Asia's airlines are filling more of their seats six months after terrorist attacks in the US by offering discounts to leisure and business travelers that will delay their rebound to profit, companies said.
While some carriers in the region say they're filling as many seats in each plane as they were before Sept. 11, that's only been possible because of cheaper fares and the suspension of flights to take surplus capacity out of service.
"Companies have become more cost-conscious, and they're scouting around to get lower ticket prices," said Patrick Lai, vice president for electronic commerce at Abacus International Pte, an air ticket reservations company owned by 11 Asian carriers, including All Nippon Airways Co, Cathay Pacific Airways Ltd and Singapore Airlines Ltd. "That's putting a lot of pressure on airlines and their yields."
Asian airlines are suffering similar pricing woes to their counterparts in the US and Europe, where a revival of travel in recent months isn't yet strong enough to push airfares back to pre-Sept. 11 levels on several routes. Many of the passengers who do board planes have either negotiated lower corporate rates or prefer to sit in cheaper seats, airlines said.
Demand for business or first-class travel remains "very weak," said Tony Tyler, Cathay's director of corporate development in an interview last week.
Cathay, Hong Kong's dominant carrier, last week reported a worse-than-expected loss of HK$662 million (US$85 million) for the second half ended on Dec. 31, compared with HK$2.82 billion net income in the year-earlier half. It blamed the loss in part on a drop in its passenger yield, a measure of profitability, which fell 5.2 percent last year.
Investors, though, are already calculating a revival will restore profits. Cathay's shares are the third-best performer on the Bloomberg Asia Pacific Airlines Index since Sept. 11, gaining 40 percent. They fell 1.3 percent to HK$11.65 yesterday.
Cathay is joined in the region by other airline stocks on the rise, including Singapore Air, whose shares are up about a third in the past six months.
In January, the most recent month for which figures are available, Singapore Air filled 76.3 percent of its seats.
Although unchanged from the year-earlier month, the tally was more than the 72.8 percent it filled in December.
Cathay filled 75.8 percent of available seats with paying passengers in January, 2.7 percentage points more than a year earlier and an improvement from 75.1 percent in December.
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Before the terrorist attacks, airlines such as Singapore Air and Cathay said they typically broke even when they filled about two-thirds of their seats. That ratio probably increased when ticket prices fell.
One sign of a rebound is that some airlines are starting to end some cheap fare programs as demand picks up.
China Airlines, which offered one free ticket for each one sold to promote its business class after the terrorist attacks, ended the promotion late last year because demand ``clearly returned,'' said company spokesman Paul Wang.
Freight forwarders in Asia also said demand rose in the first two months of this year as manufacturers increased shipments to fill orders. Air cargo accounts for as much as 40 percent of sales for some Asian carriers, so rising demand for electronics deliveries is helping to spur the revival.
Japan Airlines Co has been slow to resume suspended services as Japan's third recession in 10 years and safety worries deter many travelers from vacationing abroad.
Asia's largest carrier by sales said in January seat capacity for services to North America would fall 19 percent after the carrier reduced the number of flights to the region by a quarter. Still, the carrier said last month it will resume a third daily flight from Tokyo to Honolulu in May.
"In November, JAL traffic to Hawaii dropped by 61 percent year on year but by February 2002 it had picked up to the level of 75 percent" from the same period a year earlier, said spokesman Geoff Tudor. "March is almost back to normal."
Japan Airlines said after the attacks last year it introduced business class discounts of as much as 30 percent on transpacific and European routes. Japan Air's shares rose for the 10th day in the past 11 trading days, gaining 3.5 percent to Japanese yen 411 yesterday.
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