Cheap flights are bcoz recession is forcing airlines to cut fares

News added by James Smith under World Travel News

SHRINKING wallets are forcing airlines to offer cheap flights, with premium travellers enjoying the best discounts.Business-class fares out of Singapore fell by 22 per cent in the April-June quarter, from the three months before. They were also down by 19 per cent from the same period last year, said American Express (Amex), which regularly tracks air fares across the Asia-Pacific.

Economy fares, however, remained little changed, with fares down just 2 per cent quarter-on-quarter.Apart from Singapore, travellers in China, New Zealand and Vietnam also benefited from plummeting fares.

Overall, Asia-Pacific fares have risen only 1 per cent, compared with the January-March period. India and Japan were among some of the markets that saw a rebound in air-travel demand.

But Singapore’s situation does not bode well for Singapore Airlines, the biggest player out of Changi Airport. A fall in premium traffic and travellers slashing budgets have hit the airline head on.

Because of poor patronage, SIA has cut frequency on its non-stop Singapore-United States all-business class services. Instead of offering daily flights, it now operates only four times a week to Los Angeles and New York.

A few years ago, a business-class fare to Los Angeles was about $10,000. Now, it is hovering at $7,500. Because of falling yields, among other reasons, SIA lost $307 million in the April-June quarter - its second-ever quarterly loss since going public in 1984.

Things are not expected to improve very much in the coming few months either, industry experts say. Despite some early signs that the global economy could be recovering, most companies will continue to want further savings and to improve their bottom lines, said Mr Jonas Borglin, head of advisory services for Amex Business Travel in Asia.

The proliferation of budget airlines in the region is also putting pressure on overall fares, Amex said. Because of the global credit crunch, more and more travellers are opting for either cheaper full-service airlines or low-cost carriers like AirAsia, Jetstar Asia and Tiger Airways.

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