Cathay Pacific shares plunge after profit warning

Shares in Cathay Pacific Airways Ltd. plummeted Thursday after Asia's third-largest carrier warned that full-year profit would be "disappointing" due to slumping revenue and losses from hedging its jet fuel costs.

Hong Kong's flagship airline lost 15.6 percent to 7.96 Hong Kong dollars in afternoon trade on the territory's stock exchange. Its shares are down more than 50 percent for the year.

Revenue has started to "weaken materially" as the U.S. dollar strengthens and demand from first-class and business-class travelers falls amid a slowing world economy, Cathay said in a statement Wednesday after the stock market closed. Cargo volumes have declined as well, and corporate travel is a "concern."

Fuel hedging contracts that run through 2011 were costing the carrier an estimated HK$2.8 billion ($359 million) as of Oct. 31, though the losses hadn't been realized and could be lower should fuel prices rise again.

The bets were originally placed to protect against surging oil prices earlier this year. The company's jet fuel costs are expected to be about HK$40 billion ($5.1 billion) in 2008.

The company posted a HK$663 million ($85 million) loss in the first six months of this year because of mounting jet fuel costs — the first half-year loss in nearly five years. Average fuel costs for the first half were 60 percent above those a year earlier.

The number of passengers for Cathay Pacific and subsidiary airline Dragonair combined dropped from 2.13 million passengers in August to 1.88 million passengers in September. Passengers in September were down 0.7 percent from a year earlier.

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Associated Press

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