Cathay faces $1bn fuel deal loss

Slowing passenger demand has added to Cathay's woes

Shares in Hong Kong airline Cathay Pacific have dropped sharply after it warned it could lose almost $1bn after misjudging the direction of fuel costs.

The projected losses on fuel contracts that run until 2011 are almost three times as big as it had previously said.

Like many other carriers, Cathay entered hedging deals to try to protect it from rising fuel prices.

However, the price of oil has fallen sharply in recent months, meaning carriers have lost out.

The potential losses of 7.6bn Hong Kong dollars ($980m; £653m) would be lower if fuel prices rose again, Cathay said.

Its shares fell by more than 5% on the announcement, which also reiterated a 2008 profits warning issued in November.

Cathay said that revenue had begun to "weaken materially" because of the recent strength of the US dollar, and because of fewer first and business class passengers.