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British Airways must face flyers' U.S. lawsuit over fuel surcharges

By Jonathan Stempel

NEW YORK, Nov 8 (Reuters) - A U.S. judge has rejected British Airways Plc's bid to dismiss a lawsuit by frequent flyers who accused the carrier of imposing bogus fuel surcharges on rewards flights.

The carrier, a unit of International Airlines Group , had argued that federal regulations pre-empted the lawsuit, and that the flyers failed to plausibly allege that the surcharges were not based on fuel costs.

In a decision made public on Friday, U.S. District Judge Raymond Dearie in Brooklyn, New York, said the plaintiffs offered sufficient support for their claims that the surcharges were not "reasonably related to or based upon" fuel costs. He did not rule on the merits of the case.

The case was brought last Nov. 9 by four members of British Airways' frequent flyer program, Executive Club.

Members accumulate points known as Avios that can be redeemed for plane tickets.

The plaintiffs said British Airways saw the fuel surcharges as a means to boost revenue, and charge frequent flyers hundreds of dollars on each "free" reward ticket.

In letting the case proceed, Dearie cited a statistical analysis from the flyers that suggested that British Airways' fuel surcharges from 2007 to 2012 "bore little relationship to - and were not based upon - changes in the price of fuel."

British Airways had countered with its own analysis showing a correlation between fuel surcharges and oil prices.

Dearie also cited a suggestion that the carrier does not view surcharges as a hedge against variable fuel costs, and an allegation that one plaintiff paid a surcharge on a first class ticket to London's Heathrow Airport that exceeded the cost of an economy class ticket on the same flight.

A spokeswoman for British Airways said the carrier does not discuss litigation matters.

David Stellings, a partner at Lieff Cabraser Heimann & Bernstein representing the frequent flyers, in an e-mail called the decision "an important step forward" for customers, and said the case will move into discovery.

Earlier on Friday, International Airlines Group said its third-quarter profit more than doubled, helped by improved results at Spanish carrier Iberia.

The case is Dover et al v. British Airways Plc (UK), U.S. District Court, Eastern District of New York, No. 12-05567.