Cathay Pacific in profit warning

Cathay Pacific has been hit by slowing passenger demand

Shares in Hong Kong airline Cathay Pacific have dropped 14.3% after the airline issued a profit warning.

It said 2008's annual profits would be "disappointing" as revenue had begun to "weaken materially".

Revenue has been hit by the recent strength of the US dollar, and fewer first and business class passengers.

Cathay also said it was set to lose out on its fuel hedging contracts, which were deals it entered into to try to protect it from rising fuel prices.

However, the price of oil has fallen sharply in recent months.

The airline said that fuel hedging contracts that run to 2011 could cost it about 2.8bn Hong Kong dollars ($361m; £229m), although these losses may be reduced if fuel prices rise again.

Cathay's total fuel costs for 2008 are expected to be about HK$40bn.

In August, Cathay reported its first half-year loss for five years, and its shares are now down more than 50% this year.