Fuel prices dragging down airlines but no dent in holiday plans of Asians<\/p>\n
Vijay Joshi
\nAssociated Press
\nKuala Lumpur, Malaysia<\/p>\n
The math of the aviation industry isn't rocket science. Simply
\ncalculated, higher fuel bills mean lower profits.<\/p>\n
The unrelenting climb of oil prices has badly hurt the bottom
\nlines of airlines across the Asia-Pacific region, bringing losses
\nat Thai Airways, Malaysia Airlines and China Southern, and
\nforcing many to raise ticket prices through higher fuel
\nsurcharges.<\/p>\n
\"Everyone is suffering from high oil prices, even the best-
\nmanaged carriers,\" said Andrew Herdman, the director general of
\nthe Association of Asia Pacific Airlines, which represents 17
\nregional carriers.<\/p>\n
But the good news for consumers is that ticket prices have
\ngone up only modestly, not enough to dampen travel in the year-
\nend holiday season, analysts and industry watcher say, as
\nMalaysian property evaluator Jeannie Tan will attest.<\/p>\n
Tan is planning an 11-day package tour to China the end of
\nSeptember on Malaysia Airlines, and says she was not deterred
\nwhen the fuel surcharge was raised in July from 38 ringgit
\n(US$10) to 53 ringgit<\/p>\n
\"It's not really a big deal. If (the hike) is less than 100
\nringgit. I don't think I will feel the pinch,\" Tan said. \"It
\nwon't affect either my plans or the tourism market.\"<\/p>\n
Singaporean teacher Francis Lau, planning a year-end Hong Kong
\nholiday, also said he would have second thoughts only if the fare
\nwent up by up more than S$100 ($59).<\/p>\n
Like Lau and Tan, hundreds of thousands of other Asians and
\nAustralians will go ahead with vacations, but with small changes
\nin travel plans. Instead of taking long flights, which have
\nhigher fuel surcharges, they will go to spots closer by, said
\nImtiaz Muqbil, a Bangkok-based travel analyst.<\/p>\n
For example, Qantas imposed an additional $11 surcharge on
\ninternational routes but only a $4.50 surcharge on flights to New
\nZealand. Thai Airways raised its surcharge on regional routes by
\n$5 and on intercontinental flights by $15.<\/p>\n
Muqbil, the editor of Travel Impact Newswire, said holiday
\nmakers may also decide to stay in cheaper hotels and forgo the
\nluxury of a spa or that extra bottle of wine.<\/p>\n
\"I won't say it will result in a downturn. People will travel.
\nThere is no doubt about that. But instead of going to Europe, you
\nwill go to Thailand,\" he said. \"I don't think there will be a
\ndecline at all in the travel industry.\"<\/p>\n
In fact, the seats on flights to Asian destinations are
\noverbooked during the upcoming Malaysian school holidays in the
\nfirst week of November, said Chong Voon Siong, operations manager
\nof Amerasia Tours and Travels in Kuala Lumpur.<\/p>\n
\"There are no cancellations at the moment,\" he said.<\/p>\n
Jet fuel is for most airlines the single largest operating
\ncost. Last year, it accounted for 20 percent of AAPA's member
\nairlines' costs. That figure is approaching 30 percent now. Their
\ncollective fuel bill last year was $12 billion. It is expected to
\nbe $18 billion to $20 billion. this year.<\/p>\n
The high price has taken a heavy toll on an industry that
\nnever has been very profitable.<\/p>\n
Malaysia Airlines reported a loss of 280.7 million ringgit
\n($73.9 million in the April-June quarter. Thai Airways
\nInternational had a loss of 4.78 billion baht ($116 million in
\nthe same period.<\/p>\n
And China Southern Airlines Co., one of China's biggest
\ncarriers, reported a net loss of 907 million yuan ($112 million)
\nin the first half of 2005.<\/p>\n
Hong Kong airline Cathay Pacific Airways Ltd. reported a 6
\npercent drop in its first-half net profit while Singapore
\nAirlines' first quarter net income fell 8 percent.<\/p>\n
They all blamed jet fuel prices, which are up 50 percent over
\nlast year.<\/p>\n
Still, fares have gone up only 10 percent since 2004, mainly
\nbecause of airlines' reluctance to impose higher fares in a
\nhighly competitive market, said AAPA's Herdman.<\/p>\n
\"Most people in the industry are focused on matching price and
\nmaintaining market share. If someone is brave enough to raise the
\nfare and it is not matched, they lose their nerve and drop the
\nprices again,\" he said.<\/p>\n
Asia-Pacific airlines have also been hit by a modest growth of
\n3 percent to 4 percent in cargo traffic, compared to 7 percent in
\npassenger traffic over last year. Cargo accounts for about 20
\npercent of revenue for Asia-Pacific airlines.<\/p>\n
The latest crisis has increased the motivation of airlines to
\nimprove fuel efficiency, optimize operational procedures and
\nminimize fuel wastage.<\/p>\n
Most airlines are now focused on reducing the taxiing and take
\noff-periods and reaching cruising altitude quickly. A Boeing 747
\njumbo consumes as much fuel per passenger per mile at cruising
\naltitude as a small passenger car. The new Airbus A380 consumes
\neven less.<\/p>\n
Herdman said airlines are also talking about coordinating with
\nvarious governments and air navigation controllers to let planes
\nfly in a straight line to conserve fuel. At present, they are
\nguided through the skies by a network of radio beacons that make
\nthe flying paths a zigzag.<\/p>\n
Many airlines have hedged against fuel prices by buying future
\nstocks. But it is not a panacea to all their woes, said Damien
\nHorth, aviation analyst with UBS Warburg Asia Pacific in Hong
\nKong.<\/p>\n
\"It's just a short-term protection,\" he said. \"The only way to
\ndeal with higher oil prices is to either raise fares, which is
\ndifficult, or cut costs.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fuel-prices-dragging-down-airlines-but-no-dent-in-holiday-plans-of-asians-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}