Hot Topics » Radovan Karadzic • Zimbabwe • Iraq • Environment • America votes • Olympics • more topics »
  Edition: U.S. | Arabic | Set Pref
Monday, August 06, 2007
Who benefits from BA's big fines?

I have a problem with the huge fine levied against British Airways for its passenger and cargo price-fixing. Half a billion dollars is a serious amount of money.

Of course those involved in cartels should be punished, and as a frequent flyer I have suffered from BA's actions, but is fining the company such a huge sum a suitable punishment? It seems a remarkably unimaginative form of sanction.

Think about it. Why should the competition regulators -- the Office of Fair Trading (£121 million and the Department of Justice ($300 million) -- benefit from this windfall in their budgets? What will they do with the money? No doubt, they will investigate more cartels but that isn't going to improve my traveling lot much.

After all, who suffers from this fine? Well, BA management are certainly embarrassed but unless they were actually involved in the price-fixing and have been sacked, those that remain can say "not me guv'".

The shareholders will suffer because there will be lower profits and ultimately smaller dividends but the BA share price may actually end up rising because the uncertainty is over!

Nope! The ones who suffer are probably the passengers who will be traveling on an airline that now has half a billion dollars less to spend.

BA is being deprived of valuable capital which could and should be used to upgrade the airline.
The airline has already made some pretty swinging cuts. It's cost-cutting has bitten into the passenger experience hard: miserable sandwiches where there used to be a meal; poor industrial relations with its staff and suppliers because of lower budgets; moral so low, it's become legendary in the industry.

Instead, the regulators should have insisted BA spend half a billion dollars to improve the airline's products and services, both in the air and on the ground. Just think -- that money could have brought back food on some flights or refurbished aircraft. It could have reduced the under funded pension scheme and allowed some benefits to be restored to the suffering staff.
But -- some will say -- spending the money that way will give BA a competitive advantage, which is hardly the idea of the punishment. So what?

If you want to add a bit of pepper, force the airline to give away 1,000,000 tickets to charities around the world so they are flying planes which make less revenue. Force them to give World Offers at a further 15 per cent discount. These would all reduce shareholder value but benefit the passengers. Do anything but levy a thumping fine which improves nobody's lot.

Price fixing is a nasty, insidious crime with many victims. The sanction should be designed to punish the company's owners, benefit the company's customers and send a clear signal that the regulators will be as cunning as the crime.
Posted by Richard Quest: 4:35 PM
12 Comments Add a comment
Giving away 1 million tickets would hurt Easyjet, Ryan air etc. and would not be fair. BA played with fire and they got burned. I think a much bigger scandal is how airlines keep the taxes you have paid even if you don't take the flight. I recently booked a non refundable ticket to New York and paid 500 euros for the ticket. I called KLM to see if I could change it but that was not possible. The lady was kind enought to tell me to call expedia and ask for a tax refund if I would not take the flight. I got 200 euros back... Keepîng taxes as profits is plane theft! People can see and hear you all over the world. Can you please address this issue on your show?
Posted By Anonymous : 4:21 AM ET  
Hi Richard, I do not disagree with your comments on BA, an airline I personally avoid travelling with, but the punishment does have to fit the crime. If the airline was to give tickets to charities around the world, they would probably just deduct that as a gift, and not really a punishment, would be a good PR stunt. If the fined imposed on BA were to go to upgrade Heathrow and the air traffic control system as well as the congestion in and around the European and US Airspace, then let them pay up. As long as the monies are put to good use. Punishing the owners, the share-holders, might be the best way and you can be sure the owners will come down hard on the board.There is something to be said for good Corporate Governance.
Posted By Hans Henrik Friis, Bonn : 8:38 AM ET  
I am not really sure wht an ideal punishment could have been for BA's unruly behaviour - but its definitely not the hefty fine...

Totally endorse ur views Richard... It is not BA or the shareholders but we- The passengers- that are bound to suffer the most from such a ruling... 'Bon Voyage' to the lucky winners aka 'The Justice Department'

Owais from Karachi
Posted By Anonymous : 9:34 AM ET  
Richard,

while your idea is enchanting, I would rather believe that any fine not paid to the respective authoritiy is lilkely to end up as a top executive bonus or other type of fringe benefits to management.

