"Everyone on board was killed. The authorities are investigating the incident," the carrier, state-owned AZAL, said in a faxed statement.

The plane, a Ukrainian-made Antonov An-140, crashed shortly after taking off from Baku late on Friday en route to the oil town of Aktau, across the Caspian Sea in Kazakhstan, AZAL said.

"Five minutes after take-off the plane disappeared from the radar," AZAL said.

Azerbaijani President Ilham Aliyev visited the crash site and ordered a speedy investigation, the semi-official ATV channel reported.

British citizen James Hardy and Australian Dexter Allen were among those killed in the crash, the British embassy in Baku told AFP.

Ten of the 18 passengers were Azerbaijani and four were Kazakhs. The two other passengers were from Georgia and Turkey and all five crewmembers were Azerbaijani.

Television footage showed fragments of the plane both on land and in the sea, and it appeared that part of the airplane struck a building that was under construction, knocking down a wall.

The body of one man, wearing only underwear, was shown floating in the water shortly after the crash as investigators and medical teams picked through the debris and retrieved bodies.

Authorities announced that they had formed a special investigation commission but an official from the prosecutor's office said it was too early to determine the cause of the accident.

"Fragments of the plane and the 'black box' have not been studied yet," Deputy Prosecutor General Rustam Usubov told the official AZTV network. The black box, an onboard automatic recording device, had not been recovered as of Saturday afternoon.

The Antonov was one of four new Ukrainian turbo-props AZAL purchased for 36.5 million dollars in late 2004 and the start of 2005.

The plane crashed near the town of Nardaran, about 40km north of Baku, the site of an important Shiite shrine which thousands of pilgrims from around the Shiite world visit every year.

Flights between Azerbaijan and Kazakhstan have increased over the last decade as both former Soviet republics assert themselves as burgeoning Caspian energy exporters.

Services between Baku and Aktau, Kazakhstan's oil capital, are often used by Western and local oil executives.

It was not immediately clear if anyone aboard the flight was from an oil company.

More than 50 people died when one of AZAL's Tu-134 Russian airliners crashed during an internal flight in 1995. In 2002 a Ukrainian-owned An-140 crashed in Iran killing 45.