Cathay Pacific expects disappointing 2008 results

Cathay Pacific expects disappointing 2008 results

Cathay Pacific Airways has said it expects “disappointing” 2008 results from weak passenger revenue and substantial losses from fuel hedging contracts.

The Hong Kong based airline said yesterday the recent decline in fuel prices has resulted in HK$2.8 billion (£227.6m) in mark-to market losses on its fuel hedging contracts.

The loss amounts to about 40 per cent of its 2007 net profit of HK7.02 billion (£570.7m), but the actual loss for this year will depend on the movement of fuel prices.

“Corporate travel volumes in all classes are of concern as corporate clients begin to impose stricter travel polices on their employees,” Cathay Pacific said.

The company reported a first-half net loss of HK$663 million (£53.9m), its first since 2003, compared with a net profit of HK$2.58 bn (£209.7m) a year earlier.

But despite fears of a global recession next year, analysts said they expect Cathay Pacific to benefit from a sustained decrease in fuel prices and improved demand for passenger services to China.

UBS analyst Damien Horth said he believes Cathay Pacific’s acquisition of China-focused Hong Kong Dragon Airlines in 2006 has “materially improved the competitive position of the Hong Kong hub, relative to previous downturns”.