The Sunderland-based group, which runs more than 6,500 buses in the UK, has a hedging policy protecting it from a "material" hit this year - but was silent over the potential impact on 2009's figures.

Its shares fell almost 5% as travel and transport stocks such as rival FirstGroup and budget airline easyJet were hit by oil prices surging towards 120 US dollars a barrel.

This came despite Arriva's comments on a "positive" outlook for 2008, and a "robust" balance sheet offering prospects of more investor returns following last year's dividend hike.

Arriva's policy is to hedge fuel costs up to 15 months in advance, leaving it exposed to the higher prices in the second half of next year. It has around 90% of its fuel consumption protected in 2008 at rates similar to last year, although only 50% is covered in 2009.

Last month the group posted a 7% increase in annual operating profits to £128 million, although the figure was impacted by fuel prices and the cost of bidding for three rail franchises.

In the latest update Arriva said revenues had grown more than 60% in the first three months of 2008 after further expansion of its European business and the recently-started CrossCountry rail franchise.

CrossCountry is the UK's most extensive franchise - stretching from Aberdeen to Penzance - and increased passenger revenues by 8.3% in the first three months of the year.

In January the firm hit passengers with a 4.8% increase in peak fares, with off-peak tickets rising by an average 7% - well above the rail industry average of 5.4%.

The group, which has around 40,000 employees in 10 countries, has also boosted revenues with acquisitions such as Heathrow-based bus and coach firm Tellings Golden Miller in January.