INTERVIEW-UPDATE 1-Cathay says no plans to tap equity market

* Could raise cash from selling assets, aircraft

* Sees further yield deterioration in 2009

* Says sees no sign of recovery yet (Adds details, quotes, background)

HONG KONG, March 13 - Cathay Pacific Airways <0293.HK>, which recently reported a record $1 billion second-half loss, sees no sign of recovery yet in the aviation sector battered by a global financial crisis and volatile fuel prices, and said it could sell some assets to raise cash.

"The problem with this crisis is that we're, at best, in a U-shaped recession...We don't know how long it's going to last and we don't know how deep it's going to get," Chief Executive Officer Tony Tyler told Reuters on Friday.

However Cathay, the dominant airline of Hong Kong and Asia's fifth-largest carrier by market value, has no current plans to raise capital through the equity market, he said.

"We do have some unencumbered assets and some unencumbered aircraft that we could raise debt against. There are other things in the balance sheet we could use to raise cash," Tyler said. "At this moment we don't have any plans to raise equity."

He said the airline could see a further deterioration in yields, or the money it makes on each seat it sells, amid a downturn that shows no signs of easing.

Airlines around the world have been battered severely by the global financial crisis and have unveiled a slew of cost-cutting measures to stay afloat.

Cathay, like many of its peers, said it could cut more capacity and has tried to soften the blow by asking its cabin crew to take unpaid leave, delaying a new cargo terminal in Hong Kong by two years and suspending capacity growth this year.

RECORD LOSSES

Cathay -- which had always been among the world's most profitable airlines and is controlled by Hong Kong conglomerate Swire Pacific <0019.HK> -- saw its fortunes take a turn for the worse in 2008, as volatile oil prices and a gloomy economic climate weighed on earnings.

It reported on Wednesday a net loss of HK$7.9 billion ($1.02 billion) in the July-December period, largely in line with market expectations, versus a profit of HK$4.4 billion in the same period in 2007 on massive fuel hedging losses and weak demand.

For a story on Cathay's results, click on: [ID:nHKG191403].

Shares in Cathay rebounded after the results. They have risen 10 percent in three days to HK$7.69 on Friday, outperforming a 6.5 percent rise on the blue chip Hang Seng Index <.HSI>.

The stock has fallen about 12 percent so far this year compared with a 13 percent loss on the Hang Seng Index and a 10 percent fall in rival Singapore Airlines <SIAL.SI> shares.

Tyler said passenger yields for Cathay -- which owns regional carrier Dragonair and has an 18 percent stake in Air China <601111.SS> -- are down strongly so far this year.

Cathay's passenger yield rose 5.3 percent last year to 63.6 Hong Kong cents.

"Unless we see more demand, we're going to see a yield deterioration for the year," he said, but added that it was too early to give a more detailed forecast.

Tyler said there has been a "further deterioration" in yields from its first-class and business-class segments in the first quarter of this year.

"What we've also seen in recent weeks is a collapse in the economy class yields," he said, adding that this was mostly due to "very, very strong competition in what is a very soft market."

Cathay, which is expected to take delivery of 10 aircraft this year, is looking to see whether it can defer deliveries, Tyler said, adding that the airline needs to have further negotiations with Boeing <BA.N>.

Cathay has already announced plans to shed five airplanes from its fleet, park three freighters and return three leased planes when contracts expire this year.