Booming cargo volumes compensated in part for the third consecutive monthly decline in passenger traffic last month on Hong Kong Dragon Airlines (Dragonair), which expects the rise in the cost of aviation fuel to significantly hit earnings this year. Passenger numbers at Hong Kong's No2 carrier fell 2.7 per cent compared to May, to just under 407,000. Business over the first half was upbeat with the number of business and leisure class travellers growing a comparative 15.5 per cent, to 2.37 million, on a 10.6 per cent expansion in seating capacity, suggesting that the airline was enjoying stronger yields. 'Passenger numbers and freight shipments were stronger than in June last year, partly due to increased frequencies and capacities and partly to greater demand,' chief executive Stanley Hui Hon-chung said in a statement. 'Month on month, there was a slight fall in passenger numbers, but that was a reflection of a seasonal downturn before the start of the summer holidays. May was also a more robust month for leisure travel. There were two long-weekend holidays.' Mr Hui said the monthly decline belied strong performances from Taiwan, Japan and some mainland passenger routes. The carrier's cargo division continued its strong performance last month with freight volumes rising a comparative 20.7 per cent to 31,657 tonnes on a 37.6 per cent expansion in capacity. Dragonair's six freighter aircraft have moved almost 180,000 tonnes of cargo this year, up 21.8 per cent year on year. 'June is traditionally a quieter month for shipments,' Mr Hui said. 'But with mainland exports continuing to power ahead, that was not the case last month.' Record high fuel costs, however, have played havoc with earnings throughout the aviation industry, even for carriers in buoyant markets such as China. Guangzhou's China Southern yesterday issued a profit warning to the exchange, saying it expected to report a loss for the first six months. The price of jet fuel traded in Singapore, the region's benchmark index, has risen 40.2 per cent since reaching a February 8 low of US$51.10 a barrel to close on Wednesday at US$71.65. 'The impact on our bottom line will be significant,' Mr Hui said. 'It's a great concern.'