Shares in Britain's leading airlines crashed 25% today after Ryanair reported its worst-ever spring/summer trading and admitted it is likely to slump into the red this year.

Ryanair, Europe's largest budget carrier, reported an 85% slump in profits in the first quarter of its financial year to the end of June and admitted that, if the price of oil continues at or around the $130 a barrel level, full-year losses could be €60 million (£47 million).

Its shares, down 25% at one stage, were trading off 43 cents or 13% at €2.80. Shares in easyJet, which last week warned its profits this year will plummet 40%, fell 7% while British Airways was down another 11p at 235¾p.

With oil averaging $117 a barrel, nearly twice where it was a year ago, Ryanair profit margins, normally around 20%, have been slashed to 3%, giving it profits in the quarter of €21 million against €139 million last time.

The City was further spooked by the number of revisions to the airline's outlook since it reported its full-year figures less than two months ago. It had previously predicted it would break even even if oil averaged $130 a barrel.

It had also said it would raise air fares by 5% over the year to attempt to claw back some of the costs of kerosene. However, with recession looming in its two major markets of Britain and Ireland, it admitted fares are down by an average 8% this year so far, and are likely to fall 5% over the next year in a bid to keep people flying with Ryanair.

It had forecast 16% growth to 60 million passengers this year but, having decided to stand down about a fifth of its aircraft at Stansted and Dublin this winter, growth is being cut to 14% and it expects to carry 58 million passengers.

Analysts had thought that with the oil price at record levels, Ryanair would remain unhedged and chance the spot price.

Today the carrier said 90% of oil consumption in September had been forward-bought at $129 a barrel, while 80% of its needs from October through to the end of December had been bought at $124 - a decision made just as the oil price has fallen more than 10% from its record levels.

"We had to make a call," said Ryanair deputy chief executive Howard Millar on the oil hedges. "We have gone on our gut feeling, but it was right to take some risk off the table."

Ryanair chief executive Michael O'Leary is forecasting carnage in the industry over the coming months.

"The outlook remains poor," he said. "The market this winter will be heavily impacted by the timing and scale of EU airline bankruptcies and consolidation which are inevitable at these higher oil prices."