British Airways will pay $140 million (£71 million) in compensation to passengers affected by the carrier’s fixing of ticket prices after settling a class-action lawsuit in the United States.

A provisional settlement was reached last night and will be announced either today or on Monday.

The settlement brings BA’s total pay-outs for conspiring to fix fuel surcharges to £338 million – just £12 million shy of the total set aside to pay all penalties. However, the airline still faces regulatory fines and class action suits for fixing cargo rates in Europe and may be forced to increase its provision.

The lawsuit was brought by a US law firm on behalf of passengers who lost out as a result of BA and Virgin Atlantic conspiring to set the level of fuel surcharges – a supplemental fee added to air fares to cover rising oil prices.

BA and Virgin, which has also settled, held discussions over 18 months from August 2004 on when and by how much to increase surcharges. Virgin’s lawyers uncovered the conspiracy and blew the whistle, which led to a raid on BA’s offices by the Office of Fair Trading (OFT) in 2006.

Virgin’s action saved it from censure but BA was fined £121.5 million by the OFT for breaching competition law. The US Department of Justice fined the airline a further $300 million for passenger and cargo price fixing.

The passengers’ lawsuit seeks compensation for the airline’s involvement in price fixing. It was brought by the law firm Cohen, Milstein, Hausfeld & Toll in a San Francisco court.

Legal sources in the US told The Times that the provisional settlement was agreed by a judge last night, but the official announcement would be delayed until today or Monday.

Virgin is thought to be paying $60 million, but BA will have to pay triple damages because it did not expose the conspiracy. Both declined to comment.

The money will go into an account to be managed by an independent auditor. The level of the compensation is only one third of the fuel surcharge on each flight, which could be a few dollars per passenger. Any money that is not claimed will be given to charity.

Cohen Milstein is considering bringing a similar case in the UK for British passengers affected by the conspiracy.

The size of the BA settlement may force it to put aside more money to pay further penalties. The airline is under investigation by European authorities for fixing cargo rates and may face a class-action suit from haulage firms.

The combination of higher fuel costs and further penalties could take a significant chunk out of BA’s profits this year. The company put aside £350 million to pay fines last May.

Fifteen airlines have admitted they are part of the EU’s investigation into cargo price fixing, which also relates to the setting of fuel surcharge rates.

Explore Law

• Columnists

• Law Panel

• Law Reports

• Student Law

Times Recommends

• UK legal industry faces loss of 10,000 lawyers
• Curious case of chocolate bunny trademark
• Divorce settlement granted after 22 years