EasyJet has warned investors that its profits may be lower than expected this year, despite earlier more optimistic forecasts.

The shares plunged 16 per cent this morning to 315p.

The airline, one of Europe’s largest budget carriers, said that a potential £45 million rise in fuel costs could hit its full-year results.

Andy Harrison, chief executive, said the recent “unprecedented” rise in fuel prices, with oil over $110 a barrel this week, has hit the airline hard.

Its rival, Ryanair, has already warned that higher fuel prices may prompt a 50 per cent drop in its net income this year.

Mr Harrison has previously stated that easyJet was less vulnerable than Ryanair because its financial year starts in September rather than December, and it makes most of its profits in the summer. EasyJet has also hedged around half of its fuel needs for this summer at $750 per tonne, while Ryanair has not.

Mr Harrison said today: “Of course the price of fuel will hit all airlines and we remain convinced that the combination of our new fuel-efficient aircraft fleet, together with the proven strength of the easyJet business model, will mean that we shall emerge as winners in a high oil price environment.”

EasyJet said forward prices for fuel had risen from $840 per tonne to $1000 per tonne since February 7. It has not yet been able to pass the increased costs on to customers as it has to buy its fuel in advance.

The company said at its half-year results this morning: “It is unlikely such a large and immediate fuel increase could be mitigated in the short term by revenue improvements and cost actions, therefore pre-tax profits for the full year would be below previous guidance.”

The airline also said seat sales are slightly ahead of the same time last year. It expects to deliver first-half results in line with expectations.

Earlier this month easyJet revealed a 22 per cent rise in passenger numbers for February, mainly because of its £103 million acquisition of British Airways's low-cost carrier GB Airways.

It has been bullish as passenger numbers continued to rise, and forecast a 20 per cent increase in underlying pre-tax profits in the year to the end of September last month.

There is growing concern that budget airlines will lose out in a recession as consumers cut down on weekend breaks and holidays and fuel prices rise.

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