Cathay Pacific Airways Ltd., Asia’s largest international airline by passengers, said its performance in the first half of 2016 was “below expectations” as growth in the number of fliers failed to keep pace with an increase in capacity.

The combined passenger load factor for Cathay Pacific and unit Dragonair fell by 1.7 percentage points to 85.5 percent in the period, the Hong Kong-based carrier said in a statement to the city’s stock exchange. While the capacity increased 4.2 percent, the growth in passenger traffic was 2.7 percent, it said.

“Our performance over the first six months of 2016 has been below expectations,” Chief Executive Officer Ivan Chu said in the statement after trading hours. “Passenger revenue has been adversely affected by the reduced load factor and intense pressure on yield. Cargo tonnage has stabilized but yield continues to decline.”

The emergence of mainland Chinese carriers and many regional budget airlines are hurting premium operators such as Cathay Pacific and Singapore Airlines Ltd. A rebound in crude oil prices this year may also weigh on earnings. Cathay Pacific reported net income that almost doubled in 2015, aided by a drop in fuel costs.

“The major risk, which is not shown in the figures, is the yield,” said Kelvin Lau, an analyst at Daiwa Capital Markets Hong Kong Ltd. “So far, the comments from the last few months have been consistently talking about pressure on yield, both front- and back-end,” he said, adding the passenger load of 85.5 percent “isn’t too bad.”

Chu also said “foreign currency movements have been adverse,” without elaborating.

Cathay Pacific shares rose almost 2 percent to HK$12.56 on Monday. They have dropped 4.4 percent this year, versus a 0.5 percent decline in the Hang Seng Index.

To contact the reporter on this story: Crystal Tse in Hong Kong at ctse44@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Sam Nagarajan

©2016 Bloomberg L.P. This article was written by Crystal Tse from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: Cathay Pacific Airways is having a challenging first half of business in 2016 due to lower than expected passenger numbers and rising fuel prices. Cathay Pacific Airways