Cathay Pacific shares plummet after profits plunge

 
James Nickerson
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(FILES) This file photo dated 10 July 19
Cathay said it expects passenger yield to remain under pressure (Source: Getty)

Hong Kong carrier Cathay Pacific's shares dropped by more than seven per cent after a huge decline in first half profits.

The airline reported that its first half profits fell after losing out on its fuel hedging contracts, as well as increased competition.

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The company reported net income for the six months to June at KH$353m (£35m), compared to analysts' expectations of HK$1.07bn, and down 82.1 per cent from a year earlier. The company blamed fuel hedging losses that came in at HK$4.49bn.

Revenue also dropped 9.3 per cent to HK$45.68bn despite a 2.7 per cent uptick in passengers to 17.25m from a year earlier.

However, a slowdown in mainland China and economic uncertainty had also affected corporate travel and hit sales of premier class seats.

Read more: Capacity cuts help Cathay Pacific

"The operating environment in the first half of 2016 was affected by economic fragility and intense competition," the firm's chairman John Slosar said in the filing.

"The overall business outlook therefore remains challenging."

The company added: "We expect passenger yield to remain under pressure. Overcapacity and economic fragility will dampen cargo demand. Fuel prices have increased this year, but are still lower than in previous periods. The benefits from lower fuel prices will continue to be partially offset by losses on our fuel hedging contracts."

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