* Cathay expects first capacity decline in a long time -memo
* Rival Hong Kong Airlines also announces capacity cut
* Cathay shares up 0.8% (Adds bullets, comments from Hong Kong Airlines)
SYDNEY, Nov 29 (Reuters) - Hong Kong carrier Cathay Pacific Airways Ltd plans to cut passenger flight capacity by 1.4% next year, reversing an earlier plan for a boost of 3.1% because of a challenging business outlook, an internal memo reviewed by Reuters showed.
The capacity reduction follows Cathay Pacific cutting its second-half profit guidance earlier this month, the second cutback in less than a month, because of anti-government protests that began in Hong Kong in June that have discouraged travel to the city.
"Given the immediate commercial challenges and the fact that our position has deteriorated in recent weeks, we must take swift action to adjust our budget operating plan for 2020 downwards again," Chief Executive Augustus Tang said in the memo.
"Put another way, rather than growing our airlines in 2020, for the first time in a long time, our airlines will reduce in size."
Revenue performance continues to be disappointing and advance bookings into 2020 remain much lower than expected due to weak traffic from some of its key markets, particularly mainland China, the memo said.
A Cathay representative said the carrier had no comment.
Full-service carrier Hong Kong Airlines, backed by indebted Chinese conglomerate HNA, also said on Friday it would further reduce its capacity to mitigate the impact from the political unrest.
Several Asian airlines have also cut flights to Hong Kong, as the protests in the financial hub and an escalating China-U.S. trade war have pushed the Chinese-ruled territory into recession for the first time in a decade.
Hong Kong has enjoyed a week of relative calm since local elections on Sunday delivered an overwhelming victory to pro-democracy candidates.
But protesters stirred support for more rallies over the weekend, as police withdrew on Friday from a university campus where some of the worst clashes with security forces had occurred as part of nearly six months of unrest.
Shares in Cathay rose 0.8% on Friday, outperforming a 2% drop in the broader market. (Reporting by Jamie Freed in Sydney; Writing by Miyoung Kim; Editing by Clarence Fernandez and Christian Schmollinger)