UPDATE 2-Emirates H1 profit jumps 165 pct; still cautious

* Does not expect travel demand to rise for at least 1-2 yrs

* Profit at 752 mln dirhams vs 284 mln a year earlier

* H1 revs 19.8 bln dirhams, down 13.5 percent from '08 H1

* Seat load factor 77.5 percent

DUBAI, Nov 5 - Emirates, the Dubai-owned carrier, bucked the downward trend in aviation earnings with a 165-percent rise in first-half profit, driven by lower costs, but remained cautious in its outlook.

"The months since the global meltdown have really tested our mettle," Emirates chairman Sheikh Ahmed bin Saeed Al-Maktoum said, warning demand was unlikely to pick up in the immediate future.

Airlines around the world have been crippled by reduced spending on travel, a drop in global trade and rising oil prices. To cut their bloated cost bases, many have grounded planes and cancelled or deferred aircraft orders.

"While some say the green shoots of economy recovery are sprouting, we expect it will take at least another year or two before demand for air transport and travel services starts picking up again," al-Maktoum said.

Industry body IATA has said it sees the world's airlines losing $11 billion this year as consumers tightened their purse strings and companies cut travel budgets.

Dubai government-owned Emirates said in a statement net profit in the first half of its financial year which ends Sept. 30 was 752 million dirhams ($204.7 million). It gave no breakdown.

The carrier said total expenditures were 15.8 percent lower than the same period last year, helped by lower fuel costs and cost containment.

"Emirates like all airlines will have benefited from the drop in fuel costs and thats why we've seen an increase in margins," said Kareen Murad, lead analyst for logistics and transportation at Shuaa Capital in Dubai.

Still, revenues fell 13.5 percent on lower passenger and cargo yields.

"It's quite disappointing that revenues are down in the context that passenger growth continued in the Middle East and probably this would allude to the softening of yields," said Abid Riaz, director of research at EFG-Hermes.

COMPETITION HITS YIELDS

Middle Eastern airlines are almost alone globally in witnessing growth in passenger demand and air freight this year, according to IATA.

The Arab world's largest listed airline Air Arabia posted a 10-percent rise in second-quarter net profit, but said excess capacity was diluting yields.

Growing competition from low-cost rivals including Kuwait's Jazeera Airways but also from bigger carriers such as Qatar Airways and internationally the likes of British Airways have been eating into yields.

The airline, which was last year transferred to the emirate's sovereign wealth fund, Investment Corporation of Dubai, said capacity measured in available seats per kilometres, grew 22 percent, whilst passenger traffic measured in revenue passenger per kilometres was up 21 percent,

The volume of cargo uplifted was "in line" with the same period in 2008, it said without giving figures.

Recently, Russian flagship carrier Aeroflot said its first-half net profit fell five-fold to $14.4 million, while Finnish national carrier Finnair, which posted sharply lower third-quarter sales, said it would continue to make losses during the rest of the year.

Meanwhile, Germany's Lufthansa said last week that modest signs of stabilising volumes "are far away from making up for the enormous and unrelenting pressure stemming from the massive fall in price levels."

Emirates, which has a $55 billion order book for planes from Boeing and Airbus, expects to receive about 10 planes a year.