SHARES in British Airways fell nearly 6 per cent as shareholders fretted over the possible financial implications of a surprise Anglo-American inquiry into fuel surcharges by transatlantic airlines.

The flag carrier is already one of several airlines being investigated by the European Commission and US Department of Justice (DoJ), which in February launched an inquiry into alleged cartel activity in air cargo. But BA attracted further regulatory scrutiny yesterday as the UK’s Office of Fair Trading and the DoJ said they would look at potential price co-ordination on fuel surcharges on long-haul flights across the Atlantic, an investigation that will also draw in the likes of Virgin Atlantic, Singapore Airlines and United Airlines.

While obviously an adverse development for sentiment on BA shares, UBS sought to quantify the potential effect on the airline’s earnings. Tim Marshall, analyst, points out that, if found guilty, the maximum penalty that can be levied on the company is 10 per cent of its relevant turnover: which, with £3.1 billion of revenue from the Americas in its last financial year, would amount to £315 million, or 28p a share, for BA.

But Mr Marshall also cited the amount of management time that an investigation of this type can entail. He noted that the suspension of Martin George, commercial director, and Iain Burns, head of communications, leaves BA without two senior managers, which will not help at a time when the company is negotiating with employees on pensions and changes in working practices. BA closed 21¾p cheaper at 346p. The wider market moved in the opposite direction, drawing strength from overnight gains on Wall Street and Asian stock markets to close 19.1 ahead at 5,684.1, its best finish in two weeks.

Wm Morrison, which saw unusually high turnover in its shares late last week, was again the focus of speculative activity on the conviction that Iceland’s Baugur has plans for the troubled Bradford-based supermarket group.

Yesterday’s activity, which saw Morrison touch 201¼p at its best, could be traced to the cancellation of an appearance by Gunnar Sigurdsson, Baugur’s head of retail, at a Reuters Consumer and Retail Summit in London. The rumour mill leapt to the conclusion that Baugur was set to drop its bid for House of Fraser, 4½p cheaper at 128p, and instead mount an assault on Morrison.

The more prosaic truth was that Mr Sigurdsson was preoccupied by the merger of Mosaic Fashions with Rubicon Retail, which will bring together fascias such as Warehouse and Karen Millen to create one of Britain’s largest fashion retailers. Morrison came to rest 3p ahead at 197¾p.

An upgrade from “underweight” to “overweight” from Morgan Stanley saw Rentokil Initial rise 6½p to 149¾p. The US broker believes the stock market is failing to appreciate the scale of management and structural changes at the company, where it has set a 171p price target.

Unilever firmed 25p to £11.71 on reassuring comments on growth targets from Patrick Cescau, its new chief executive.

• NEW YORK: shares posted a moderate decline, with investors once again fretting about interest rates. The Dow Jones industrial average closed at 11,019.10, down 60.40 points.

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