Cathay Pacific suffered millions of dollars in losses from fuel-hedges in the past two years. With the city’s government adding new fees on passengers to fund building a runway, the carrier faces more challenges to retain profit margins. The charges to fund the expansion of the Chek Lap Kok airport follows the city government banning from February fuel surcharges airlines could levy after crude oil prices tumbled to as low as $26 a barrel. The measures threaten to further depress ticket prices and yields as the company fights to prevent passengers from switching to Chinese and Middle Eastern airlines that are expanding rapidly in the region. CEO Ivan Chu, who will detail H1 results Wednesday, has already warned the aggressive capacity injection by his rivals is putting "intense pressure" on the metric, a sentiment also shared by Singapore Airline. “There has been substantial capacity increase from Chinese carriers,” said K. Ajith, an analyst at UOB Kay Hian Pte in Singapore. “Cathay has to lower fares to make it more attractive for people to come to Hong Kong and that’s hurting yields.” Cathay may report net income fell 46% to HK$1.07b ($138m) in H1, according to the median estimate in a Bloomberg News survey of four analysts. Cathay and its unit Dragonair carried 2.7% more passengers in the first seven months of this year, taking the number to 20.3m, the airline said Monday. Traffic during the period rose 2.6% from a year ago, while capacity increased 4%.<br/>