UPDATE 2-Cathay Pac revenues below target; stock blips up

* Passenger revenues 13 pct below target;cargo 22.5 pct below

* Cathay sees no indications of sustained recovery

* Analysts expect Cathay to see first profit in a year

* Expected to book once-off gain gain on oil hedge

(Updates with share price rise; quotes)

HONG KONG, Aug 3 (Reuters) - Hong Kong's top carrier Cathay Pacific Airways (0293.HK) reported a bottoming out in weekly revenues, triggering a brief jump in its share price but signalled it faces a tough environment in the months ahead.

"There are signs that our own weekly revenue results seem to have bottomed out now, but at a very low level. As yet, there are still no signs of any sustained recovery," Chief Executive Tony Tyler said in a note to staff obtained by Reuters.

He said the airline's latest revenue figures showed it was not yet clear of the difficulties it suffered in the first half, with passenger revenue 13 percent behind target and cargo revenue 22.5 percent below the desired mark for the first seven months to July.

The stock rose to a high of HK$12.40 after the news, up 2.8 percent before shaving the gain to 0.33 percent by the close of the morning session. The broader market index .HSI was up as much as up 1 percent hitting a high of 20,786.02 points, before ending up 0.62 percent.

Cathay Pacific is scheduled to release its interim results on Wednesday.

Analysts said the carrier is likely to turn around in the first half from losses posted last year, on the back of a one-off fuel hedging gain but like many other carriers continues to face strong headwinds in the months ahead.

Singapore Airlines (SIAL.SI), the world's second largest airline by market value, last week unveiled its first quarterly loss in six years, and warned that it could post an annual loss if adverse conditions continued. [ID:nSIN455944]

"Operationally, (Cathay) is still facing a difficult environment in the second half, but the gains from hedging will help the results to turn around," said Cho Fook Tat, an aviation analyst at Taifook Securities.

If oil prices stay at $75 a barrel over the next three years to 2011, the company could make mark-to-market gains and write back some of the paper losses from fuel hedging provisions.

Crude oil has dropped 50 percent to its current level of about $72 from a peak of $145 hit in July of last year.

Brokerage Citi had downgraded the stock to 'sell' before a copy of Tyler's remarks was obtained, but Daiwa was optimistic.

"We are optimistic about a gradual recovery, and believe this would overwhelm any negative impact that weak results would have," Daiwa Securities said in a research note last week.

The brokerage forecast a HK$1.4 billion net profit for the first half, supported mainly by a one-off fuel-hedging gain of HK$2.1 billion.

MORE PRESSURE AHEAD

As of July 25, Cathay's weekly passenger revenue was 15.8 percent behind target for the year to date, while cargo revenue was 21.4 percent below target, Tyler said in a weekly business report obtained by Reuters on Monday.

"We are certainly still in a very challenging operating environment," chief executive officer Tony Tyler said in the report. "Our latest revenue figures highlight the fact that we are still some way from climbing out of our deep hole."

Advance premium bookings were no longer comparable with last year, he said, noting that "corporates were not pre-booking travel as they did before."

Tyler did not provide specific figures for passenger and cargo traffic levels.

However, Cathay last month reported that its combined traffic with unit Dragonair in terms of passenger numbers for June 2009 fell sharply year-on-year, in part due to the impact of the Influenza A (H1N1) outbreak.

Tyler said that advance bookings for economy and business class were "not that bad" but added that the overall situation remains grim.

For September through November, Cathay's front-end bookings were still heavily down, he said, adding that the company would only know in early September whether business travel would show any signs of a turnaround. (Reporting by Joanne Chiu and Nerilyn Tenorio; Editing by Chris Lewis and Valerie Lee)