British Airways has blamed the ‘worst trading environment ever’ for an 88 per cent drop in profits for the three months until the end of June.

The carrier reported a pre-tax profit of £37m for the period, compared with £298m during the same quarter last year.

Chief executive Willie Walsh said fuel costs had gone up 49 per cent and it was now spending the equivalent of £8m per day on fuel. It is cutting its winter capacity by 3.1 per cent to reduce costs.

“We are in the worst trading environment the industry has ever faced,” said Walsh. “The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits.

“Fuel prices have doubled in the past year. A successful hedging programme mitigated the impact but nevertheless fuel costs at £706m were up £233m in the first quarter. We expect our fuel bill to top £3bn this year �" the equivalent of more than £8m every day.”

However, Walsh said BA was well prepared for the downturn and was focussing on controlling costs.

BA revealed that more than six million passengers have gone through Terminal 5 since its opening in March and merger talks with Iberia are still under way.