Hong Kong carrier Cathay Pacific said Wednesday it would cut the year-end bonus for its local staff to half a month`s pay or 8,000 Hong Kong dollars (1,026 US), whichever is higher.

The company said in a statement that it was unable to pay staff the traditional year-end discretionary bonus of one month`s salary because business has been hit hard by high fuel prices and the global financial crisis.

However, it said it will increase staff salaries by an average of 2 percent to boost morale.

`We are in turbulent times, and things will get worse before they get better,` said Tony Tyler, the airline`s chief executive.

`As a commercial airline with no government financial support or subsidies, we have to manage our resources in a responsible and prudent manner in the interests of our shareholders and staff.`

The airline posted a first-half net loss of 663 million Hong Kong dollars in August.

Cathay recently issued its second profit warning of the year, stressing that its full results for 2008 were expected to be disappointing following losses on fuel-hedging contracts taken out to counter the high cost of oil earlier in the year and a slowdown in passenger demand.

In a separate statement Wednesday, Cathay`s affiliate, Dragonair, announced a similar move to slash year-end bonuses for its Hong Kong-based staff.