury but are not the subject of the inquiry.
While BA’s shares traded slightly up on Friday, they will be depressed under the weight of this inquiry and the prospect of a large fine, a real setback for BA which has begun to claw its way back into investors’ favour.
However, its critics will be gleefully reminding anyone prepared to listen that there have been warnings of trouble ahead and that the fuel surcharge rises were a case in point. The budget carriers, for instance, have claimed that the big airlines like adding these charges to long-haul flights as it allows them to offer more competitive rates against the low-cost airlines. Whether true or not, BA is now backed into a corner and its budget rivals will be eager to throw a few punches.
Then there is the whole business of what is and is not “collusion”. There are so many exclusive agreements in this business - including one that limits Heathrow-US traffic to just four airlines - that it is not difficult to find arrangements that suit certain carriers over others. The US, itself a protectionist state, is hardly unblemished when it comes to deciding how it will conduct its airline business.
Perry perspective
SO Jack Perry says he’s not quitting Scottish Enterprise. Quite right. Last week’s parliamentary report into the agency was as damning as any to have emanated from Holyrood, but it hugely overstated the so-called “crisis”.
Chief executive Perry has admitted mistakes had been made. He lost control of the agency’s finances and he failed to keep the Executive informed about it. For that he deserved to be censured.
But as this newspaper revealed soon after this dispute emerged, the Executive had to carry some of the blame for saddling the agency with an unfathomable accounting system that even got the better of some of the best accountancy brains in Scotland. Most of them sit on the SE board.
There were also weaknesses in the relationship between the Executive and SE. The report supports the view expressed in this column that the Executive fudged Perry’s reform plans, supporting his creation of two new metro-regions but rejecting his plan to scale back the local enterprise company network, described by the committee as a “confusing compromise”.
To put all this into perspective, we’re talking about a “non-cash” overspend. It’s an accounting slip. The comedy element is that nobody is asking how Perry intends to spend the bulk of SE’s £500m budget and whether we are getting value for money.
It’s notable that despite the huffing and puffing of enterprise convener Alex Neil, neither the First Minister, nor the enterprise minister support his call for Perry’s head. The board of Scottish Enterprise is backing its chief executive.
My guess is that there are bigger plans for SE. We already know that Perry wants a smaller, more clearly focused agency, concentrating on six key industries and rid of Careers Scotland.
All this points to a dramatic reduction in the budget in the years ahead.
When that happens, the £30m “overspend” will be put into its proper context.