British Airways admitted yesterday that it had breached competition law by discussing changes in fuel surcharges on passenger fares and air cargo rates with rival airlines.

BA, which has been under investigation - along with several other leading international carriers - for about 18 months, disclosed that it was taking a provisional £350 million (€511 million) charge against profits for the eventual settlement of potential fines and claims by competition authorities and in civil litigation.

Willie Walsh, BA chief executive, said the breaches of the company's "clear and comprehensive" competition compliance policy were "deeply regrettable and completely unacceptable. . . It will not be tolerated at BA."

Separately, BA yesterday revealed aggressive plans to take advantage of the recently agreed US/EU open skies deal to liberalise transatlantic air services with the launch next summer of premium class services between the US, most probably New York, and some leading European cities in a direct challenge to its biggest rivals.

BA suffered a drop in profits last year and in particular in the final quarter from January to March, but forecast a big rise in profits this year and said that it was planning to make a dividend payment for the current year to March 2008 for the first time since 2000-01.

BA and several other carriers have been under investigation by the US justice department, the European Commission and the UK office of fair trading for alleged illegal price fixing of long-haul fuel surcharges levied on air cargo.

It has been undergoing a separate probe for alleged price fixing of fuel surcharges on passenger fares.

BA said it had "become apparent" that there had been breaches of the company's competition compliance policy "in relation to discussions about these surcharges with competitors". It said the investigations were continuing.

The £350 million provision was its "best estimate" of the amount needed to settle all competition authority and civil claims. - (Financial Times service)