Hong Kong's Cathay Pacific Airways Ltd posted on Wednesday a first-half loss of HK$5 billion ($637 million), narrowing from the prior year's HK$7.57 billion, as easing quarantine rules boosted passenger numbers.

The airline had said in June that it expected a lower first-half loss than the previous year, but warned the figure would still be "substantial".

First-half revenue rose 17% to HK$18.6 billion, driven by a rise in ticket sales and persistent strong demand for air cargo, although passenger numbers stayed 95.2% below pre-pandemic levels in June.

Hong Kong is one of the few places in the world, along with mainland China and Taiwan, to still require COVID-19 quarantine for arrivals, though such hotel stays are to be cut to three days from seven, officials in the financial hub said this week.

Cathay reiterated that it expected passenger capacity to approach up to 25% of pre-pandemic levels by year-end, up from 11% in June, and was now targeting a positive cash flow position.

Its ability to add flights is crimped by rules for air crew on passenger jets to spend three days in quarantine in hotels upon returning home.

"We will only be able to operate more flight capacity when the existing stringent travel restrictions and quarantine requirements applicable to Hong Kong-based aircrew are lifted," Chairman Patrick Healy said in a statement.

As restrictions ease, the airline is preparing to bring back more planes from storage to restore Hong Kong's status as an air transport hub.

Cathay said it expected financial results to improve in the second half from the first. The airline is expected to report a full-year loss of HK$4.5 billion, according to the average of 11 analyst estimates compiled by Refinitiv. ($1=7.8495 Hong Kong dollars) (Reporting by Jamie Freed in Sydney; Editing by Tom Hogue and Clarence Fernandez)