Published October 28, 2009

Discount days end, flying's expensive again

Airlines call a halt to promotions with some fares up by 50% and set to climb further

By UMA SHANKARI AND FELDA CHAY

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(SINGAPORE) Airfares have climbed as much as 50 per cent in recent weeks as airlines end promotions and demand from travellers picks up ahead of the year-end peak period.

Rising surcharges, fuelled by the recovering price of oil, are another culprit.

Chan Brothers Travel, one of Singapore's largest travel agents, says airfares, including taxes and other charges, have risen about 20-50 per cent in the past few weeks.

Likewise, Sino-America Tours Corporation says ticket prices have been steadily increasing, especially since the recent National Association of Travel Agents Singapore (Natas) travel fair. Depending on the destination, the price hike is anywhere between 10 per cent and 40 per cent, the company says.

One reason is that airlines, which offered steeply discounted fares to fill seats during the economic slump, have now begun to stop such promotions.

'Due to the slump in travel as a result of the economic and health crises in the first half of 2009, airlines embarked on aggressive promotions to fill seats, and airfares were pushed to their lowest levels ever,' said a Chan Brothers spokeswoman.

'Now that the economy has bottomed out and travel demand is reverting to pre-recession level, but with airlines yet to reinstate their pre-recession capacity, a rise in fares is inevitable,' she said.

The approaching peak travel period - November and December - also means the lowest-category economy class airline seats are no longer available. Consumers therefore often have to look at the next category of fares, which are about 30-40 per cent dearer.

Travel agencies say part of the hike in fares can be attributed to the rising price of oil which has reached a new high for 2009, continuing its recent rise on the back of the weak US dollar. The likely result is higher fuel surcharges.

'Just fuel charges and taxes alone have climbed from $60-plus previously to the current $200-plus, so those who cultivated the habit of booking earlier have benefited a lot in terms of savings,' said a spokeswoman for Sino-America Tours.

CTC Holidays says taxes have climbed about 20-30 per cent across the board since Oct 1.

When contacted, airlines said ticket prices are usually adjusted according to market conditions.

A Singapore Airlines spokesman said: 'Fares are generally a function of market demand and supply, and they are adjusted depending on market conditions. Actual changes in fares also vary from route to route, and a range of fares is offered in different booking classes. As such, it is not possible to give specific figures relating to how airfares may have changed over a set time, and it is not possible to provide estimates of how they may change in future.'

For the coming year-end peak season, for example, airlines say they will be less aggressive in launching promotions. But selective promotions for flights on routes that are not filling up fast can still be expected.

'We will continue to price our tickets based on expected load factors on our flights, and for flights with weaker booking numbers, we will continue to launch promotional fares to stimulate demand,' said a SilkAir spokesman.

Despite rising airfares, demand for year-end travel has been strong. Travel agencies here are reporting steady bookings, not just for the year-end school holidays but also advance bookings for as far as March 2010.

But comparing the whole of 2009 with 2008, there is still a year-on-year shortfall in demand, as demand for travel dipped in the three peak months from May to July and industry players missed out on the June school holiday period.

Demand for air tickets started to slowly come back on track in the third quarter, agents say.

Looking ahead, airfares are expected to climb further as the December festive season and the extended Chinese New Year weekend in February get closer.

Sino-America Tours, for example, is estimating further hikes of 15-25 per cent on top of current rates for the coming festive season.

But airfares could well fall again if demand tapers off next year, industry sources say.

'Our view is that if demand starts to soften by mid-January to April 2010, the lower fares will be available again,' said a spokeswoman for CTC Holidays. 'However, the taxes and prevailing fuel surcharges may be more constant.'