Cathay Pacific has failed to rule out cutting jobs after reporting a record loss of HK$8.56 billion last year amid a deepening crisis in the aviation industry.
Much of the loss was due to fuel hedging by the airline after oil prices rose to record levels last year and subsequently fell. Despite the setback, Cathay's shares closed 5.86 per cent higher, at HK$7.41 yesterday as investors took heart from the company saying that it currently had no fund-raising plans.
Cathay says it will have to pay US$1.4 billion to settle outstanding fuel hedging contracts in the next three years if oil prices stay at current levels of about US$45 a barrel.
The result is a dramatic change of fortunes for the carrier, which reported a record profit of HK$7.02 billion in 2007. Cathay, along with its rivals, is feeling the pain not only of slowing global demand but of wrong-way bets on fuel prices.
After watching oil prices reach record levels in 2008, Cathay and many other airlines locked themselves into fuel contracts on the expectation that oil prices would continue to rise. But oil fell, leaving Cathay with HK$7.6 billion mark-to-market losses on those contracts.
The airline's net loss is 25 per cent worse than the median estimate of HK$6.81 billion from 18 analysts polled by Thomson Reuters. No final dividend was declared.
Cathay chairman Christopher Pratt said yesterday: 'The aviation industry is in crisis and many of our regional competitors are receiving overt government support. Cathay Pacific does not [receive support] and must survive on its own resources.'
