Cathay Pacific Airways has swung back into profit in the first half of the year despite a three-week pilots' strike which cost the airline an estimated $500 million. f Attributable profit for the six months to June 30 was $108 million, compared with a $175 million net loss for the same period last year. The airline's full-year loss last year was $542 million. Cathay Pacific chairman James Hughes-Hallett yesterday said: 'We are pleased that we have been able to return to profitability after facing extremely challenging conditions throughout 1998.' Partly responsible for the carrier's return to profit was a $322 million exceptional gain realised from the sale of its stake in Equant, an airline data communication network. The pilots' strike was absorbed as an operating cost rather than as an exceptional. The result surprised some analysts who had expected Cathay Pacific, 45.1 per cent owned by the Swire Group, to continue making losses. John Casey, Singapore-based aviation analyst for investment bank Dresdner Kleinwort Benson, said: 'The result was surprising, much better than I had expected.' Mr Casey said rising fuel prices, only marginal recovery in passenger and cargo levels and the pilots' strike had led him to forecast a net loss of as much as $200 million. 'A lot of analysts are going to have to make a big revision in their forecasts for Cathay Pacific's full-year results,' he said. First-half turnover rose 1.4 per cent to $13.2 billion, while earnings were 3.2 cents per share, up from last year's 5.2 cent loss. Interim dividend is an unchanged three cents. The first five months of the year saw a recovery in a number of markets - including Indonesia, Korea, the Philippines and the United States - and passenger numbers increased on most routes, Mr Hughes-Hallett said. Still, he warned that average fares remained weak. Cathay Pacific's cargo division enjoyed a strong first half with an 8.7 per cent increase in turnover to $3.6 billion. Mr Hughes-Hallett said a January agreement with its flight attendants to fly more hours in exchange for a pay rise helped boost productivity, placing the company 'on a much better footing to compete' with its rivals. A subsequent agreement in June with pilots over an 8 per cent pay cut in exchange for stock options also helped boost competitiveness, Mr Hughes-Hallett said. More than 500 flights were disrupted during the action by pilots, during which Cathay had to lease capacity from other airlines. During the first half, Cathay Pacific's cost per available tonne kilometre - a rough measure of costs - dropped to $2.34 during the first half, down from last year's $2.36. Mr Hughes-Hallett said he expected operating costs to continue falling in the second half of this year. Wendy Wong, aviation analyst at Merrill Lynch, said she expected Cathay Pacific to record a strong summer for revenues in passenger and cargo traffic. 'Cathay Pacific has gone through the hardest bit,' Ms Wong said, adding there was optimism that regional air travel was beginning to recover from the economic crisis. 'These results are slightly misleading as they end in June. I'm expecting that traffic will really pick up in July and August,' she said. 'There is a genuine recovery going on in air travel in Asia. I think it's moved back in Cathay's favour.'