Cathay Pacific Airways is expected to post a record net loss of US$1.03 billion for 2008, hit by mark-to-market fuel hedging losses, analysts say, adding that lower fuel prices may not offset the decline in traffic income, The Standard reported.

"Apart from the US$979.6 million unrealized fuel hedging loss, Cathay said in a profit warning in January that its earnings may be further affected by potential provision against the five aircraft it tried to dispose of," said Paul Dewberry, an analyst at Merrill Lynch Research.

"In addition, its 18 percent stake in Air China, which is recorded at HK$9.5 billion, is now only worth HK$4.6 billion, while the HK$7.5 billion in Dragonair goodwill may also be at risk," said Dewberry.

"A big loss is widely expected which actually helps Cathay to have a clean start. We think Cathay could potentially break even in 2009," said a Credit Suisse spokesperson.

"The drop in traffic demand may be faster than the falling speed of fuel cost," said Jim Wong, an analyst at Nomura.

The previous time Cathay recorded a net loss was in the first half of 2003, because of the SARS epidemic.

Photograph: Cathay Pacific fleet in March 2005. Photo by CARNOC.com message board member - Celestar.