Cathay announced a HK$175 million ($22.5 million) loss in the first six months of 1998 on Wednesday, compared with a net profit of HK$1.07 billion in the year-earlier period.

Hit by Hong Kong's air cargo fiasco and flagging business throughout Asia, the once-proud carrier could see the loss extended to between HK$300 million and HK$560 million for the year, analysts said.

"I'm downgrading it. I am forecasting losses of HK$559 million for the full year," said John Hetherington, analyst at Paribas Asia Equity. Most of the blame for Cathay's woes in the second half of 1998 will go to the air cargo fiasco which hit Hong Kong's new airport at Chek Lap Kok right when it opened on July 6.

Computer problems forced the main air cargo operator Hong Kong Air Cargo Terminals Ltd (HACTL) to temporarily halt cargo-handling,hurting airlines, freight forwarders, agents, importers and exporters, and transportation companies.

Cathay said on Wednesday the fiasco had cost the company HK$250 million in lost revenues in July alone and said the figure would "increase until the problems are rectified".

"In the absence of difficulties at Chek Lap Kok, they would have made money in the second half of the year, something like HK$200 (million) to HK$250 million," said Philip Tulk, analyst at Lehman Brothers Asia.

"But sadly, Chek Lap Kok is going to cost them HK$300 million to HK$350 million in lost revenue. This problem is going to certainly force them into the red again in the second half."

HACTL has been working on the problems but does not expectto be at full capacity until mid-August. Another factor which will haunt the airline in months tocome will be Asia's economic problems, which have slowed consumption and air traffic, another analyst said.

"The economy is so bad, I'll be surprised if passenger traffic growth improves inthe second half," said Jim Lam, analyst at ABN Amro Hoare Govett Asia.

"Also in the second half, China's trade will continue toslow down and (Cathay's) cargo business will be hit," said Lam, who predicted a full year HK$383 million loss for Cathay.

The airline's overall passenger load factor for the firstsix months of the year was 66.5 percent, down from 71.2 percent in the same period last year.

Cathay Pacific Cargo registered a 9.4 percent fall inturnover during the interim period to HK$2.79 billion.

It carried 293,015 tonnes of cargo from January to June, down 2.3 percent year-on-year. But some analysts were confident the company's strongmanagement and commitment to cost-cutting would keep it in good stead when the embattled region turns around.

"Once the economy turns around, it (Cathay) would, too. Further downside to its stock price is very limited. We still recommend a buy," said Lam.

Cathay's stock price fell HK$0.15 in morning trade onThursday to end at HK$5.75, weighed down by itsinterim loss.