British Airways yesterday unveiled record pre-tax profits but warnedits fuel bill could soar by £1bn this year if oil prices remained at current all-time highs.

The airline spent £2.1bn on fuel during the past year, more than a quarter of its total costs.

Pre-tax profits rose 45% to £883m. The results gave the airline its widest-ever operating margin of 10%, leading it to pay out its first dividend to shareholders since the September 11 terrorist attacks and triggering a multi-million-pound bonus pool for its staff.

But despite the doubling in the price of oil to the $115 mark during its last financial year, fuel and oil costs were just 6.4% higher over the period.

That is mainly down to the airline's hedging operations - or the bulk buying of fuel in advance at agreed prices. It has allowed BA to buy well over half of this year's fuel needs at prices between $82 and $90 a barrel.

With crude currently costing $125 a barrel, the non-hedged exposure leaves the airline facing a huge hit if the prices do not fall back.

BA said: "Based on the current market price for oil of $120 per barrel, our total fuel costs would rise by around £1bn this financial year."

Back in March, the airline was forecasting a £450m hit for the current year based on an $85 price.

The carrier, which uses approximately six million tonnes of jet fuel a year, also said it takes a £16m profit hit for every one dollar rise in oil prices.

For its first quarter this year, to June 30, 70% of fuel has been bought at $82. Three quarters has been acquired at $86 for the second quarter, with 60% at $86 for the third and 55% at $90 for the final quarter.

The company said it would return £58m, paying 5p per share.