Hong Kong's Cathay Pacific Airways, Asia's fourth-largest carrier, reported its biggest loss ever for the first half of 2003 yesterday, pounded by the combined effects of the Iraq War and the outbreak of SARS.

"The first half of 2003 has been the most challenging period in Cathay Pacific's history, and we would like to thank our staff for their dedication and our customers for their continued support," said James Hughes-Hallet, chairman of Cathay Pacific Airways.

Cathay suffered more than any other Asian carrier whilst Hong Kong was one of the regions hardest hit by the SARS epidemic. The carrier incurred a loss of HK$1.24 billion (US$159 million) in the first half, amounting to HK$0.372 per share. This presents a sharp contrast from last year's first half profit of HK$1.41 billion (US$181 million).

Despite a strong start to the year, the airline had been forced to cut flights since the second half of March as passenger demand collapsed in the face of the epidemic. Its total turnover fell by 20.9 per cent to HK$12.3 billion (US$1.6 billion).

In spite of losses, Cathay will pay an interim dividend of HK$0.03 per share, compared with HK$0.16 for the first half of last year.

The company is expected to perform better in the second half, with the containing of SARS in June.

"We hope to break even and catch up in the second half. We will continue to focus on passenger safety, service and on-time performance that Cathay has always provided," said Hughes-Hallet.

Cathay's chairman also expresses optimism for the mainland market as the airline has applied to resume flights there. He hopes the airlines will start flying to Beijing by the end of the year.

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