EasyJet today finally admitted it has been caught in the slipstream of a soaring oil price and will follow rivals Ryanair and British Airways with a dive in profits this year.

The budget airline, dominant at Gatwick and Luton airports, issued a profit warning indicating the cost of airline fuel will eat significantly into its earnings, which will now miss previous forecasts by a mile.

It had been insisting since last autumn and through a tough winter for the industry that profits in its current financial year to the end of September would be around 20% higher than last year's £191 million.

But today it said record prices for kerosene are likely to add £45 million to its fuel bill in the second half of the year.

City analysts are now expected to cut their profits forecasts for the airline this year to around £185 million, a fifth lower than previous expectations and a fall in earnings of 3.5% year on year.

EasyJet shares have plunged by more than 40% since full-year results in November.

The carrier's decision to come clean follows Ryanair's warning last month that its profits could halve in 2008 and British Airways' announcement that it had been forced to abandon its 10% profit margin target and that earnings would plunge 25% or around £235 million in 2008-9.

EasyJet said 40% of its fuel needs for the summer have been forward bought at $750 per tonne but warned prices on the spot market have risen from $840 per tonne to $1000 in the last six weeks.