Cathay Pacific posted a loss of HK$2.05 billion (£204 million) in the six months to the end of June, its worst first-half net deficit for at least two decades.
The Hong Kong-based airline group made a profit of HK$353 million in the same period a year earlier.
Passenger revenues in the first half of 2017 fell by 3.9% to HK$32.1 billion and yield dropped by 5.2% to HK51.5 cents.
Cathay Pacific is facing “intense” competition from state-backed Chinese airlines and rising fuel costs.
The group is undergoing a major three-year cost-cutting shake-up, aimed at a “long term sustainable recovery in revenues and financial performance”.
But chairman John Slosar warned: “We do not expect the operating environment in the second half of 2017 to improve materially.
“In particular, the passenger business will continue to be affected by strong competition from other airlines and our results are expected to be adversely affected by higher fuel prices and our fuel hedging positions.
“However, the outlook for the cargo business is good and we expect robust demand and growth in cargo capacity, yield and load factor in the second half of this year.
“We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.”
He added: “We are addressing the industry challenges through our corporate transformation and by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft.
“This will help us to increase productivity and to reduce costs while improving the quality of our services to customers. We continue to enhance our high standards of customer service and are proud of the quality, dedication and professionalism of our staff.
“The new management team is acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses, delivering more to customers with improved productivity.
“We are confident that we are on the right track to achieve strong and sustainable long-term performance, with a leaner, more competitive business, while enhancing the brand and the quality of services that our customers deserve and expect.
“These services are always delivered by our people, who remain dedicated in these volatile times. I would like to thank them for their hard work and commitment.
“Our commitment to Hong Kong and its people remains unwavering and we will continue to make strategic investments to develop and strengthen Hong Kong’s position as Asia’s largest international aviation hub.”
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