British Airways is being investigated by the Office of Fair Trading (OFT) and the US Department of Justice over a suspected fare-fixing cartel with rival airlines.

The allegations relate to the fuel surcharge on long-haul flights, which Britain's flagship airline has increased seven times in two years. BA passengers now pay a £35 fuel tax on top of the price of a single long-haul ticket.

Investigators will examine whether sections of the industry might be colluding to inflate this charge, which the airlines have always argued was introduced to keep pace with rising oil costs.

BA, which is Europe's third largest airline, confirmed today that it is assisting the OFT and the Justice Department with the investigation. In a short statement, the carrier insisted that it conducts its business in "full compliance with all applicable competition laws".

Two senior executives - Martin George, commercial director, and Iain Burns, communications chief - have been given "leave of absence".

The names of the other airlines involved in the investigation have not been released. One industry analyst suggested however that it appeared to be the lucrative London to New York route that was being examined.

Mark Thompson, an analyst at Morgan Stanley, said: "The probe seems to be on the transatlantic route where there are four carriers from London Heathrow to New York JFK."

Both BA and Virgin have raised the surcharge for a one-way longhaul flight from £2.50 to £35 since May 2004, at a time when the cost of oil has doubled from $35 to $70 a barrel.

A spokesman for Sir Richard Branson’s airline, Virgin Atlantic Airways, said: "We cannot confirm that we are one of the airlines under investigation but we can say that we are assisting the Office of Fair Trading and the United States Department of Justice with their inquiries."

In the US, American Airlines and United Airlines both charge a corresponding levy, according to the most recent figures published on their websites.

American Airlines said today that it had received a US federal grand jury subpoena in connection with the probe but had been told that it was "not a target of the investigation". United Airlines said that it was cooperating with authorities but declined to comment further.

Other airlines - including Delta, bmi, Continental Airlines, Lufthansa, Finnair, KLM, Icelandair and SAS - said they were not being investigated.

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