Cathay Pacific Airways posted a bigger-than-expected 61 percent drop in 2011 net profit on Wednesday amid high fuel costs and a slowing global economy, and warned of a more challenging year ahead.
Global economic instability has continued in the first half of this year and jet fuel prices have risen further, Cathay, Hong Kong's largest carrier, said in a statement to the Hong Kong Stock Exchange.
"As a result, 2012 is looking even more challenging than 2011 and we are therefore cautious about prospects for this year," chairman Christopher Pratt said in the statement.
Cathay may see a softening in premium air passenger demand in the first half of 2012 before an improvement in air cargo demand in the second half, Nomura analyst Jim Wong said in a research note before the results.
He expected a recovery in Cathay's premium air passenger demand in 2013.
The notoriously cyclical global airline industry faces headwinds from high fuel prices and sluggish demand, particularly in the premium segment.
Cathay rival Singapore Airlines has cut cargo capacity and asked its pilots to take non-paid leave to counter the downturn.
Cathay, the world's largest air cargo carrier, reported an annual net profit of HKD$5.5 billion (USD$70.85 million), down from a record high of HKD$14.05 billion in 2010 which included HKD$3 billion of profit from the sale of its interests in two units.
The cost of fuel, which is Cathay's biggest single expense, rose 44 percent to HKD$12.46 billion in 2011, it said.
Air China, the country's flag carrier and 19 percent-owned by Cathay, contributed 31 percent of Cathay's consolidated profit before tax in 2011.
Combined passenger traffic of Cathay and its unit Dragonair grew just 2.9 percent last year to 27.6 million while cargo throughput dropped 8.6 percent to 1.65 million tonnes as demand for its key markets in China and Hong Kong slowed.
Cathay has a fleet of 132 aircraft and has 91 new aircraft due for delivery up to 2014 and beyond. Dragonair had 32 planes in operation by the end of 2011.