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Cathay Pacific flies into big loss

CATHAY Pacific Airways Ltd, Hong Kong's biggest carrier, will delay taking new planes and review all routes after slumping to its first loss in 10 years.

"The aviation industry is in crisis," Chairman Christopher Pratt told reporters yesterday. "We must carefully and realistically review all the options open to us." He didn't say how many additional aircraft may be delayed.

The carrier has already drawn up plans to return planes to lessors, offered staff unpaid leave and postponed a new cargo terminal to weather slowing demand amid the recession.

The airline posted an HK$8.56-billion (US$1.1 billion) loss last year, its first since the 1998 Asian financial crisis, after reporting HK$7.6 billion in paper fuel-hedging losses.

"No matter how much you save, it's useless if there's no demand," said Jim Wong, a Hong Kong-based analyst at Nomura International Ltd. Still, "last year's earnings weren't that bad." Cathay Pacific rose 5.9 percent, the most in two weeks, to HK$7.41 yesterday, after 2008 sales rose a better-than-expected 15 percent. The net loss, which was in line with analyst estimates, included the hedging losses and a HK$468-million charge for a price-fixing fine in the United States, Bloomberg News said.

Excluding those two items, last year's "earnings were close to break-even levels," said Jack Xu, a Shanghai-based Sinopac Securities Co analyst. "Cathay may be able to turn profitable in 2009."

The carrier, which scrapped its final dividend, made a HK$1-billion provision for expected fourth-quarter losses at affiliate Air China Ltd in its 2008 results.

Cathay Pacific had 10 planes for delivery this year, including one to be leased by unit Hong Kong Dragon Airlines.


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