CATHAY PACIFIC 1986 PROFIT SEEN ABOVE TARGET

  Buoyed by low fuel prices and
  favourable currency factors, Cathay Pacific Airways Ltd's
  &lt;CAPH.HK> 1986 profits are expected to surpass the airline's
  forecast of one billion H.K. Dlrs, stock analysts said.
      Analysts said they expect the airline to show net earnings
  of between 1.1 billion and 1.25 billion dlrs when it reports
  results tomorrow for its first year as a public company.
      Cathay, 51 pct owned by Swire Pacific Ltd &lt;SWPC.HK>, made
  its earnings forecast in the prospectus for its flotation in
  May last year.
      Cathay is expected to pay a 13-cent final dividend, making
  a total of 19 cents for the year, as forecast in the
  prospectus, analysts polled by Reuters said.
      They said the airline's performance improved in the second
  half of the year after it reported interim profits of 503 mln
  dlrs.
      The weakness of the local currency, pegged at 7.80 to one
  U.S. Dollar, and low fuel prices moved further in the company's
  favour from the assumptions made in the prospectus at the time
  of the flotation, James Capel (Far East) Ltd said.
      James Capel estimates average fuel prices for the airline
  industry in 1986 at 63 U.S. Cents per gallon, 27 pct below the
  1985 level. It said a one pct movement in fuel prices would
  affect Cathay's net profits by 10 mln dlrs and forecast profits
  of 1.25 billion dlrs.
       Analysts said the company's estimates of fuel price and
  currency movements set out in its prospectus were conservative.
      "This is reflected in their interim results which showed
  that profit margin has increased," said Frederick Tsang of
  Mansion House Securities (F.E.) Ltd.
      Cathay's six-month turnover rose 19.8 pct from year-earlier
  levels, but profits rose 69 pct.
      The rise in oil prices in late 1986 had little impact on
  the company's fuel oil bill last year, as aviation fuel prices
  usually lag behind crude price movements by several months,
  analysts said.
      By last September the yen had risen some 54 pct against the
  Hong Kong dollar from the end of 1985, the mark 43 pct and
  sterling 12 pct.
      "Overall the weakness of the Hong Kong dollar against
  Cathay's major trading currencies helped push passenger yields
  in the first half up 7.2 pct," said James Capel. "This should
  continue through the second half to enable passenger yields to
  end the year up 7.6 pct."
      A strong performance from the 2.9 billion dlrs in cash
  under management also improved profits, James Capel said.
      A general improvement in air traffic last year contributed
  to Cathay's revenue increase, but the company's load factor
  declined because of increased competition and an expansion of
  its fleet and services.
      James Capel estimated Cathay's passenger-kilometres flown
  last year rose six pct from 1985 and freight-kilometres flown
  climbed 17 pct, though the airline's load factor probably fell
  to 68.8 pct from 70 pct.
      "Cathay added new planes, and was forced to fly some routes
  last year because of the threat of competition from Dragon Air,"
  said Tsang. "This affected its load factor."
      Fear of possible competition from fledgling carrier &lt;Hong
  Kong Dragon Airways Ltd> may have contributed to Cathay's
  decision to resume service to New Zealand last year, analysts
  said.
  

