Published January 5, 2009

Sweeter travel deals as jet fuel price falls

Some airlines cutting or dropping fuel surcharge to boost flagging demand

By NISHA RAMCHANDANI AND VICTOR KATHEYAS

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(SINGAPORE) With jet fuel trading at nearly half of what it used to cost and with travel demand contracting, air travellers may just be able to grab some pretty sweet deals.

London calling: Competitive airfares and the decline in various currencies - especially the British pound and the Australian dollar - are also enticing Singaporeans to take a more serious look at various distant destinations like the UK and Australia

National Association of Travel Agents Singapore (Natas) CEO Robert Khoo notes that while travel demand has suffered of late, no thanks to the economic slowdown, things were far worse during the 2003 severe acute respiratory syndrome (Sars) crisis.

'At this moment, there has not been any business closure as a result of this economic downturn,' he said.

In short, while many Singaporeans have tightened their purse strings and opted for shorter regional trips, they still have the spending power. In any case, as Mr Khoo puts it, 'travel has evolved into a Singaporean lifestyle'.

Also helping are competitive airfares and the strength of the Singapore dollar.

While many Singaporeans have tightened their purse strings and opted for shorter regional trips, they still have the spending power. In any case, 'travel has evolved into a Singaporean lifestyle'. Also helping are competitive airfares and the strength of the Singapore dollar.

The falling price of jet fuel has prompted several airlines to reduce fuel surcharges. Thai Airways International announced that fuel surcharge rates on domestic and international routes would be virtually halved. For its Bangkok-Singapore route, fuel surcharges dropped 45 per cent from US$45 per sector to US$24.50 per sector.

Other airlines that have also pared fuel surcharges include Qantas, Lufthansa, Cathay Pacific, Malaysia Airlines and British Airways, while Malaysia's budget carrier AirAsia announced last November that it was dispensing with fuel surcharges altogether.

Singapore Airlines has cut surcharges twice since last September and could do so again if fuel prices remain low.

The average weekly jet fuel price is now under US$70 per barrel, compared to US$175 six months ago.

Meanwhile, the decline in various other currencies - especially the British pound and the Australian dollar - is enticing Singaporeans to take a more serious look at various distant destinations like the UK and Australia.

Natas expects outbound travel to remain quite strong until Chinese New Year, then slow down after.

Chan Brothers Travel shares the same sentiment. Ticket sales for the 2008 year-end matched the previous year's levels, and travel for Chinese New Year is actually 10 per cent up year-on-year.

However, Chan Brothers is bracing for a drop in demand for long-haul destinations. A spokesman said: 'For 2009, we expect a 20 per cent drop in long-haul travel as travellers go for short-haul destinations. Singapore travellers will be more cautious in their budget planning and look for more value.'

Meanwhile CTC Holidays says bookings on long-haul destinations such as America, Europe, the Middle East and South Africa have dipped by about 5-8 per cent over the last two months.

'We are definitely seeing a slowdown which may get worse,' said Alicia Seah, CTC's senior VP, marketing and PR. 'Forward bookings are not too optimistic and response so far has hardly been overwhelming. We'll have a better feel by mid-January.'

According to Ms Seah, the grim reality of layoffs, salary cuts and smaller year-end bonuses will eat into sales by the second half of 2009.

'Airlines have adjusted their fares by providing some very attractive deals,' she added. 'These deals will help stimulate the market during the low season in the first quarter, excluding the Chinese New Year peak period.'

According to online travel provider Zuji, fares in general have gone down both due to lower fuel surcharges as well as lower base fares as a result of falling demand.

Meanwhile, the latest global travel numbers make for depressing reading. The International Air Transport Association (Iata) last week reported that global passenger traffic contracted 4.6 per cent last November, making it five consecutive months of decline. For Asia-Pacific carriers, passenger traffic declined 9.7 per cent, following a 6.1 per cent contraction in October.

And traffic in 2009 is expected to fall some 3 per cent.

'Our advance bookings for the current quarter are holding up, although we do see some signs of weakening demand beyond that,' said Stephen Forshaw, SIA's vice-president of public affairs. 'We are monitoring the situation closely and have made adjustments to better match capacity to demand.'

The airline is already looking at cutting capacity on several of its routes, and CEO Chew Choon Seng indicated the possibility of parking planes if things got worse.

But for the moment, at least, everyone seems to be simply holding their breath.