Airlines slash prices in U.S., cut costs, capacity in Asia

CASSIE BIGGS, Agence France-Presse, Hong Kong

U.S. airlines are desperately cutting prices in an attempt to tempt shell-shocked Americans into flying again.

But in Asia bargains are proving to be thin on the ground as local carriers opt to cut capacity and costs rather than slash prices in an attempt to boost passenger numbers in the wake of the Sept. 11 suicide hijackings in the United States.

U.S. carrier Delta is offering to give away 10,000 free flights to New York and United Airlines has cut business class fares by up to 50 percent.

But only a handful of their Asian rivals see any mileage in similar promotions with many claiming that passengers needed to be reassured about safety rather than tempted back into the air by cut-price deals.

"As long as there is concern over terrorism, we think people are not interested in visiting the United States even at cheaper air fares," said a spokesman for Japan Airlines (JAL) in Tokyo. JAL was not planning to introduce special discounts, he added.

Crimson Lee, a spokesman for Korean Air, said airlines in the region had been hit by a contraction in demand even before the Sept. 11 attacks and were wary of the impact of discounting on their bottom line.

"We cannot afford to adopt such marketing strategies and we must prepare for even worsening business environments," Lee told AFP.

In an effort to protect its margins, Korean Air has moved quickly to reduce capacity. Last week it suspended flights on five international routes and reduced four others for three months till Dec. 13.

Its local rival Asiana has reduced its flights to Los Angeles and the two companies are considering making 1,200 staff redundant.

It is a similar tale elsewhere in the region. Malaysia Airlines announced Thursday it would cut 12 international routes and suspend its New York service after seeing demand for long- haul flights dry up after the terrorist attacks.

MAS managing director Mohamad Nor Yusof said there had been 3,600 passenger cancellations since Sept. 11 and the airline expected passenger volume to fall around 15 percent from last year.

But it would not follow the U.S. and offer discounts to entice passengers to fly. "Our market is different from other markets, like in the U.S., so we have different strategies from them," he said.

Higher fuel and insurance costs have also made airlines reluctant to cut ticket prices. Philippine Airlines has already announced a six-dollar surcharge on tickets to offset the impact of skyrocketing insurance premiums.

With the collapse of Australia's Ansett and the problems of its former parent Air New Zealand also contributing to a contraction of capacity in the region, some passengers could find themselves paying top dollar for a seat on a packed plane.

There are however a few good deals already on offer and analysts expect more to come on stream if the current slump carries on for weeks or months.

Hong Kong-based carrier Cathay Pacific admitted it was considering offering some discounts although its immediate focus was on security measures.

Thai Airways also said it would cut ticket prices and offer discounts on hotels in the kingdom in a bid to attract more visitors.

First and business class passengers on Air India are to be allowed to take along a companion free of charge on trips to New York, Chicago, London and Paris.

The airline denied however that Indians had been put off flying by the attacks on New York and Washington, stressing instead the impact of the global slowdown on the volume of business travel.