Sat, Dec 13, 2014 - Page 13 News List

Airlines cut fares as oil prices slide

BALANCING ACT:Local carriers do not expect the adjustments to affect their bottom lines, because the reduced fares will mainly apply to off-peak travel

By Amy Su  /  Staff reporter, with CNA

Thanks to plummeting global crude oil prices, four Taiwanese airlines offering domestic flight services will start cutting fares on some or all routes starting on Monday in response to a government request.

The Civil Aeronautics Administration (CAA) had asked four domestic carriers — Mandarin Airlines (華信航空), Uni Air (立榮航空), TransAsia Airways Corp (復興航空) and FAT Taiwan Inc (遠東航空) — to reduce ticket prices for off-peak travel to reflect falling fuel costs and as a benefit to the public.

Each of the four carriers has adopted its own rate cut program, with airfares for certain routes dropping by as much as 50 percent — mainly for online purchases.

The airlines do not expect any negative impact from the price adjustments, as they are being made to balance out passenger loads between peak and off-peak travel.

“We expect the rate adjustments to help raise our passenger loading factor during off-peak hours,” Mandarin Airlines public relations office manager Nadia Huang (黃尤欗) told the Taipei Times by telephone yesterday.

However, China Airlines Ltd (中華航空), EVA Airways Corp (長榮航空) and TransAsia Airways have no plans to cut ticket prices for international flights, saying the CAA-orchestrated fuel surcharge adjustments every month already factor in changes in global crude prices.

Currently, the surcharge stands at US$20 for a regional flight in Taiwan, and rises to US$52 for long-haul flights, compared with US$27.5 and US$71.2 respectively in March, data showed.

Industry observers say the positive impact of low oil prices on airline companies’ profitability is very clear, as nearly 30 percent of their operating costs last year was related to oil consumption.

As global crude oil prices have fallen 40 percent since the beginning of the year, international airlines are expected to post a collective global net profit of US$19.9 billion for this year and US$25 billion for next year, the International Air Transport Association (IATA) forecast on Wednesday.

After adjusting for inflation, average round-trip airfares excluding taxes and surcharges are expected to fall by 5.1 percent from this year, with cargo rates set to fall by a slightly bigger 5.8 percent, the association said.

Arnaud Bouchet, BNP Paribas Securities’ Singapore-based transportation analyst, said that falling oil prices are an unexpected boon for airlines around the world.

“This greatly benefits airlines’ bottom lines,” Bouchet wrote in a note on Thursday. “Even though top lines will come under pressure as airlines start reducing fuel surcharges, we expect the overall impact of falling oil prices to be positive.”

In related news, Tigerair Taiwan (台灣虎航), a joint venture between China Airlines and Singapore’s Tiger Airways, yesterday said it was recruiting another 150 flight attendants as part of its rapid expansion.

The budget airline currently has 70 flight attendants.

The starting salary being offered is NT$50,000 per month — about twice the average pay of entry-level office workers in Taiwan, Tigerair said.

Tigerair now flies from Taiwan to Singapore and the Thai cities of Bangkok and Chiang Mai.

On Wednesday, it will launch its Taoyuan-Macau route, followed by its Greater Kaohsiung-Macau services on Thursday. It also plans to start flying to Japan and South Korea next year.

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