Hong Kong's Cathay Pacific Airways has reported a more than $1 billion net loss for 2008 as it booked sizeable losses from fuel-hedging contracts.
The Oneworld alliance carrier says in a stock exchange filing that it suffered a net loss of HK$8.55 billion ($1.1 billion) during the calendar year, compared to a net profit of HK$7.02 billion the year earlier.
The loss came despite 15% growth in turnover, to HK$86.5 billion, on the back of solid growth in passenger traffic, particularly in the first half.
Cathay says the net losses are largely the result of unrealised mark-to-market losses on fuel hedging contracts, of HK$7.6 billion, incurred after fuel prices fell in the second half.
It says the losses are for contracts covering the 2009-2011 period, adding that Air China, in which it has a minority stake, also booked fuel-hedging losses and a provision of HK$1 billion has been made to cover this.
"Although 2008 was a difficult year for the Cathay Pacific Group, there were many positive developments. These include the arrival of efficient new aircraft, an expansion of our passenger services and the continued rollout of innovative three-class cabins on our medium- and long-haul aircraft, which can now be found on 41 aircraft," says Cathay.
"However our business was deeply affected by the dual impact of high fuel prices in the first half and a marked contraction in the world economy thereafter."
Cathay has revised downwards its growth plans for 2009, adding that it "expects an extremely challenging year". Fuel-hedging losses of HK$1.9 billion have already been incurred this year, it says.
"Having made a painful adjustment to high fuel prices, the aviation industry now has to adjust to a severe economic downturn," it says.
"Passenger and cargo demand are expected to remain weak and, if fuel prices remain at their present levels, further losses on fuel hedging contracts will be incurred (although they will not be at the levels incurred in 2008 and the actual cost of fuel will be substantially lower than in 2008)."