Cathay Pacific Airways surprised the market with a net loss for the first half on Wednesday as high fuel prices and a one-off fine more than offset firm passenger demand.
Cathay, which owns regional carrier Dragonair and has an 18.1 percent stake in mainland carrier Air China, and other Asian airlines are struggling this year as high fuel costs and easing demand for first and business class travel eat into profits.
Last month Cathay issued a profit warning and said its average fuel price rose 60 percent in the first half from the same period last year.
On Wednesday, the firm said its total six month fuel bill rose 83 percent to HKD$19.31 billion (USD$2.47 billion), and fuel as a percentage of total operating costs reached 45.3 percent from 33.6 percent during the reporting period.
"Global aviation is making a painful adjustment to the new reality of USD$100-plus oil," Cathay chairman Christopher Pratt said in a statement.
"The industry will not survive in its current form," he added. "Cathay Pacific is reducing costs where it can but there is a limit to how much cost can be saved before quality and brand are compromised and the service proposition to the customer is changed beyond recognition."
Hong Kong's largest carrier posted a net loss of HKD$663 million (USD$84.95 million) for the January-June period, versus HKD$2.58 billion in profit a year earlier.
The results took into account a USD$60 million fine for cargo price-fixing charges leveled by the US Department of Justice.
In late July, Hong Kong's Civil Aviation Department said Cathay Pacific could increase fuel surcharges from HKD$171 to HKD$231 on short-haul flights and from HKD$710 to HKD$924 on long-haul flights.
Cathay's passenger revenues climbed 22.6 percent to roughly HKD$42.4 billion for the first half.
But analysts say slowing demand is also a major concern as companies suffer from US economic woes and cut back on travel budgets for traveling executives.
Cathay and Dragonair carried 12.5 million passengers in the first half, up 13.7 percent from the same period last year, although there was "softening" in first and business class demand.
Shares in Cathay tumbled 25 percent during the first half of 2008, lagging a 20.5 percent loss on Hong Kong's benchmark Hang Seng Index.
(Reuters)
Source: http://news.airwise.com/story/view/1218020516.html