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Cathay Pacific chief hints at more cost-cutting, citing fuel prices

The chief executive of Cathay Pacific has hinted at deeper cost-cutting, saying high fuel prices and a global recession threatened to have a severe impact on Hong Kong's flagship airline.

Tony Tyler said in a newsletter to staff that further cost-cutting measures may be necessary, particularly as the US and UK may be 'heading towards recession'.

'These are extremely difficult times for the aviation industry and I'm sorry to say there doesn't appear to be any light at the end of the tunnel just yet,' Mr Tyler wrote in CX World, an internal newsletter circulated among staff yesterday. 'The industry is now in the middle of a major crisis and it's unlikely that we are going to emerge unscathed.'

He said the recent fall in oil prices had not eased the pressure on Cathay Pacific, which earlier this summer announced its first losses since 2003.

Added to this, Mr Tyler said, there had been a softening in the Hong Kong corporate market, Cathay Pacific's biggest source of revenue. He described the trend as 'worrying'.

The situation could be worsened still by recession in the United States and United Kingdom which would 'hit us hard', Mr Tyler said, as both markets generate a big percentage of the airline's revenue.

Cathay has already reduced flights on less popular routes and increased fares and surcharges.

But Mr Tyler warned further measures could be needed: 'If the situation changes for the worse, we may have to change our strategy.'

He went on: 'If revenue drops - and some believe we are about to enter phase two of the crisis when demand will start to collapse - then we'll have to think again.'

Mr Tyler also criticised recent court cases brought against Cathay Pacific by staff unions. 'It's been a jarring note to see the airline involved in a couple of high-profile court cases recently involving different staff groups,' he said. 'Of course staff have a right to air their grievances ... but right now the focus for all of us needs to be on working together to get through what looks set to be a very difficult time.'

John Findlay, general secretary of the Aircrew Officers' Association, said Mr Tyler was being prudent, but said: 'Cathay's record of recovering from such crises ... is there for all to see. I'm very confident that this will happen again.'

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