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Cathay Pacific Airline Sees 2005 Profits Dive


Hong Kong's Cathay Pacific airline has reported lower profit than expected for last year and the United States and Malaysia are in talks about a free-trade agreement.

Cathay Pacific, Asia's second largest airline, said its profit fell 25 percent to $425 million last year.

The drop was mainly caused by higher fuel prices, which prevented the airline from turning a strong growth in passenger numbers into a bigger profit.

Higher fuel costs have affected the profitability of the whole aviation sector. Peter Williamson, airlines analyst at Macquarie Securities in Hong Kong, believes earnings of Asian airlines will continue to be low.

"They are putting through fuel surcharge to claw back some of the impact of the higher fuel price, but it's not enough to counterbalance the notional increase of fuel, so they'll all be suffering at the hands of fuel, primarily, this year," said Williamson.

The former chief executive of Singapore office of China Aviation Oil has said he will plead guilty to some of the charges related to the jet-fuel supplier's near collapse two years ago. The charges against Chen Juilin include fraud, insider trading, and failing to disclose the company's losses.

The fuel trader sought court protection from creditors in 2004 after revealing speculative trading losses of $550 million that had been concealed from investors.

China Aviation Oil's fall was the biggest financial scandal in Singapore since 1995, when Nick Leeson's trading losses caused the collapse of Britain's Barings Bank.

The United States has begun free-trade negotiations with Malaysia, its 10th biggest trading partner.

Washington is increasingly trying to tear down trade barriers for its goods in Asia.

The U.S. already has a free-trade pact with Singapore and is negotiating similar agreements with Thailand and South Korea.

The road to free-trade talks with Malaysia opened up after the country lifted its ban on U.S. beef imports last week. The ban had been in place since 2003 after a cow in the U.S. was found to have mad cow disease.

Sri Lanka aims to attract a record $1 billion in foreign direct investment this year, three times as much as foreign-owned companies invested in the country last year.

To help meet the target, the government has raised the minimum investment level to $250,000 from $50,000.

The biggest single investment in Sri Lanka this year is a $450 million coal-fired power plant, which will be built by India's National Thermal Power Corporation.

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