Cathay Pacific's profit dives 61% in 2011

Hong Kong Cathay Pacific Airways, Hong Kong's biggest airline, said Wednesday that profit fell 61 per cent last year, hurt by persistently high jet fuel prices and weakness in the world's major economies.Cathay said high prices for jet fuel — its biggest expense at more than 40 per cent of total costs — had a "significant effect" on operating results. Fuel costs rose by HK$12.5 billion, or 44 per cent, in 2011 from the year before, reflecting both higher jet fuel prices, which rose to an average of $130 a barrel, and that it flew more routes. The airline managed to offset some of that with a HK$1.8 billion profit from fuel hedging contracts, which cover about 20 per cent of its fuel costs. "We worry about high oil prices," said Pratt. "Any increase in the cost of fuel eats into our profitability in a very, very direct way." Cathay executives said fuel prices have risen further but said that deliveries of new, more efficient aircraft over the next few years will help bring down the fuel bill. The airline warned of a challenging outlook for 2012 as it posted a profit of HK$5.5 billion (Dh2.60 million) for 2011, down from 2010's record HK$14 billion. The 2010 profit which was boosted by some one-time gains. Earnings per share fell to HK$1.40 from HK$3.57. A "double whammy" of steep fuel prices and slumping cargo demand hit profits, Chairman Christopher Pratt said. He said 2012 is "looking even more challenging" than 2011 because of uncertainties, including weakness in Europe and the United States, an unsettled Middle East and a forecast slowdown in China.