May 17, 2008

Cathay Pacific Airways considers cutting routes

By MIN LEE

The Associated Press

Cathay Pacific Airways might cut routes to help cope with surging fuel prices, its chief executive said.

Tony Tyler said in an internal company newsletter, seen Saturday by The Associated Press, that the airline must focus on its most profitable markets, maximize use of fuel-efficient aircraft and cut unspecified routes if necessary.

Cathay spokeswoman Carolyn Leung said the plan does not apply to its China-focused sister airline Dragonair.

Hong Kong-based Cathay boasts more international coverage than Dragonair, offering flights to 120 destinations in 37 countries and territories.

While Cathay was earning better-than-expected revenue this year, 'all this good work is being undone by the fuel crisis,' Tyler said, noting that at the end of April the airline was paying 60 percent more for fuel than last year.

Tyler said the airline was also constrained by the limited room for raising fuel surcharges and ticket prices.

'We need to be sensitive to the market's ability to absorb fare increases _ after all we are still in very uncertain economic times,' he said.

Leung said the airline is in the process of replacing its fleet of seven B747-200 freighters with more fuel-efficient ones.

The price for a barrel of benchmark light, sweet crude oil for June delivery jumped $2.17 Friday to settle at a record close of $126.29 on the New York Mercantile Exchange. Investment bank Goldman Sachs hiked its oil price forecast for the second half of the year to $141 a barrel, up from $107.

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Cathay Pacific: http://www.cathaypacific.com