Willie Walsh, the chief executive of British Airways, this morning announced an 88 per cent fall in pre-tax profits for the three months to June in what he described as "the worst trading environment the industry has ever faced".

He blamed mounting fuel costs, which have doubled in the past year and pushed costs up 49 per cent to £706 million for the quarter to June 30, 2008. Profit before tax was £37 million in the first quarter, down from £298 million in the same period last year. Revenue was up 2.8 per cent to £2.25 billion.

Mr Walsh said this morning: "We expect our fuel bill to top £3 billion this year - the equivalent of more than £8 million a day. The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits."

He said British Airways is well prepared and has adapted its plans in the event of further economic uncertainty. He pointed to a greater focus on cost control and a reduction in capacity in the airline's winter schedule.

Mr Walsh added that discussions regarding a merger with Iberia are under way, adding that the deal would lead to increased efficiencies and synergies.

"It will be several months before talks are finalised but we are confident of securing regulatory approval," said Mr Walsh.

British Airways said its financial position remained strong despite the weak quarter, with just under £2 billion in cash, up £91 million since March and net debt was £1.1 billion, £206m lower than at its year end.

The airline added that there had been more than six million passengers through Terminal 5 since March 27.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax