Cathay Pacific issues profit warning

Cathay Pacific Airways today issued a profit warning to shareholders saying that the airline's results in the first half of 2003 are expected to be adversely affected by the sharp fall in passenger demand caused by the war in Iraq and widespread public concern about the outbreak of atypical pneumonia.

The full text of the warning is as follows:

CATHAY PACIFIC AIRWAYS LIMITED

PROFIT WARNING

This announcement is made pursuant to paragraph 2 of the Listing Agreement.

The Board of Directors of Cathay Pacific Airways Limited announces that its results for the first half of 2003 are expected to be materially adversely affected by the recent sharp fall in passenger demand for air travel caused by the Iraq war and widespread public concerns over the outbreak of atypical pneumonia in Hong Kong and other parts of the world.

After a strong start to the year Cathay Pacific's passenger load factors dropped sharply in the second half of March. The impact was felt across almost all routes, both long-haul and short-haul. The average number of passengers being carried by the airline per day is currently approximately one-third of that for the comparable period last year. Forward bookings are also very weak.

Airlines have responded to this sudden and unexpected collapse in passenger demand by reducing scheduled capacity. The Company currently plans to operate approximately two-thirds of the flights it originally scheduled for April and May, mainly by reducing frequencies whilst largely maintaining the network of points served.

On a more positive note, the cargo business remains largely unaffected to-date, with freighter services operating normally, although there may be some adverse impact from the reduction in belly capacity following the cutbacks to passenger services.

Management are taking other actions to minimise expenditures and conserve cash resources. Cathay Pacific has a strong balance sheet with adequate liquid funds on hand to meet foreseeable cashflow requirements.

The Board does not currently have a view as to how long the current weakness in travel demand will continue, and it is therefore not possible, at this stage, to quantify the potential impact on the Company's results.

Shareholders of Cathay Pacific and investors should exercise caution when dealing in the shares of the Company.