Cathay Pacific Airways A330-300. Courtesy, Airbus

Hong Kong-based Cathay Pacific Airways (CX), which has warned its first-half results are “expected to be disappointing,” said it will cut costs and reduce capacity as operating costs rise due to high fuel prices and economic uncertainty.

CX COO Ivan Chu said fuel costs, which account for 42% of the total operating expenses, and fuel hedging is not enough to offset rising fuel expenses.

CX CEO John Slosar said the company had previously warned “that 2012 is looking even more challenging than 2011 and we were therefore cautious about prospects for this year (ATW Daily News, April 25). In response to the challenging environment we face, we are reducing costs where possible, including through a reduction of capacity.”

On the passenger side, the Cathay Pacific Group will see its capacity growth reduced to 3.2% from the targeted 7% this year. The carrier will reduce its flight frequencies on some long-haul routes to North America and Europe.

For cargo, CX will now target 4% growth instead of 7%. CX operates 25 freighters, including five Boeing 747-8Fs.

The carrier is also expected to deploy more fuel-efficient 777-300ERs on more routes, including flights to San Francisco and Paris, as well as speed up the retirement of its older 747-400s. The airline operates 21 747-400 passenger aircraft and will retire three this year. CX will retire five more in 2013 and one more in early 2014, bringing the fleet down to 12 aircraft.

In addition, the company will offer voluntary unpaid leave for cabin crew from June, will cancel non-essential business travel for staff, and will reduce its marketing and IT spending.