BRITISH Airways last night warned that high oil prices would cost it an extra £150m this year.

The airline, which last week raised prices by £5 for a return trip to cover rising fuel costs, yesterday posted a 70 per cent rise in annual profits.

It said it expected revenues to increase by up to three per cent in the current financial year.

Pre-tax profits of £230m for the 12 months to March 31 were higher than expected in the City, while BA reported strong progress in its drive to cut costs.

Annual savings of £869m had been delivered by its Future Size and Shape strategy, compared with a target of £650m, mainly through the loss of 13,082 jobs.

Despite the improved profits performance, BA revealed a number of key markets remained under pressure and it would not be paying a final dividend to shareholders.

The airline has been affected during the past year by concerns about terrorism, with the cancellation of a number of transatlantic flights.

BA said that long-haul volumes were recovering steadily, but short-haul demand in the premium sector remained weak.

It said that volumes were expected to rise in the current financial year as confidence returned to the industry. The size of BA's fleet was cut from 330 aircraft to 291 during the year, with planes being used more often on short-haul routes.

Chief executive Rod Eddington said employee costs would remain under review as the company sought to make further savings.

''We are working with the unions and workforce to find acceptable ways to reduce staff costs and that is ongoing,'' he said.