Cathay Pacific mulls route cuts on high fuel: paper

HONG KONG (Reuters) - Cathay Pacific Airway Ltd (0293.HK: Quote, Profile, Research, Stock Buzz), Hong Kong's dominant airline, is considering cutting its money-losing routes amid soaring fuel prices, South China Morning Post said on Saturday, citing the airline's chief executive as warning in an internal newsletter.

"We will have to make sure that our fleet is flying the most suitable and economic routes for each of our aircraft types," the newspaper quoted Chief Executive Tony Tyler as saying in CX World.

"This will mean to allocate capacity to our strongest and most profitable markets, and to reduce or eliminate routes that are draining cash," Tyler said.

Cathay Pacific officials were not immediately available for comment.

The airline was studying profit dynamics of all destinations and no decision would be made until August on any route reduction, the newspaper cited the carrier's Chief Operating Officer John Slosar as saying.

Cathay had to pay about 60 percent more in average jet fuel cost per tonne in the first 4 months of 2008, against the level last year, Tyler said, adding that fuel costs account for 30 percent of the carrier's operating costs.

Shares of Cathay, haunted by concern over rising operating costs on soaring oil prices, have fallen 19 percent so far this year, underperforming an 8 percent drop in the broader Hang Seng Index .HSI.

Oil prices surged to a record high near $128 a barrel on Friday as a bullish price forecast from investment bank Goldman Sachs drowned out an offer of more supply from OPEC kingpin Saudi Arabia.

(US$1=HK$7.8)

(Reporting by Donny Kwok; Editing by Anshuman Daga)