Cathay Pacific suffered a loss of HK$2.05 billion (US$262 million) in the first half of 2017.

The poor result, which compares to a HK$353m profit in the same period last year, was attributed to fierce competition, currency issues and rising fuel costs.

The group’s passenger revenue declined 3.9% in the January-June 2017 period, despite a 1.1% increase in seat capacity. The group’s average load factor remained strong at 84.7%, but its yield fell by 5.2% to 51.5 Hong Kong cents, which Cathay said is due to “intense competition in all classes”.

Fuel costs surged 33.4% year-on-year, which reflects a 31.5% increase in fuel prices and a 1.6% rise in consumption. Fuel accounted for 30.4% of the group’s total operating costs in the first half.

“Fundamental structural changes within the airline industry continue to affect the operating environment for our airlines and created difficult operating conditions in the first half of 2017. Intense competition with other airlines was the most significant,” the airline said in a statement.

Congestion at Hong Kong International Airport and air traffic control constraints in Greater China was also blamed for the airline’s rising costs. Despite these issues, Cathay said that its three-year corporate transformation programme to reduce costs and improve performance is working.

“The objective is a long-term sustainable recovery in revenues and financial performance, in which we compete successfully in an industry that is undergoing fundamental structural changes. Through the transformation, Cathay Pacific is intended to emerge as a leaner, more agile and more profitable airline that responds to changing market trends and customer preferences,” Cathay said.

Looking ahead, Cathay Pacific chairman John Slosar that he does not expect any improvement in the operating environment in the second half of 2017. Although he is hopeful that the airline’s turnaround plan will have a positive effect.

“We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018,” Slosar commented.