On July 10, Cathay Pacific Airways announced the first stage of its redeployment of services driven by the continuing rise in fuel prices. At the same time the airline said it is increasing fares for First and Business Class passengers on most of its routes to and from Hong Kong. The fare rises, in the range of 3-15%, will begin taking effect from July 11.

In terms of its flight operations, the airline is working to redeploy capacity to routes where demand is high, starting with a service boost to two key Middle East destinations and a return to the normal winter schedule for flights to Vancouver and Toronto.

From October 1, 2008, the airline will add four more direct flights a week between Hong Kong and Dubai, meaning the airline will provide a total of 18 flights each week to this key destination in the United Arab Emirates. Each of the four new Dubai flights will continue on to Bahrain. Four flights each week will be continue to be routed through Bangkok.

At the same time, Cathay Pacific will also enhance its services to Riyadh, introducing a four-times-weekly non-stop service between Hong Kong and Saudi Arabia's capital city. The airline currently serves the city with four flights a week each routed through Bahrain.

The airline has also announced that, effective September 16, it will resume the regular winter schedule of 17 direct flights to and from Vancouver each week compared to the current 21. At the same time the Toronto service will revert to a daily non-stop service from Hong Kong, with the three seasonal flights per week routed through Anchorage being discontinued.

Effective from the winter schedule the airline will also reintroduce four additional flights a week to Auckland, turning it into a double-daily service. The airline has been providing additional peak-season capacity to New Zealand since 2006.

The continuous rise in fuel prices is having a significant impact on airlines worldwide and on July 2 Cathay Pacific issued a profit warning to the Hong Kong Stock Exchange advising that its financial performance is being "materially and adversely affected" by the high price of jet fuel. The average price paid by the airline in the first half of 2008 was 60% above that paid in the first half of 2007.

Cathay Pacific Chief Executive Tony Tyler said: "What we are facing at the moment is a cost problem, not a revenue problem. Demand remains high but the soaring cost of fuel means we have to operate more flights to areas with revenue-earning potential. We will not take a 'slash and burn' approach to the problem - it's important to preserve our network as Hong Kong's home carrier and we aim to keep our team together.

"During this difficult period we need to work to maximise our revenue. Of course we regret having to charge passengers more, but the increase in our fuel bill is too great for us to absorb. We have to ask our passengers to pay more for their flights, either through increased surcharges or by increasing fares."