Hong Kong - The head of Hong Kong's flagship airline Cathay Pacific Tuesday warned of the need for cost-cutting as the effects of high fuel prices and global recession take their toll on profits.

Tony Tyler, the airline's chief executive, indicated in a letter to staff that further cost-cutting measures may be necessary as the US and Britain 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.

"The industry is now in the middle of a major crisis and it's unlikely that we are going to emerge unscathed," Tyler said in a message carried in the internal newsletter CX World, distributed Tuesday.

Tyler said there had been a softening in the Hong Kong corporate market, Cathay Pacific's biggest source of revenue, a trend he described as "worrying."

The situation could be worsened by recession in the US and UK which would "hit us hard," Tyler said, because both markets generate a big percentage of the airline's revenue.

Cathay, which last month announced its first losses in five years, has already cut flights on some weaker routes and increased fares and surcharges.

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

"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."

Cathay Pacific carried 23.5 million passengers and 1.6 million tons of cargo last year. The airline and its subsidiaries employs more than 27,000 people worldwide. (dpa)