Hong Kong's Cathay Pacific books H1 loss

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Gloom for the airline industry deepened on Wednesday as soaring fuel costs drove Hong Kong's Cathay Pacific to a first-half loss and Japan's two main carriers considered cutting routes.

Skyrocketing jet fuel prices have battered the airline industry, with carriers worldwide shedding thousands of jobs and scrapping routes as losses mount. Some have gone out of business, while others are threatened by insolvency.

"Global aviation is making a painful adjustment to the new reality of $100+ oil," Cathay Chairman Christopher Pratt said in a statement after the airline, usually among the world's most profitable, tumbled into the red.

The cost of jet fuel has jumped about 69 per cent over the last year to about $144 a barrel.

"The industry will not survive in its current form," Pratt added, a day after two big European carriers posted quarterly results that reflected the worsening operating environment.

"Cathay Pacific is reducing costs where it can, but there's a limit to how much cost can be saved before quality and brand are compromised and the service proposition to the customer is changed beyond recognition," Pratt said.

Cathay, which owns regional carrier Dragonair and has an 18.1 per cent stake in mainland carrier Air China, posted a January-June net loss of HK$663 million ($84.95 million) versus HK$2.58 billion in profit a year earlier. Three analysts polled by Reuters has predicted average profit of HK$913 million, while UBS had expected a HK$400 million loss.

Cathay said its total six-month fuel bill soared 83 per cent to HK$19.31 billion ($2.47 billion), and fuel as a per centage of total operating costs rose to 45.3 per cent from 33.6 per cent.

Higher fuel costs are prompting carriers to cut routes in a desperate attempt to protect their bottom line.

All Nippon Airways, Japan's second-largest airline, said it may cut services on about 10 domestic and international routes, while the Nikkei business daily said bigger rival Japan Airlines Corp planned to cut flights on 21 routes, including service to London.

Japan Airlines is due to report results on Thursday, and a spokesman declined to comment on the media report, saying any announcement on flight cuts would be made then.

The cuts could save Japan Airlines 12-13 billion yen ($111-$120 million) a year, the Nikkei said.

On Tuesday, Air France-KLM and Spain's Iberia reported quarterly results bruised by economic slowdown and higher fuel prices.