HONGKONG Dragon Airlines has finally paid off the hundreds of millions of dollars in losses it accumulated during its start-up years. The seven-year-old airline is now said to be making significant profits, but just how much is a closely guarded secret of the privately owned company. Dragonair is poised for a period of strong growth with a new fleet of aircraft, the first of which arrived earlier this week. Its biggest constraint now is not money, but congestion at Kai Tak airport, which is expected to be operating at capacity by 1995. This is likely to limit Dragonair's expansion plans. The quicker Hongkong's new airport at Chek Lap Kok is opened the better as far as Dragonair is concerned. The airline's fortunes have been completely turned round since Cathay Pacific and its parent company, Swire Pacific, bought a 35 per cent stake in the then-troubled airline in January 1990 from the Chao family, which had acquired Sir Y.K. Pao's equity stake in 1989. CITIC Pacific, which already had a 12.5 per cent stake in Cathay, acquired a 38 per cent share. At the same time, Cathay took over the airline's management on a 15-year contract. (There have since been some further adjustments in shareholdings. CITIC now owns 46 per cent, Cathay and Swire jointly own 43 per cent, the Chao family six per cent and other shareholders five per cent.) Better results were seen almost immediately, and in 1990 the airline managed to make a profit. Admittedly it was only $10 million, but it was the turning point. While some of the losses from the early days can be attributed to the massive start-up costs, Dragonair's frequently changing strategy has also been blamed. Mr Simon Heale, Dragonair's chief operating officer on secondment from Cathay, said the owners had found it more difficult than expected to get landing slots around the region. Flights were cancelled at short notice and morale suffered. ''Now we are a scheduled operator, and travel agents and customers know if they book on to a flight we will deliver,'' said Mr Heale. ''People believe in us now and trust us. They take us seriously.'' When Cathay and CITIC got involved, Dragonair was granted permission to begin operating in China - an expanding market with huge potential. Savings were immediately made by closing down Dragonair's own aircraft engineering operations and cargo business. Then, just when times were looking brighter, came the Gulf War, which increased fuel costs and caused a slump in passenger travel worldwide. The hostilities held back Dragonair's recovery for a while. The closing of Dragonair's facilities was enough to stem the losses but not sufficient to provide any real profit. Great efforts have since been made to improve the marketing and sales side of the business, and this seems to being paying off. A strong commitment has been shown to Dragonair's future by its new owners. While CITIC has been using its might to lobby hard on Dragonair's behalf for extra traffic rights in China, Swire has been using its blue-chip status to get new planes through the International Lease Finance Corp (ILFC). Dragonair is taking delivery of six new Airbus A320-168s this year on lease through ILFC to replace its ageing fleet of Boeing 737s. It has also options on four more A320 or the larger A321s. In addition, the airline will be getting a second TriStar through its sister airline Cathay to operate on longer routes.