Thus, my personal take is that the simplest answer to an airline which management commits insidious crimes, flies outdated aircraft, provides imporper service and constantly lowers employee morale is not to use any of its services or products offered.

Cheers

Chris from Munich
Posted By Anonymous : 1:17 PM ET  
"The sanction should be designed to punish the company's owners." Unless I missed something in basic Economics, aren't those called 'shareholders,' dear boy?

I don't have a problem with the budgets of these agencies being supported by fines. After all, they work on behalf of all of us passengers, current and prospective, as well as keeping competition fair. What I resent are agencies that refuse to fine flagrant violations, e.g. several water companies in the UK.

BTW, if you want better airline service, why not fly another carrier? Competitors have increasingly proven that there is plenty of fat in BA's operations, which they could cut without harming the quality of service.
Posted By Karin Edwards, London : 4:51 AM ET  
Agree 100%! Exactly the question that was in my mind about who benefits from the fines. The flying public should. I have just flown back to Tanzania with BA because their tickets are the cheapest and they fly direct. Now will I have to pay more to make up for this shortfall just like my home insurance in the UK will be more expensive to fund the insurance companies shortfall after these floods?!
Posted By Paul Kassell : 1:04 PM ET  
CHEERS I AGREE 100%
Posted By Anonymous : 2:15 AM ET  
Richard,

I don't know why you're complaining about BA's fines. You should be complaining about what's being charged to the passengers. And please include the most ridiculous taxes and fees imposed by the British Government. Taxes for landing, taxes for departure, taxes for taxes, and recently the tax on carbon use. Do they think taxing a seat because of it's carbon use is going to stop it? If they want to stop it, just ban flying out of England all together.

In reality, it's not a tax to stop carbon at all. It's simply to weaken a currency.
Posted By Anonymous : 11:32 PM ET  
the best thing to do is find another airline. Your "fine" system would encourage airlines to get involved in price fixing scams. Surely?

I have it with BA. Old planes. Rude cabin crew and the final straw was when they booked me on flight that I couldnt be booked on!?!?!? Their error cost me over 500 GBP.
Posted By Anonymous : 12:37 PM ET  
I always wondered what happened to those fines and what 'pocket' in which they entered. Perhaps those "powers" should take all that punitive money and upgrade the air traffic control systems the airlines are want to complain?
Posted By Barbara : 6:15 PM ET  
I totally agree with your article Richard Quest.
Posted By David : 11:13 AM ET  
Passengers who have been overcharged can sue for a refund, and because it is antitrust, the damages will be trebled.
Posted By Anonymous : 4:10 AM ET  
CNN Comment Policy: CNN encourages you to add a comment to this discussion. You may not post any unlawful, threatening, libelous, defamatory, obscene, pornographic or other material that would violate the law. Please note that CNN makes reasonable efforts to review all comments prior to posting and CNN may edit comments for clarity or to keep out questionable or off-topic material. All comments should be relevant to the post and remain respectful of other authors and commenters. By submitting your comment, you hereby give CNN the right, but not the obligation, to post, air, edit, exhibit, telecast, cablecast, webcast, re-use, publish, reproduce, use, license, print, distribute or otherwise use your comment(s) and accompanying personal identifying information via all forms of media now known or hereafter devised, worldwide, in perpetuity. CNN Privacy Statement.
Home  |  Asia  |  Europe  |  U.S.  |  World  |  World Business  |  Technology  |  Entertainment  |  World Sport  |  Travel
Podcasts  |  Blogs  |  CNN Mobile  |  RSS Feeds  |  Email Alerts  |  CNN Radio  |  CNNAvantGo  |  Site Map
CNN en Espaňol  |  Arabic  |  Japanese  |  Korean  |  Turkish
CNN U.S.  |  CNN U.S. TV  |  CNN International TV  |  Headline News  |  Transcripts
© 2008 Cable News Network. A Time Warner Company. All Rights Reserved.
Terms of service  |  Privacy guidelines  |  Advertise with us  |  About us  |  Contact us  |  Help