The airline's more spacious economy seats have been particularly popular on long flights to Europe and the U.S., and command prices that are on average 80 percent higher than for regular economy seats, according to UOB Kay Hian analyst K Ajith.

Cathay had fitted 85 of its medium-haul and long-haul aircraft with premium economy seats as at the end of 2013, raising the prospect this year of higher passenger yields, or revenue per passenger mile.

Higher seat prices helped Cathay book a net profit of HK$2.6 billion ($334.97 million) last year from 2012's restated earnings of HK$862 million. The result compared with a HK$3.3 billion mean forecast of two analysts polled by Thomson Reuters.

The gain was thanks to "strengthening of the passenger business", the airline said in a stock exchange filing on Wednesday. Earnings were pressured by high prices for jet fuel which accounted for 39 percent of operating cost.

Shares of Cathay ended morning trade down 0.51 percent in Hong Kong, compared with a 1.59 percent fall in the benchmark Hang Seng Index <.HSI>.

The airline said it carried nearly 30 million passengers last year, up 3.3 percent. Passenger yields on North American and European routes rose 8.3 percent and 3.6 percent, compared with an overall increase of 1.8 percent.

Weak cargo demand remained a drag on earnings though there was some recovery in the fourth quarter, Cathay said.

The airline also said its new HK$5.9 billion cargo terminal in Hong Kong will allow for improved efficiency and reduced costs. ($1 = 7.7619 Hong Kong Dollars)

(Reporting by Fang Yan and Matthew Miller; Editing by Christopher Cushing)