Hong Kong Aircraft Engineering Co (Haeco) has forecast another fall in profit for the year to December, with no clear sign of a recovery in market rates for aircraft maintenance. The heavy maintenance company said while the outlook remained bleak after three consecutive years of declining profit, the industry's downturn appeared to be easing slightly as worldwide selling rates for aircraft maintenance stabilised. Haeco, which performs all aircraft maintenance for Cathay Pacific Airways and Hong Kong Dragon Airlines, yesterday reported a 2.6 per cent increase in attributable first-half earnings, to $178.8 million from $174.2 million. Excluding a $17 million exceptional loss in the period last year, core earnings fell 6.5 per cent from the already bleak 1995 first half. Chairman David Turnbull, also a deputy managing director of Cathay, said he expected results for the full year would be slightly lower than those of 1995. A positive factor was that, during the first half, there had been no further deterioration in the company's operating environment. The heavy maintenance industry worldwide has suffered in the past few years from tough competition, reducing rates to unprofitable levels. Haeco has been particularly hard hit in the past three years because Hong Kong's high inflation rate makes it difficult for it to compete internationally. As a result of its performance, the company will be deleted from the Hang Seng Index from August 30. First half net operating profit fell to $210.8 million from $218.8 million, although turnover was up 11.5 per cent to $1.18 billion from $1.17 billion. Dividend per share was unchanged at 26 cents while earnings per share increased to 97 cents from 94 cents, although excluding last year's exceptional it fell from $1.03. Mr Turnbull said the company had made internal progress on some fronts, including an improvement in productivity, but said Hong Kong's high inflation rate was still hurting and further productivity boosts were being looked for during the second half. Contributions from associates fell in the first half as a result of initial losses on the start-up of a Xiamen-based maintenance centre, Taikoo Aircraft Engineering Co. 'While the company's cost base continues to be adversely affected by the impact of Hong Kong inflation, this has been offset to some extent by productivity improvements,' Mr Turnbull said. Analysts had generally predicted an even greater fall in core earnings for the first half and were 'pleasantly surprised' by the result, one said.