HOWZAT

Under powers assumed in 2002, the regulator can impose a fine of up to 10 per cent of a company's turnover if it is found guilty of breaking competition laws. Last year, BA reported a turnover of £8.5 billion.

The cartel investigation has no deadline and could drag on for months. Its duration depends on several factors including its complexity, the extent of subjects' co-operation and whether the airlines exercise their right to a defence.

A spokeswoman for the OFT told Times Online that it was conducting "both a criminal and civil investigation into alleged price co-ordination by airlines in relation to fuel surcharges for long haul passenger flights to and from the UK."

She added: "The OFT’s investigation is at an early stage. No assumption should be made that there has been an infringement of competition law. The OFT will not be in a position to conclude whether the law has in fact been infringed until it has completed its investigations and assessed the available evidence."

Peter Sherrard, head of communications at low-fare airline Ryanair - which like easyJet and other budget carriers does not levy a fuel surcharge - said: "It is about time that British Airways’ rapacious fuel surcharges were investigated.

"When British Airways collected more in fuel surcharges (£470 million) than its entire profit after tax last year something is clearly wrong."

Today's announcement comes four months after BA and many of the world’s biggest carriers became involved in a global investigation into the suspected price-fixing of cargo transport.

This probe centred on surcharges that airlines have imposed both for fuel and extra security since the September 11 hijackings. At the time, BA stated that it carries out all of its business in compliance with applicable competition law.

Last month BA, which is Europe's third largest carrier, announced better-than-expected annual profits of £620 million - up 21 per cent on the previous year, continuing a trend which a seen a revival in its fortunes since September 11. These came despite the rising fuel costs and industrial action at Heathrow over the summer.

The airline's short-haul business was returned to the black for the first time in a decade, resulting in a £48 million bonus for BA’s workers.

Willie Walsh, who took over as Chief Executive from Rod Eddington last year, has embarked on a cost-cutting drive which will result in the loss of up to 6,000 jobs in order to plug a pensions deficit and pay for the move to Heathrow's new Terminal Five.

BA shares dropped 4.8 per cent to 350 pence this morning against a rise of 1.3 per cent across the FTSE 100 index.

"The market is only going on the headlines," one dealer told Reuters. "It could well be that there is no case to answer and there is no negative impact."

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