[R]1:00PM New York - Cathay Pacific Airways 2007 profit jumps 72% and predicts tough 2008.

Revenue Review

Cathay Pacific Airways, the flagship Hong Kong airline reported Wednesday fiscal 2007 revenue climbed 24% to HK$75.35 billion from HK$60.78 billion a year before, boosted by higher passenger demand, especially in China.

The airline said passenger revenue rose 17% to HK$39.29 billion. In the year Cathay Pacific carried 17.8 million passengers, up 6.2% from prior year.

Including Dragonair, which focuses on mainland China, Cathay Pacific carried 23.35 million passengers in 2007, up 28.5% from prior year, first consolidated earnings since its acquisition in September 2006. Cathay, with the inclusion of Dragonair, now serves 25 destination compared to two.

Cargo division revenue gained 10% to HK$13.18 billion. The airline freighted 1,353,000 tons of cargo in 2007, but weak demand out of Europe and Asia plus stiffer competition led to a 7.7% decline in cargo yield to HK$1.56.

Earnings Review

Cathay Pacific said net profit for the year rocketed 72% to a record HK$7.02 billion compared with HK$4.08 billion in 2006. Profits from associate companies surged to HK$1.06 billion from HK$301 million a year earlier, especially from Air China in which Cathay holds 18% stake.

The profit beat estimates of HK$5.9 billion to HK$6.06 billion, according to analysts surveyed by Thomson Financial.

In 2007, earnings gained 53.8% to 178.3 cents against 115.9 cents posted in 2006. Dividend remained unchanged at 84 cents per share.

A weaker dollar also helped the record profit increase, said Cathay Pacific, but higher fuel costs narrowed earnings growth.

Its fuel bill for 2007 rose 21.8% to HK$24.62 billion and surcharge fuel charges only helped to reduce extra costs, partially. Fuel expenses accounted for at least 31% of group net operating costs.

On the international market, crude oil prices have touched record levels at over US$102 per barrel, up 15% from 2007.

Cathay Pacific charged a total HK$7.7 billion to travellers in 2007, trying to recoup costs on higher fuel prices, where on average it paid US$91 per barrel, 6.5% higher than 2006.

Business Review

Capacity, measured in terms of available seat kilometres, rose by 3.9% as new aircraft arrived and services on key routes were strengthened in the second half of the year.

Cathay Pacific and Dragonair added 12 new aircraft to their fleet last year, including the first five of 30 Boeing 777-300ERs the airline has on firm order. The new aircraft, which are likely to form core fleet of Cathay Pacific''s long-haul travel, were used to add a second daily non-stop flight to New York.

New daily services were also added to Melbourne and San Francisco, with flights also added to Adelaide, Frankfurt, Paris, Perth, Tokyo, Toronto and Vancouver. In addition, there were seven new destinations to the network in 2007 through code-share arrangements with Dragonair.

In the year, Dragonair saw a total of six new destinations – Busan, Fukuoka, Kathmandu, Phuket, Sendai and Taichung – added to its network while frequencies to a number of secondary mainland destinations were strengthened. Connection times at Hong Kong International Airport were also improved, giving a boost to Hong Kong''s position as a leading international aviation hub.

On the product side, Cathay Pacific began rolling out its new three-class long-haul in-flight product, which features first class suites, full-flat beds with enhanced privacy in business class and unique economy class seats that recline within their own shell.