Hong Kong's Cathay Pacific posts 1st annual loss since 2008, shares drop

Brenda Goh

* Posts net loss of $575 mln vs $6 bln profit in 2015

* Revenue down 9.4 percent at HK$92.75 billion

* Says 2017 outlook remains challenging

* Cathay shares drop almost 5 percent

(Adds comment, revenue, other details)

SHANGHAI, March 15 (Reuters) - Cathay Pacific Airways

on Wednesday reported its first full-year loss since

the 2008 global financial crisis, dragged down by overcapacity,

a strong Hong Kong dollar and mounting competition from mainland

Chinese carriers.

Shares of Hong Kong's flag carrier fell almost 5 percent

after the news. Cathay had warned its results for the second

half of 2016 would be weak as it battles falling demand for

premium class seats on long-haul routes. It now expects the

outlook to remain challenging in 2017 as the headwinds continue.

Acknowledging the competitive landscape, Cathay recently

undertook what was the biggest review of its business in two

decades and said it would cut jobs and consider shifting some

flights to its short-haul arm as part of a three year

programme.

For 2016, the Hong Kong carrier posted a net loss of HK$575

million ($74.01 million), versus a profit of HK$6 billion a year

ago. This is only the third time the company has posted a

full-year loss since it was founded in 1946.

The results fell significantly short of an average estimate

for a net income of HK$384.86 million from 13 analysts polled by

Thomson Reuters. Thomson Reuters Starmine SmartEstimate had

forecast a much lower profit of HK$27.10 million.

"The operating environment for our airlines was difficult in

2016, with a number of factors adversely affecting their

performance. Intense and increasing competition with other

airlines was the most important," Chairman John Slosar said. "We

expect the operating environment in 2017 to remain challenging."

Group revenue dipped more than 9 percent to HK$92.75

billion, while passenger yields - which refers to the average

fare paid per mile per customer - tumbled 9.2 percent to $0.54.

Yield on cargo services fell 16.3 percent.

The airline said it would not pay a second interim dividend,

slashing its dividend per share for the full year by 90.6

percent to HK$0.05.

Cathay has typically held up its premium service as its

calling card, but business has faltered with state-backed

mainland Chinese and Gulf carriers as well as budget airlines

luring away passengers with cheaper fares.

The Hong Kong airline has also failed to reap the full

benefit of low fuel costs brought on by weak crude oil prices

due to hedges put in place when prices were much higher.

Cathay said it planned to cut costs in the long term by

buying new and more fuel-efficient aircraft, while continuing to

grow passenger capacity by 4-5 percent annually to meet strong

growth in demand from the Asia Pacific region.

Shares in Cathay, which have recovered slightly from a

7-year-low hit in October after the company warned of weak

results, were down 4.5 percent at HK$11.08 by 0528 GMT on

Wednesday. The Hang Seng Index was mostly unchanged.

($1 = 7.7689 Hong Kong dollars)

(Reporting by Brenda Goh; Editing by Himani Sarkar)