Cathay Pacific Airways Ltd, Asia's No. 3 carrier, posted a forecast-beating 85 per cent jump in second-half profit yesterday on surging passenger demand and higher ticket prices but the global credit rout has dimmed its outlook for 2008.

Cathay, which bought rival Dragonair for $1.06 billion in 2006, is battling a gloomy forecast this year as analysts predict the US credit crisis will cause companies and consumers to cut spending, resulting in a slowdown in global business and personal travel.

Last month, The International Air Transport Association (IATA) said global air passenger traffic growth slowed to 4.3 per cent in January from 6.7 per cent in December, and warned of turbulence ahead.

Premium cabins account for roughly 40 percent of Cathay's revenue, according to Merrill Lynch. A looming cutback in international business travel as banks incur massive write-downs amid fears of a US recession could spell trouble ahead, analysts said.

"We see Cathay Pacific as one of the most exposed to a downturn, given its focus on the long-haul, premium and air cargo markets, which are our main areas of concern," Merrill Lynch analysts wrote in a research note ahead of the results.

Cathay carried a record 17.8 million passengers in 2007, up 6.2 per cent from last year, with passenger revenue up 17 per cent at HK$39.3 billion.

But cargo revenue growth - which the firm has been fighting to expand - rose just 10 per cent to HK$13.2 billion. The results for the whole of last year are the first to include a full-year's contribution from Dragonair.

Adding to US recession concerns this year are soaring jet fuel prices and an oversupply of seats.

CLSA predicts overall fuel costs will rise 18 per cent. That could account for HK$32 billion, or 39 per cent, of Cathay's 2008 costs, CLSA said in a research note.

Soaring jet fuel prices peaked at $117 a barrel in November.

Cathay is expected to add 11 per cent seat capacity in 2008, including 35 percent in North America, which could crimp yields. In December, the firm said it had agreed to buy eight Airbus A330 aircraft for a catalogue price of $1.7 billion, mainly to serve in the Asia Pacific region.

Roughly 60 per cent of Cathay's revenues are derived from outside Hong Kong and China, however.

Last month, the carrier purchased 15 million shares in Air China, raising its stake to 18.1 per cent from 17.5 per cent.

Cathay publicly supported the failed bid made by Air China group in January for a tie-up with its rival China Eastern.