'It is the intention that ordinary dividends should be paid generally in the proportion of one-third for the first interim and two-thirds for the second interim,' the company said in a filing to the Hong Kong exchange yesterday. 'The higher increase in the dividend in the first half reflects an adjustment in this regard and shareholders therefore should not expect a similar increase in the second interim dividend.'

The second half is expected to be challenging, said Christopher Pratt, chairman of Haeco.

Although demand for airframe maintenance and line maintenance in Hong Kong remains firm, the outlook for the company's mainland operations is weak.

Joint ventures on the mainland are expected to continue to be affected by higher staffing costs and fierce competition, he said.

Demand for line maintenance and airframe maintenance operations in Chek Lap Kok was strong, despite a decline in demand from cargo flights.

Haeco's mainland offshoot, Taikoo (Xiamen) Aircraft Engineering Co (Taeco), was adversely affected by higher operating costs, mark-to-market losses on forward foreign-exchange contracts and a slight reduction in demand for its airframe maintenance services.

The profit from Taeco attributable to the company plunged 41 per cent year-on-year to HK$46 million in the period. Hong Kong operations held up quite well, posting a 4 per cent increase in net profit to HK$203 million.

Demand for line maintenance at Taeco's operations in Xiamen, Beijing and Tianjin was strong in the first half.

The joint venture between Taeco and Shanghai Foreign Aviation Service Corp at Pudong International Airport saw aircraft movements per day increasing 33 per cent in the first half.

In May, a line maintenance station was opened in Chongqing.

Shares in the company edged up 0.1 per cent to close at HK$103.8 yesterday.

26%

Haeco's board of directors declared an interim dividend of 88 HK cents per share - an increase from last year of this much