With recent spot prices for jet fuel almost double the average price paid last year, Hong Kong-based Cathay Pacific Airways warned Wednesday that its first-half and full-year profit would both be "disappointing."

Shares of Cathay Pacific Airways tumbled as much as 7.8%, to 13.70 Hong Kong dollars ($1.76), in afternoon trading on Wednesday in Hong Kong, before closing at 14.06 Hong Kong dollars ($1.80), down 5.4% from the previous trading day.

"Cathay Pacific's financial performance is being materially and adversely affected by the high price of jet fuel," read a company statement filed with the Hong Kong Stock Exchange after morning trading. The regional air carrier revealed that its fuel costs rose 60% from a year ago in the first half, while the most recent spot price of jet fuel was 93% higher than the average price paid last year. In view of the volatility of jet fuel prices, and the limited and uncertain extent to which these can be offset by fuel surcharges, Cathay Pacific said it is not possible to estimate accurately the effect of fuel costs on its 2008 earnings.

Cathay Pacific, Asia's third-largest airline by market value, saw its net profit leap by 72% in 2007, to 7.0 billion Hong Kong dollars ($897.4 million), on strong demand from first-class and business-class travelers. However, analysts expected the airline would have a significant profit drop this year because of the rocketing fuel costs. It was downgraded by various brokerage houses in June. Macquarie reiterated its "underperform" stance and a target price of 13.25 Hong Kong dollars ($1.70) on the stock, indicating that the carrier was exposed to price volatility because it had not increased its fuel hedging for 2008 and 2009.

Although Cathay Pacific raised its fuel surcharges by 70% in June, Credit Suisse has lowered its earnings forecast for 2008 and 2009 by 25% and 24%, respectively. The securities firm estimated that each $1 per barrel increase in fuel prices will lower 2008 net profits by 187 million Hong Kong dollars ($24.0 million), or 4%, assuming the fuel surcharge is not adjusted.

Crude oil rose above $142 a barrel in Asia on Wednesday, after an International Energy Agency report published Tuesday predicted that oil demand would rise the most in developing countries in Asia, the Middle East and Latin America over the next five years.