THE Cathay Pacific Group reported a profit of HK$2.8 billion ($359 million) for the first six months of 2011 compared to HK$6.8 billion ($872 million) in the first half of 2010. Earnings per share fell by 58.9 per cent and turnover for the period rose by 13.2 per cent to HK$46,7 billion ($602 million). The passenger businesses of both Cathay Pacific and Dragonair performed well, with strong demand for premium class travel despite economic uncertainty in some of the world’s major economies. The cargo business performed reasonably in the first quarter of the year but was appreciably weaker in the second quarter. Increased jet fuel prices had a significant effect on operating results in the first half of 2011. Fuel is the group’s biggest single cost and during the period fuel costs rose by 49.5 per cent compared to the same period in 2010. Managing the risk associated with fuel prices is a key objective and the group has a robust fuel hedging programme in place. Passenger revenue for the period was HK$31.7 billion ($4 billion) – an increase of 15.9 per cent compared to the same period in 2010. Capacity increased by 9.8 per cent and the two airlines carried a total of 13.2 million passengers, a rise of 1.7 per cent on 2010. The load factor fell by 4.7 percentage points while yield increased by 11.8 per cent. Load factors in economy class remained high, particularly on the North American and Southeast Asian routes, while demand for premium class travel remained strong and yields continued to increase. However, the earthquake and tsunami in Japan in March resulted in a significant reduction in demand in one of the group’s most important markets. By June there was some recovery on the Japan routes, though volumes remain well below those achieved before the earthquake and tsunami. The Cathay Pacific and Dragonair cargo business performed reasonably in the first quarter of 2011, though demand out of its two most important markets, Hong Kong and Mainland China, weakened significantly from April onwards. The group took delivery of six new aircraft in the first half of 2011 with a further eight scheduled in the second half of the year. In March Cathay Pacific announced its intention to acquire another 27 new aircraft – two Airbus A350-900s, 15 Airbus A330-300s and 10 Boeing 777-300ERs. In August, Cathay Pacific announced a further acquisition of four Boeing 777-300ERs and eight Boeing 777-200F freighters. The delivery of the airline’s new Boeing 747-8F freighters has been further delayed. Two are now scheduled to arrive in September 2011, with three more before the end of the year. However, the delivery schedule is still subject to final confirmation. Cathay Pacific started flying to Abu Dhabi in June and will launch a Chicago service in September, with frequencies increased to Milan, Paris, New York, Toronto and a number of Southeast Asian routes. Dragonair increased frequencies to a number of cities in Mainland China.