Somehow, airline operators almost always find a way to make things worse for themselves. Many of these stocks have actually been doing okay, finally recovering from the bruising impact of higher oil prices. Now, though, word that British Airways (NYSE:BAB) is under investigation for price-fixing is stirring the pot once again.
Apparently in response to a tip from Virgin Atlantic, authorities in Britain and the United States are investigating British Airways, American Airlines (NYSE:AMR), and United Airlines (NASDAQ:UAUA) for possibly attempting to collude on fuel surcharges. It's very important to note, though, that it seems that American and United are only involved in the sense that government officials want information from them -- they do not appear to be targets at this time. It's also important to note that other operators, like Continental (NYSE:CAL) and Ryanair (NASDAQ:RYAAY), don't seem to be involved at all.
Fines for such a deed, if British Airways did indeed do something wrong, can be quite steep. What's more, it would also likely poison customers' attitudes toward airlines. Airlines are a weird business -- where else can you sit between two people who may have paid $200 more or $200 less, respectively, for their ticket than you? And while the traveling public has more or less swallowed the fuel surcharges, proof that one company was inflating them wouldn't do the innocent any favors.
I'm sure this will all eventually blow over. Even if British Airways is/was being naughty, why would very many Americans care? And while I suppose the temptations to boost revenue and profits through a little extra juice in the fuel surcharge might be real, I would really have to question the collective intelligence of company managers if they risked huge fines (and corporate reputation) to do it.
In the meantime, this is still an industry with an almost unbeatable track record of dismal performance and bad long-term returns to shareholders. There are a few airliners here and there worth a look, but Foolish investors may want to do extra-careful due diligence before buying into this sector.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
