Asia airlines may hike fares on higher fuel costs

Asia airlines may hike fares on higher fuel costs

KUALA LUMPUR (Reuters): Asian carriers may have to increase
air fares to cope with rising jet fuel costs despite improving
passenger and freight load factors, an industry official said on
Tuesday.

"Ultimately, like any business, if your costs go up, then that
has to be reflected in the prices charged to the customer,"
Richard Stirland, director general of the Association of Asia
Pacific Airlines (AAPA), said at a news conference.

"The demand for aviation fuel is actually growing faster than
the demand for oil in general," he said.

"Because of market pressures, it's likely that even if the
price of a barrel of oil stabilizes or even declines, it doesn't
necessary follow that aviation fuel prices will also stabilize or
decline."

Stirland was speaking to reporters after announcing the 18-
member industry group's relocation to Kuala Lumpur in search of
more stable political and economic conditions after 30 years in
Manila.

He said domestic flights in particular faced possible fare
hikes as airlines had less flexibility to change domestic
schedules and concentrate on better-yielding routes.

AAPA's 18 members include China Airlines, Cathay Pacific
Airways, Air New Zealand, Qantas Airways, Philippine Airlines,
Singapore Airlines, Thai Airways International, Japan Airlines,
Korean Air, Vietnam Airlines, EVA Airways and Malaysia Airlines.

Stirland expected Asia air traffic growth, negative during the
region's financial crisis, to maintain a double-digit recovery
rate year-on-year in the near term.

"We're thinking 11-12 percent growth in the short term, and
perhaps tailing off to something just below double digits in 18
months' time," Stirland said of monthly passenger traffic growth.

He added that cargo traffic was expected to grow by 12-15
percent year-on-year over the long term in line with increasing
trade both within Asia and with the rest of the world.

Stirland also expected yields, measured by revenue per
passenger, to pick up as load factors rose.

"There is no sign that the airlines are going to order lots
more aircraft...so airlines will be able to improve their
yields," he said.

Air safety

Stirland acknowledged a widely-held perception that Asian
airlines were more prone to accidents than their Western
counterparts, but said members were taking steps to erase that
image to cling on to customers.

"Statistically, you can prove that over the past five years,
there has been a greater incidence of significant accidents in
Asia than equivalent airlines in Europe," he said. "That is
undeniable."

A 20-year-old Alliance Air Boeing 737-200 aircraft crashed
into a housing estate and burst into flames in eastern India on
Monday, killing 55 people and triggering a debate over the use of
aging aircraft.

Stirland said constant training and checking of cockpit crews
in the region was needed, in addition to breaking cozy ties
between national airlines and regulatory authorities to ensure
proper checks.

Airlines in China had recently recruited safety officials from
the United States in an effort to improve their safety records,
he said.

On the group's membership, Stirland said he expected to
welcome mainland Chinese airlines into AAPA within the next 18
months despite difficulties caused by the current inclusion of
Taiwan's China Airlines and EVA Air.

Beijing considers Taiwan a breakaway province and has
threatened to invade if the island declares independence or drags
its feet indefinitely on reunification.