RISING oil prices have been blamed for a £4m fall in profits at budget airline easyJet.

The carrier said it expected pre-tax profits of at least £52m this year if global oil prices ease slightly and the pound stays reasonably strong against the US dollar.

The airline said it had limited the cost of 55 per cent of its fuel supplies for the second half to $301-a-tonne.

But it said fuel prices continued to be a concern, with the average fuel price in the first two months of the second half standing at $360-a-tonne before hedging.

"If this price continues, our results would be adversely affected by approximately £4m at current exchange rates," the company said.

The fall in profits echoed that of its rival airline Ryanair, which last week posted its first fall in profits since 1989. Ryanair said pre-tax profits in the year to March 31 were down to £152.1m from £176.1m the year before.

Despite this, passenger numbers reached an all-time high.

Easyjet also said the number of customers flying with the airline had risen by 19 per cent last month to 2,092,709 from 1,759,659 in the same month last year, while revenues had increased by 24 per cent to £1.015bn.

The airline said demand for low cost travel remained strong, but pricing remained unpredictable because of competition.

The company said it had the financial strength to defend its market position, despite arranging funding for 82 new aircraft in the next three to four years.

EasyJet said it would continue to expand its network, maintain its market-leading position and maximise cost efficiency through economies.

The company also said it would increase capacity by 20 per cent this year, although it said it was reviewing how to use its capacity for the 2005 financial year.

Last week, easyJet announced another tender to choose low cost airports for the next stage of its expansion.

It also said it made history when every passenger on one of its flights checked themselves and their baggage in using self-check-in kiosks.

It said the 16 Airbus A319 jets that it has so far received had helped it to achieve excellent punctuality levels in the past few months. Another seven will be delivered in this financial year.

Chief executive Ray Webster said the increasingly competitive nature of the European airline market was continuing.

"While this may have a bearing on the growth in our profits this year, it will ensure sound medium and long-term growth for easyJet in a market place where there will be fewer carriers," he said.