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. Last Updated: 07/27/2016

Cathay Back to Profitability Despite Costs of Pilot Feud

HONG KONG -- Cathay Pacific Airways said it swung back to profitability in the first half of the year, although its results were hit hard by a dispute with pilots that cost 500 million Hong Kong dollars ($64 million).

Cathay said Wednesday it earned 108 million Hong Kong dollars in the six months ending June 30. That profit compared with a loss of 175 million Hong Kong dollars during the same period last year.

First-half revenues rose 1.4 percent to 13.7 billion Hong Kong dollars ($1.7 billion).

"We are pleased that we have been able to return to profitability after facing extremely challenging conditions throughout 1998," Cathay's chairman, James Hughes-Hallett, said.

Although Cathay saw its fortunes improve in several markets, including the United States, Indonesia, Korea and the Philippines, average fares remained weak, Hughes-Hallett said.

Hughes-Hallett noted that a January agreement with Cathay's flight attendants to fly more hours in exchange for a pay increase has boosted productivity and placed the company "on a much better footing" against its rivals.

A deal with the airline's pilots June 10 also boosted Cathay's competitiveness, Hughes-Hallett said. The pilots agreed to take an average 8 percent in pay cuts in exchange for stock options.

But before the pilots went along with the deal, they staged a sickout that grounded hundreds of flights and hit Cathay revenues hard. Cathay had not announced the cost of the dispute until Wednesday.

Hughes-Hallett said operating costs were expected to go down in the second half of this year, a sentiment echoed by many analysts.

"There is a genuine recovery going on in the air travel business in Asia," said analyst Wendy Wong at investment bank Merrill Lynch. "If it continues, Cathay should do pretty well."

Cathay released its results after the stock market closed. But its shares had risen nearly 2.8 percent on the day, after falling 7 percent earlier in the week.