Cathay Pacific has posted its first back-to-back annual loss since the carrier was founded in 1946.
The Hong Kong-based airline blamed intense competition from low-cost Chinese carriers and higher fuel prices, among other issues.
Losses came to HK$1.26 billion (£115 million) for the year to December on top of a loss of HK$575 million in 2016 – its first deficit in eight years.
Cathay is part way through a three-year cost cutting initiative.
Chairman John Slosar said: “Overcapacity in passenger markets led to intense competition with other airlines and continued pressure on yields on many of our key routes. Fuel prices were higher, but fuel hedging losses reduced.
“As the year progressed we began to see positive results from our transformation programme and our business also benefited from a strong cargo business, a weaker US dollar, and improved premium class passenger demand.”
He added: “Congestion at Hong Kong International airport and air traffic control constraints in the Greater China region continued to impose costs on the Group. We are doing more to improve the reliability of our operations.”
Looking forward, Slosar said: “Our priorities for 2018 are our transformation programme, changing the way that we work so as to better contain costs which will strengthen our passenger business further.
“We are confident of a successful outcome from these efforts. We also look to benefit from a slowing of the decline in passenger yields as global economic conditions improve.
“Increased fuel costs are increasing operating costs and adversely affecting results. Fuel hedging losses are declining.”
Cathay Pacific is to start flights to Barcelona next month, Dublin in June and Washington DC in September.
Slosar said: “We are improving our competitive position by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft.
“We have improved productivity and efficiency and at the same time we are improving our already high customer service standards.
“We are proud of the quality, dedication and professionalism of our people. They have my utmost respect and I would like to thank them for their hard work and commitment during a period of uncertainty.
“Difficult but necessary decisions have been made. We are acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses. We believe we are on track to achieve strong and sustainable long-term performance.
“Our commitment to Hong Kong and its people remains unwavering, as has been the case over more than 70 years.
“We will continue to make strategic investments to develop and strengthen Hong Kong’s position as Asia’s largest and most popular international aviation hub.”