Fags'n'ash Friday hits airlines and supermarkets

The Icelandic ash plume could cost airlines £100m, while OFT fines stores £225m for tobacco price-fixing.

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Last Updated: 06 Nov 2012

Those pesky Icelanders, we want their cash, not their ash. The four-mile high plume of volcanic ash billowing from the Eyjafjallajokull (hopefully we’ve spelled that right) volcano, which has resulted in the closure of all British airspace, might continue for another five days, say experts.

In  the meantime, consumer watchdog the OFT has fined a number of retailers (and two tobacco companies) a total of £225m for fixing the price of cigarettes and other tobacco products. Oh, the hidden perils of smoking. 

It’s the biggest total fine ever imposed by the OFT, and the brunt of its retail impact will be born by Asda and The Co-op, hit to the tune of  £14m each.

Other stores also fined are the now-defunct off license group First Quench, Morrisons, One Stop Stores, Safeway, Shell, Somerfield and TM Retail. Sainsbury’s has escaped censure by dint of being the one which alerted the OFT to the goings-on in the first place.

But the largest fines of all are dished out to Imperial Tobacco and Gallaher, a whopping £112, 332, 495 and £50,379,754 respectively. The fins related to a activities between 2001 and 2003, where Imperial and Gallaher made arrangements with retailers to link the prices of their goods to those of their competitors, and vice versa, thus limiting their chances of being outpriced by cheaper brands.

The OFT was not happy about this at all. Senior director of goods Simon Williams said ‘Practices such as these, which restrict the ability of retailers to set their resale prices for competing brands independently, are unlawful. They can lead to reduced competition and ultimately disadvantage consumers.’

The fines seem to have had little impact on the share prices of either Gallaher or Imperial, perhaps because the investigation has been ongoing for some seven years so isn’t much of a surprise.

Back up in the air, or rather down on the tarmac, the fallout from another kind of smoking is making itself felt. That cloud of highly-abrasive volcanic ash has caused the grounding or all commercial flights into and out of the UK for another day, and may continue through the weekend. As if airlines didn’t have enough to worry about at the moment.

Predictably, economists eager for a bit of publicity have been plucking numbers out of the (con-trail free) air as to how much it could all cost. Current favourite guesstimate is £100m, suspiciously exactly the same number cited for the last time anything similar happened. Back in 1989, the eruption of an Alaskan volcano badly disrupted US airspace for a few days, at an estimated cost of, you guessed it, £100m.

Whatever the true figure, it’s bad news for anyone trying to enter or leave the UK at the moment, and the longer it goes on the worse things will get.  Let’s hope that the eruption stops, or the wind changes direction – and soon.

 

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