Fuel prices guzzle Cathay Pacific net

CATHAY Pacific Airways Ltd, Hong Kong’s biggest carrier, reported a larger-than-expected 38 percent decline in second-half profit because of record jet fuel prices. The stock fell by the most in more than four months.

Net income dropped to HK$1.63 billion (US$210 million) from HK$2.65 billion a year earlier, less than the HK$2.01 billion median forecast in a Bloomberg survey of 10 analysts. Sales rose 17 percent to HK$27 billion.

The earnings decline at Cathay Pacific, which posted record passenger and cargo volumes in 2005, highlights the strain on Asian airlines caused by last year’s 49 percent surge in jet fuel prices. Chief Executive Officer Philip Chen’s attempt to halt the slump failed, even as he doubled hedging to 30 percent of fuel purchases and raised surcharges four times.

“The airline probably didn’t expect such high volatility in fuel prices,” said Samson Man, Core Pacific-Yamaichi International Hong Kong Ltd’s analyst. “We’re likely to see oil prices remain high this year, but with less volatility.”

Bloomberg