HONG KONG (AP) — Cathay Pacific Airways said its first half earnings will be disappointing because of the cloudy global economic outlook and high fuel prices, forcing it to cut costs and reduce flights on some long-haul routes.
Hong Kong's biggest airline reiterated a warning given in March that 2012 will be more challenging than 2011. Since then, cargo business has continued to slump, pressure remains on economy class revenue and premium class revenue is softening, the airline said.
Cathay will cut capacity on routes to North America and Europe because of high fuel costs and "depressed" revenue. But in Asia, the airline and its Dragonair division will boost flights and add six new destinations.
It said it will use new Boeing 777-300ERs on more routes, including to San Francisco, Toronto and Paris. The airline already has six of the more fuel efficient jets and will take delivery of 15 more this year. The retirement of older, gas guzzling Boeing 747-400 aircraft will be sped up.
The company will also retire three older cargo freighters as it takes delivery of newer, fuel efficient models.
"This is not just a Cathay Pacific problem, it is clearly an industrywide issue, and continued high fuel prices in particular are hitting airlines hard across the globe," said chief executive John Slosar.
"We have no option but to take concerted action to adapt to this volatile operating environment," he said.
Other cost cutting measures include a hiring freeze on new or replacement ground staff and offering voluntary unpaid leave for cabin crew.
Cathay Pacific reported a 61 percent drop in 2011 profit earlier this year because of a what it called a "double whammy" of steep fuel prices and slumping cargo demand.