CATHAY Pacific Airways Ltd is considering cutting money-losing routes and retiring less fuel-efficient planes as fuel costs surge, Hong Kong's South China Morning Post reported yesterday citing airline management.

The carrier will have to "reduce or eliminate routes that are draining cash," and reallocate capacity to its "strongest most profitable markets," the English-language report quoted Cathay Chief Executive Officer Tony Tyler as saying in an internal newsletter published yesterday.

The airline will not make any decisions until August, John Slosar, chief operating officer, told the newspaper. Cathay's average jet fuel cost per ton surged 60 percent in the first four months from a year earlier, Tyler was quoted as saying. Fuel represents 30 percent of the airline's operating cost, the newspaper said.

Cathay may face increasing competition from Taiwanese rivals on the Hong Kong-Taiwan route after direct air links between the Chinese mainland and Taiwan are established as early as August. The route is one of its most profitable because of the large number of Taiwanese travelers to the mainland who change flights in Hong Kong under current restrictions, the newspaper said.