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Cathay Pacific says its first half losses hit US$85 million

Hong Kong airline Cathay Pacific said yesterday it had tumbled to a loss of HK$663 million (US$85 million) in the first half of the year because of soaring fuel prices.

The figure is 125.7 percent lower than the profit of HK$2.58 billion over the same period last year, Cathay said in a statement.

The airline blamed the result on high jet fuel costs, which overshadowed a 22.6 percent rise in turnover to HK$42.45 billion following a significant increase in both passenger and cargo revenue.

“Global aviation is making a painful adjustment to the new reality of US$100-plus oil,” Cathay chairman Christopher Pratt said in the statement.

“Cathay Pacific is reducing other costs where it can, but there is a limit to how much cost can be saved before quality and brand are compromised,” he said.

FUEL COSTS

Fuel accounted for 45.3 percent of total operating costs for the first half against 33.6 percent over the same period last year, and Pratt said fuel surcharges approved by Hong Kong regulators fell far short of the higher bill.

The airline said it had also made a provision in its interim results for a US$60 million fine it has agreed to pay following a sweeping probe by US regulators into air cargo price fixing by a number of carriers.

Cathay’s results follow warnings by analysts that high oil prices have sparked the biggest crisis in the Asian airline industry for years, with weaker carriers at risk of going under.

Upstart Hong Kong-based budget carrier Oasis has already folded this year, while other regional airlines have cut flights or closed routes in a desperate scramble to pare down costs.

Crude oil prices hit record highs above US$147 per barrel last month, but have since fallen sharply to below US$120, although they remain high by recent standards.

JAPANESE CARRIERS

Separately, major Japanese carriers Japan Airlines (JAL) and All Nippon Airways (ANA) will slash domestic and international flights because of the higher fuel costs, a report said yesterday.

JAL, Asia’s largest carrier, will scrap 12 domestic and five international routes by next March, including one between western Japan’s Kansai airport and London, the Nikkei Shimbun economic daily said.

The other international routes to be abolished include links between Kansai and Chinese and South Korean cities, the daily said without citing its sources.

JAL will also reduce flights on four domestic routes, it said.

The measures are expected to reduce costs by between ¥12 billion and ¥13 billion (US$111 million and US$120 million) a year, it said.
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