Foreign airlines wage price war

Foreign airlines wage price war

JAKARTA (JP): Major foreign airlines are waging a price war in
Indonesia's financially strapped market, slashing fares over 60
percent due to stiffening competition.

German carrier Lufthansa is currently offering return fairs to
London, Frankfurt, Zurich, Madrid or Rome at US$699, almost 70
percent lower than their normal rates.

For $749, passengers departing from Indonesia can travel to
other European destinations, while several major U.S.
destinations cost as little as $799.

"It's not the best deal for us, but we want to increase our
market," Lufthansa's general manager for Indonesia, Carlos
Heinemann, told The Jakarta Post.

Heinemann said Lufthansa's market in the country had dropped
25 percent to 30 percent compared to last year, significantly
thinning his company's profit margins.

"Airline profit margins are always thin anyway, so in a
situation like this, you can go under," he said.

Air France's country manager, Christian Herpin, said his
company had allocated some of its seats as a discounted "special
booking class" to European cities.

A return trip to Western Europe, including Britain, Germany,
Switzerland and Portugal, cost $850 in this special class, he
said.

Tickets to other destinations such as Sweden, Norway, Greece
and Turkey are priced at $699, he said.

The prices are about 60 percent lower than their normal price,
Herpin said.

"Air France understands that we have to lower our rates, but
we can't go very low because 80 percent of our costs are in
dollars," he said.

The monetary crisis has bitten into the income of most
Indonesians, slashing their purchasing power which has
subsequently lowered the number of outbound overseas travelers.

The rupiah has plummeted against the U.S. dollar by 70 percent
since July.

In February, the government raised the departure tax for
Indonesian residents 300 percent to Rp 1 million ($125), creating
a further blow to international flight services.

Herpin said Air France's revenues from outbound travelers from
Indonesia had dropped 20 percent.

"Our target is to maintain this and not go below 20 percent,"
he said, adding that he expected to sell at higher rates again in
June and July.

Other airways have also cut their fares to similar levels.

British Airways offers return fairs to London at $659, to
Frankfurt and Zurich at $699, to Madrid and Rome at $729 and to
New York at $749.

Singapore Airlines has advertised $585 as its rate to London,
including a free one night stay in a Singapore hotel.

Hong Kong's Cathay Pacific charges $599 for a return flight to
European destinations from either Jakarta, Surabaya in East Java
or Denpasar in Bali. Return flights to North America cost $689.
Each destination comes with the bonus of staying one night free
in a leading Hong Kong hotel.

Australian carriers may be more relieved compared to their
European counterparts, since traveling to nearby Australia is
more affordable than to other continents.

"Our profit yields have not been as good as last year's, but
since Australia is not too far, there are still more people
traveling there than to Europe or the United States," said Fonny
Tedjakusmana, one of Australia's Qantas sales and marketing
executives.

Fonny said the number of Qantas passengers to Australia from
Indonesia in the July 1997 to April 1998 period rose 2 percent
from the same period in the previous years.

But she admitted that Qantas' revenue had dropped during the
period, due to its reduced rates to compete for passengers.

Qantas' passengers are now largely made up of migrants,
students and business travelers, since holiday travelers are few,
she said.

Although its flight rates are currently not discounted, Qantas
has been offering cheap travel packages to Sydney, Melbourne,
Coolangatta, Adelaide and Perth since February to attract more
vacationers.

The packages, valid until August 1998, start from $477 and
include return flights between Jakarta and one of the five
destinations, three nights of accommodations, a choice of tours
and discount shopping cards.

Another Australian carrier, Ansett, is also offering similar
packages to Adelaide, Melbourne, Sydney and the Gold Coast from
$599. It also offers packages to New Zealand starting at $948.

In addition, Ansett also has lowered its Jakarta-Sydney return
fair to $400 this month from $750.

The airline's load factor is currently about 70 percent, down
from 80 percent last year, she said, while revenues have dropped
50 percent. (das)