Cathay Pacific Airways, burnt by fuel hedging contracts, is expected to post a record loss for last year after posting a record profit in 2007.
The amount of red ink analysts expect ranges from HK$1.23 billion to HK$11.24 billion, according to Bloomberg, with the mean estimate for a loss of HK$7 billion to HK$8 billion.
The drastic change in Cathay's bottom line is unprecedented, reflecting the perfect storm that the carrier has run into during the past year.
Like most of its peers, Cathay Pacific was first hit by skyrocketing oil prices in the first half. Then the aviation industry fell into a tailspin from the financial crisis, which curtailed air traffic demand, especially in business and first class, which make up 8 per cent of total passengers but 15 to 20 per cent of revenue.
Cathay spoke of the impact on premium traffic in September, saying 15 of its top 20 corporate clients who usually travel in the front-end of the cabin are related to the financial sector. In addition to weakening business traffic, discretionary travel at Cathay also showed signs of softening. The combined passenger traffic figure fell for two out of the three months in the fourth quarter.
Carriers in the United States, where the crisis began, ironically are better cushioned from the downturn because most of them reduced capacity in the first half by grounding aircraft. That is because the average age of the US fleet is much older than that of Asian carriers and is more vulnerable to high oil prices.
Cathay Pacific, on the other hand, had not reined in its capacity until the end of last year. It said it would ground three cargo freighters and retire four classic freighters, Boeing 747-200Fs, this year. However, on the passenger side, it said in December that capacity would be at the same level as last year.
