management economics

BA and virgin Atlantic price fixing .and apply game theory IntroductionThis article I analyze the price-fixing of the BA and Virgin Atlantic Airways, in the critical part, I use game theory to explain. Price fixing and apply game theory is very important for company. In the main part of my discussion of the three examples .The Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. The group of market makers involved in price fixing is sometimes referred to as a cartel.(For Wikipedia) Game theory is a method of studying strategic decision making. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.BodyThey Virgin is run by an entrepreneur, Richard Branson. He established his reputation and wealth through the Virgin music business which has now been sold. The airline started in 1984 with a solitary Boeing 747 on the New York to London route and by 1993 had expanded its fleet to 8, and had won landing slots at London Heathrow and extra slots into Tokyo. BA was unhelpful to Virgin denying it access to the Heathrow night flight simulator which it made readily available to a domestic competitor, British Midland. Following the take-over of British Caledonian, BA stopped their contract to service Virgin aircraft. ‘Treat others as you would like to be treated yourself.’(British Airways, Code of Business Conduct, 2010)BA staff in New York phoned Virgin passengers, often in their hotels at inconvenient hours, offering first class seats or Concorde seats instead of their flights with Virgin. Sometimes, they suggested that Virgin had difficulties and the passengers had to transfer. New Consumer, (2004). To do this BA staff posed as Virgin staff. In order to contact the passengers BA staff obtained illegal access to Virgin's passenger and loading information. Virginalso subsequently alleged that relevant internal BA documents had been shredded (Betts and Chassell, 2011).The case shows three points. British Airways fuel price-fixing trial collapses, British Airways and Virgin Atlantic are set to pay passengers £100million compensation after the firms were found guilty of fuel price-fixing. Any compensation paid out to the U.S. lawsuit will reportedly go into an account to be managed by an independent auditor. The level of compensation is said to be only one third of the fuel surcharge on each flight, which could see claimants receive only a few dollars each, with any unclaimed money given to charity.(From mail online)secondly, The EU said that the airlines ”co-ordinated their action on surcharges for fuel and security without discounts “between early 1999 and 2006. The taial of three ex-British Airways executives and one current employee on price-fixing charges has collapsed.the European Commission has fined 11 airlines almost 800m euros(690m pounds)for fixing the price of air cargo between 1999 and 2006. Devendra Kodwani, Lecturer in Finance at the OU´s Business School, explains the wider implications of price fixing with four British Airways executives due to appear in court on price-fixing charges.Are alleged to have colluded with their counterparts at Virgin Atlantic concerning fuel surcharges on long-haul flights. But with the trial being delayed, Devendra also explains what mechanics ofcorporate governance could have highlighted this kind of business practice.(From: /)The main issue here is the fact that anticompetitive practices have been entered into by both parties. The wider implications are not only the financial loss to passengers but also to the air cargo customers who would be mostly business enterprises using services of BA / Virgin Atlantic, causing an increase in the logistiical cost of shipping goods which will ultimately be passed on by businesses to its customers. The implications of unfair trade practices by airlines impact both the travelling passengers and ordinary consumers buying goods that are transported by airlines.() ConsolationBA winter schedule to Nigeria SHOULD NOT BE APPROVED until ARIK AIR's RIGHT under the BASA to land and take off to Abuja from heathrow is fully restored. Further, the FG should commence price fixing and manipulation by both BA and Virgin Atlantic on the LOS-LHR and ABV -LHR routes and they should be made to explain why thier tickets are some 30% cheaper in Ghana than in Nigeria! , then suspen Virgin flight into Nigeria and allow only BA 3 slots to Lagos only! If any body thinks Nigerians will be the ones to suffer I tell thats absolutely untrue! LOS - LHR is one of the most lucrative flight routes in the world and a big earner for BA especially during the winter, hence BA will be hit hard financially botj items of revenues and dues!Reference:/British Airways, Code of Business Conduct, 2010New Consumer, (2004). Spring, pp.4-8.Betts, P. and Cassell, M. (1993b). “Virgin’s honour remains intact...”. FinancialTimes, 12 January 2011。