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Cathay posts biggest ever loss
HONG KONG, China (CNN) -- Cathay Pacific has posted its biggest ever loss as it totals the financial cost of SARS and the Iraq war to its bottom line. The airline lost US$160 million in its first half in line with forecasts, compared to a profit of $180 million made a year ago. Shares in the airline dipped only 0.45 percent lower to HK$10.95. The broader market lost almost 2 percent. The airline -- one of Asia's biggest carriers -- says it does expect a rebound in the second half. The SARS outbreak and the war in Iraq brought much of the global airline industry to its knees, forcing layoffs and flight cancellations. In a memo leaked to the media at the height of the SARS crisis in April, Cathay revealed that with many passengers foregoing travel, the carrier was hemorrhaging some $3 million a day in losses. "They grounded 45% of their fleet at the worst point. It was by far the most aggressive response to SARS," Peter Hilton of Credit Suisse First Boston told CNN. "Things have improved better than expected but it was quite possible SARS would linger for many months more than it did." The carrier is still taking some hard knocks. Two months after SARS abated, Cathay says it is ferrying 15,000 passengers daily, only half its pre SARS load. Still, analysts say the jumbo carrier is turning things around.
"They're reporting significant loss but we've seen a very good recovery in demand from the business traveller and that's high yield," Hilton says. "Passenger travel on the leisure market is coming back more slowly but discounts offered, response is much better than expected. "Even Cathay expects to have its flight pretty much back in the air at the end of next month. And I suspect airlines in general will be reducing the level of discounts over the next month or so," Hilton adds. Cathay has other factors in its favor -- the expected opening up of individual travel instead of just group travel between China and Hong Kong, a steady freight business and a pent up demand. Abacus International, the largest ticketing and reservation group in the region owned by Asia's major airlines including Cathay, says passengers are returning to the skies. "We are seeing in Asia Pacific that medium/ long term trend in travel is 4 - 5 % growth year on year," Abacus CEO Don Birch told CNN. "Airlines are returning to full capacity. It means that recovery is sustained, which then becomes the engine going forward" Analysts say the September 11 terror attacks were a dry run for the carrier, preparing it to deal with the onslaught of SARS. Cathay has learned some hard lessons in cutting costs and in spite of huge losses, analysts say recovery could come sooner rather than later. -- CNN Correspondent Jill Neubronner contributed to this report.
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