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)