BA is warning investors about the impact of rising costs

The airline expects a rise in revenue of 4%-4.5% to more than �9.1bn in the year to March 2009.

Fuel costs will rise by �450m to �2.5bn, a 20% increase, with non-fuel costs expected to be up by 3%-3.5%.

As a result, the airline is forecasting an operating margin of about 7% for the financial year 2008/09.

Gloomy picture

At close shares in the airline were down 7.55% or 20 pence to 245 pence.

"The outlook for next year is consistent with economic slowdown, the impact of increased fuel costs and one-off Terminal 5 transition costs," chief financial officer Keith Williams said.

Fuel will become our single largest cost next year Keith Williams, BA Check BA's share price

BA will move more than 90% of its Heathrow operations to Terminal 5.

With the price of oil now around the $100 mark, Mr Williams said: "That's going to have an impact ultimately on all of the industry... Fuel will become our single largest cost next year."

The much-anticipated downturn has begun, particularly in the US, he said, adding: "We're well placed to deal with a down-cycle. We're going into the downturn from a position of real financial strength."

Strike?

Earlier this week, British Airways said its passenger traffic rose 5.3% in February compared with a year earlier, helped by a 15.1% increase in business and first-class.

The airline is facing a possible pilot strike over staffing on BA's new transatlantic subsidiary Open Skies.

Balpa members have voted to strike over what they say are plans to operate BA Open Skies with crews on inferior terms to those of existing staff.

Such action would be the first for nearly 30 years, and both sides have agreed to take the matter to conciliation service Acas.