Hong Kong airline says global economic slump and euzozone crisis also hitting passenger numbers and air cargo demand

Cathay Pacific Airways fell into the red in the first half of the year because of persistently high fuel prices, the global economic slump and weak air cargo demand, the company has said.

Hong Kong’s biggest airline, which blames jet fuel prices for significantly affecting profitability, is fighting back by upgrading its fleet, confirming that it has added 10 more Airbus A350 jets to a previous order and is converting 16 others into larger models.

The company said Europe’s economic instability was having a big effect on its passenger and cargo services, while revenue from many other international routes was also under pressure because of increased competition.

The Asian carrier is the latest in a string of global airline companies to report poor results.

“Cathay Pacific’s core business was significantly affected by the persistently high price of jet fuel, passenger yields coming under pressure and weak air cargo demand,” its chairman, Cristopher Pratt, said. “These factors are common to the aviation industry as a whole. Airlines around the world are being adversely affected by the current business environment.”

Cathay posted a loss of HK$935m (£77m) or 23.8 Hong Kong cents a share for the first six months of 2012. That was down from a profit of HK$2.8bn, or 71.4 cents a share, last year.

Revenue for the period rose by 4.4% to HK$48.4bn.

The airline had warned in May that first half results would be disappointing and that it would respond to the challenges by freezing staff numbers and allowing cabin crew to take unpaid leave.

Cathay is also modernising its fleet by replacing older, fuel-thirsty jets with newer, more efficient ones. It confirmed plans announced in July to upgrade an existing Airbus order for 30 aircraft, adding 10 Airbus A350-1000 jets worth $3.3bn (£2.1bn) to the deal. It is also converting 16 other jets that were part of the original order to larger A350-1000 models, adding £706m to the list price.

The airline said, however, that it was paying less than the list price because it was getting a significant discount from Airbus. It is common practice for manufacturers to give airlines discounts, and the final selling price for aircraft is rarely disclosed.