Soaring fuel costs have seen Hong Kong's Cathay Pacific to its first interim loss in five years.
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 to a six-month loss for the first time since the Severe Acute Respiratory Syndrome (SARS) virus wrought havoc on Asia's aviation industry in 2003.
The cost of jet fuel has jumped about 69 per cent in a year to about $144 a barrel, and Cathay said its six-month fuel bill soared 83 per cent to almost $2.5 billion, accounting for 45.3 per cent of total operating costs, up from 33.6 percent.
"The industry will not survive in its current form," Mr 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," Mr 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 had predicted average profit of HK$913 million, while UBS had expected a HK$400 million loss.
The results included a $60 million fine for cargo price-fixing charges leveled by the US Department of Justice.
Analysts and fund managers say that although oil prices have eased in recent ITV predicts ad slowdown weeks airlines still need to restructure their costs to fight price volatility.
"Because the cost of oil is beyond your control, you have to focus on other cost elements, which is the key thing to do right now," said Christopher Wong of Aberdeen International Fund Managers Ltd.