Asian airlines slash fares to boost outbound travel

Asian airlines slash fares to boost outbound travel

SINGAPORE (Reuters): Some airlines in Asia have slashed fares
to boost outbound travel, anticipating tougher times when this
month's holiday mood evaporates, airline officials said.

They said steep losses on local currencies which have plunged
in value against the U.S. dollar since July last year as
financial crisis swept through Asian economies, have made flying
a luxury.

Flights to Korea and Indonesia, the region's most troubled
economies, have been dropped by some airlines, while others have
plans to switch to smaller planes on less popular routes.

"What you are seeing at the moment is a temporary short-term
initiative aimed at stretching the Chinese New Year peak," said
Christian Destrieux, Air New Zealand and Ansett Australia general
manager for Southeast Asia in Singapore.

The Lunar New Year falls on Wednesday and Thursday and is
followed on Friday by Islamic Idul Fitri.

"It's a seasonal thing but it's probably accentuated by the
current predicament," he said, adding discounts would hopefully
transfer demand to the slow, post-new year season.

"Various airlines are adjusting their capacity to demand in
the region," he said.

Air New Zealand, which with News Corp owns Ansett, suspended
service to South Korea in December, followed later by Ansett and
Qantas.

Singapore Airlines changed its usual practice earlier this
week, advertising aggressive fare reductions for its Southwest
Pacific route.

An SIA spokeswoman said that previously the airline advised
agents of discounts and let them advertise special fares to
customers.

But advertising discounts directly was a "market necessity"
for the lull period after the festive season, she said.

The airline offered passengers rock bottom fares of Singapore
$570 (US$324) to some Australian cities and S$1,098 (US$624) to
London -- discounts of S$300 to S$400 on regular prices.

"We have no plans to cut frequency but there may be plans to
reduce capacity, to use smaller aircraft (to certain Asian
destinations)," the spokeswoman said.

The Bangkok to Seoul route has suffered a drop in passenger
traffic, the spokeswoman said.

"No one in Korea has been flying. They have been told not to
and it's not economically viable," Destrieux said.

Regional currency woes have made it unattractive for Asian
residents to travel overseas. Some governments of the region's
hardest hit nations have urged travelers to spend their cash at
home instead.

A travel agent who did not want to be named told Reuters that
Indonesians were being discouraged from leaving the country as
well.

"They are queried about why they are leaving, and in some
cases, we hear they are asked about their money," she said.

The Indonesian rupiah collapsed beyond 16,000 per U.S. dollar
on Thursday, down about 80 percent since July. It recovered to
around 13,000 on Friday after central bank intervention.

Qantas and British Airways joined the price war by beating
SIA's fares from Singapore to Australia, offering S$548 to some
cities, and S$998 to London.

Qantas, seen as one of the region's stronger airlines, has
said it would suspend flights between Melbourne and Jakarta,
Bangkok and Kuala Lumpur in February.

Airlines have also seen a slowdown in Japan, where yields have
gone down and returns are less profitable.

A Northwest Airlines official in the U.S. said recently he
expected the industry to trim capacity on Japanese leisure routes
by 7.5 percent in the first quarter, and 11.5 percent in the
second.

Airlines hope to offset weaknesses in the outbound market by a
stronger inbound one, as tourists from Europe and the United
States benefit from weaker Asian currencies.

Ian Heywood, regional sales and marketing manager for Qantas
and British Airways, said some sales to Asia remained strong.

"Certain parts of Asia are very good value for holidays, for
inbound, so we expect strong growth in that segment," he said.

Heywood said the UK and European markets enjoyed strong
currencies, offsetting some downside in the outbound market.

Qantas had pulled out of Korea but that was not a big market
for the airline, he said.