Cathay Pacific Airways Ltd. racked up its first annual loss in 10 years yesterday as bad bets on jet fuel costs and plummeting demand due to the economic crisis took a toll on Asia's third-largest carrier.
Hong Kong's flagship airline reported a loss for the 12 months ended Dec. 31 of about US$8.6 billion Hong Kong dollars (US$1.1 billion).
"Having made a painful adjustment to high fuel prices, the aviation industry now has to adjust to a severe economic downturn," Cathay Chairman Christopher Pratt said in a statement. "Cathay Pacific expects an extremely challenging year in 2009."
The loss, far worse than expected, compared to a profit of HK$7 billion (US$900 million) for 2007 and was the airline's first annual red ink since the height of the Asian financial crisis in 1998. For all of 2008, revenue grew by about 15 percent to nearly HK$87 billion, the company said.
The market had expected a loss of HK$6.8 billion, according to analysts polled by Thomson Reuters.
Cathay has repeatedly warned its full-year results would disappoint. As with a number of airlines around the world, Cathay suffered massive losses from bad bets on contracts meant to hedge against a rise in jet fuel prices during the first half of 2008. Paper losses on hedge contracts running from 2009 to 2011 have surged to HK$7.6 billion, the company said.
The second half was equally turbulent as passenger demand fell off sharply amid the accelerating global slowdown.
Passenger traffic at Cathay and its subsidiary Dragonair climbed 7.3 percent to 25 million last year compared to the previous year. But cargo volumes slipped 1.6 percent.
To cope with the downturn, Cathay has previously announced plans to park two freighters, offer unpaid leave to employees and possibly delay construction on a cargo terminal to cut costs.
The company has said it will keep passenger growth flat in 2009 by scaling back services to North America and adding flights to Australia, the Middle East and Europe.
Deutsche Lufthansa AG, Germany's largest airline, reported yesterday a 65 percent drop in net profit in 2008 as the economic slowdown and higher fuel prices ate into its bottom line and it lacked the large one-time gains booked in 2007.
The Cologne-based airline said it made a net profit for the year of 599 million euros (US$755 million), compared with 1.7 billion euros in 2007. Profits in 2007 included 503 million euros from the company's sale of its stake in travel company Thomas Cook. Operating profits were also higher in 2007.
Revenues in 2008 were 14 percent higher. The company did not immediately release fourth quarter figures. It said the global economic slowdown has been particularly felt in its passenger and catering business segments.
"Fuel costs at record levels, strike-related losses and the decline in demand caused by the state of the world economy during the second half of the year, all had a negative effect on the result," in those segments, the company said.
Chief Executive Wolfgang Mayrhuber said the company is well equipped to cope with the global economic crisis, although the company statement said it's "not possible to forecast the duration and extent" of the downturn.
Irish airline Aer Lingus swung to an after-tax loss of 107.8 million euros (US$137 million) in 2008, it reported yesterday, and said it was unlikely to meet its previous forecast of a pre-tax profit in 2009.
The former state carrier also posted a 17.6 million euro operating loss, which it expects to increase in 2009 as passenger fares and cargo revenue fall.