Published March 12, 2009

Airfares dive to scoop up passengers

Airlines and hotels cut rates in effort to drum up business in tough environment

By NISHA RAMCHANDANI AND VICTOR KATHEYAS

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(SINGAPORE) Airfares are coming down to earth from last year's heights as airlines strive to stimulate travel demand by offering travellers plenty incentive to snag a great deal.

'Most of the airlines have lowered their airfares by about 20-30 per cent compared to the same time last year, in view of the weak consumer spending confidence,' said CTC Holidays senior vice-president of marketing Alicia Seah.

What remains to be seen is whether deep discounts will be enough to see the travel industry through the next six to nine months.

While the National Association of Travel Agents Singapore (Natas) is hoping for the best, 'it looks like it's going to get worse', warned CEO Robert Khoo. To ease the burden somewhat, Natas aims to offer participating members a 10 per cent reduction in costs for the next Natas travel fair.

The most recent Natas fair raked in $45 million - $5 million less than last year - despite steep discounts offered by travel agents. The number of visitors was also down by 2,000, coming in at 56,000.

'While clutching their purses tighter, (Singaporeans) are definitely still travelling and will spend if there are good deals.' - Jane Chang, marketing manager for Chan Brothers

However, individual fairs held earlier by travel agencies such as Chan Brothers Travel, Sino-America Tours (SA Tours) and CTC Holidays seemed to have fared better, with all three outstripping their own sales targets.

As such, SA Tours remains upbeat that the more affordable rates will entice and encourage travel. For instance, even though the exchange rate for the yen has increased, people are still flocking to Japan, said marketing manager Ruth Lim. Lower fuel surcharges translate to $500 in savings per person for travel this April, compared to November last year.

This sentiment was shared by Jane Chang, marketing manager for Chan Brothers. 'While clutching their purses tighter, (Singaporeans) are definitely still travelling and will spend if there are good deals,' she said.

What this means is that Singaporeans are going where the deals are.

'We are seeing favourite destinations changing hands,' added Mr Khoo, pointing to fluctuating exchange rates, lower airfares as well as cheaper accommodation.

Europe emerged as the second most popular destination for tour packages - after China - at the Natas travel fair last month, which comes as something of a surprise since it is not usually in the Top 5 or even Top 10, he said.

Eager to draw customers, Jet Airways recently offered a package to Mumbai starting at S$588, which includes return airfare, two nights' stay at the posh Taj President Hotel and all taxes, surcharges and fees. The offer was open to a minimum of two passengers travelling together. A similar deal last year might have cost twice as much.

And airlines aren't the only ones dangling carrots; some hotels are also lowering room rates and making unbeatable offers in wooing travellers.

Last month, Laguna Resorts & Hotels Public Company announced plans to give away 100,000 complimentary room nights at six of its Phuket hotels and resorts to stave off the slowdown in tourist arrivals amid political uncertainty and a deteriorating global economy.

This comes on the heels of an earlier campaign where, together with the Tourism Authority of Thailand, Banyan Tree gave away 1,000 complimentary room nights at its Banyan Tree Bangkok and Banyan Tree Phuket hotels.

Consumers are also looking for additional perks such as admission passes, airport transfers or even daily breakfast as this translates to a sizeable amount of savings for a family, added Ms Lim.

But while all this may be good news for travellers, it's hardly the stuff of dreams for the airline and hotel industries.

In response to falling travel demand - the current crisis facing the aviation industry now that jet fuel prices have dropped - airlines have been forced to cut capacity as passenger loads decline.

Singapore Airlines's January passenger load factor fell to 74.1 per cent from a 78 per cent average during October-December 2008.

In February, SIA announced that it would reduce capacity by 11 per cent in FY2009-10 and decommission 17 of its aircraft.

This comes on the back of other capacity changes announced earlier, including the withdrawal of service to Amritsar and Vancouver, a lower frequency of flights to India, as well as a cutback on the non-stop flights between Singapore and the US.

Malaysia Airlines is expected to cut capacity by 5 per cent this year - after a 6.4 per cent reduction in 2008 - while Cathay Pacific is considering paring capacity and eliminating routes after posting a US$1.1 billion loss for 2008, Associated Press reported.