Air fares war: Price cuts amid low sales
Saturday 07 May 2011
A 13,000-mile round-trip to South East Asia for less than a standard return rail ticket from London to Glasgow: the apparently absurd bargain flight announced yesterday shows the disarray within the aviation industry.
Just when conventional wisdom indicates air fares should rise sharply – because of the high price of oil and continuing political unrest in some key destinations – instead they are being cut to unprecendented levels.
Malaysia Airlines, one of the major players between the UK and Asia, startled the travel business by announcing a short-term seat sale on its twice-daily flights from London Heathrow to Kuala Lumpur and beyond. A return fare of £305 applies on a wide range of dates from mid-August to 11 December, and from 16 January to the end of March next year. An “Anytime” standard-class return between England’s and Scotland’s largest cities costs £1 more. At the national minimum wage, it would take only 51 hours’ work to earn enough for a trip to the Malaysia capital.
Even bigger bargains, compared with normally prevailing prices, applies to other destinations. The island of Bali, a round-trip of 15,500 miles, costs only £340 return, while two big cities with no direct services from London – Ho Chi Minh City and Manila – are available at £343 each. Business-class flights to any Asian destination served by Malaysia Airlines are being sold at a flat rate of £1,999 return. Bookings must be made by 17 May.
The fares are being sold through travel agents at similar prices. “We have been very busy today,” reported Adam Waldock of the long-haul giant, Trailfinders. “These are without doubt the best fares that Trailfinders has seen all year. The next-best fare to KL is indirect and almost £300 more.” His company has packaged the flights with hotels to offer an eight-night holiday on the Thai island of Phuket for £499, including breakfast and transfers.
Dato’ Bernard Francis of Malaysia Airlines said the aim was to “kick-start” the market. Since February, sales right across the travel industry have been sluggish. Yesterday the regional airline, Flybe, warned its profits would fall below market expectations and saw its share price slump.
IAG, the new company that combines British Airways and Iberia, offered some signs of hope with its first quarter results yesterday. Despite fuel costing nearly one-third more, and the number of empty seats on the average flight increasing (on a typical 150-seat jet there are three fewer passengers), the airline has reduced its losses. Business traffic is building strongly and the company can command higher average fares.
Last week Europe’s biggest airline, Lufthansa, had a short-term sale from UK airports to key destinations in China for £350 return or less. Etihad today launches a “flash sale” from Heathrow and Manchester to a wide range of cities via its hub in Abu Dhabi. Manchester to Seoul is priced at £481, while Heathrow to Bangkok is on offer for £442. Very low fares to Asia and beyond were last seen two years ago, at the depths of the recession, when Singapore Airlines sold tickets to New Zealand for as little as £359 return.
The weakness of the British economy, and Sterling, is a cause of much concern for airlines, especially those serving Australia – where the dollar is at a 30-year high. The UK is a crucial market for many carriers, and further price cuts can be expected if sales fail to pick up.
One immediate beneficiary of the fares war is the Chancellor: Air Passenger Duty of £85 is payable on all the economy tickets, while business-class passengers pay £170 in APD. On the cheapest flight to Kuala Lumpur, this represents a tax rate of almost 40 per cent.
The “extras” that passengers must pay on flights are being examined by the Office of Fair Trading. This week easyJet raised its charge for paying by debit card to £8, adding one-third to a typical domestic flight costing £24. The actual cost to the airline for handling payments is less than 20p. For credit-card payments, the minimum is now £12.95. These apply per booking, for any number of flights, unlike the Ryanair practice of charging £6 per person per sector – amounting to £48 for a family of four on a return trip. Next month the OFT is expected to rule on whether these charges are reasonable.
For the lowdown on the Malaysia Airlines deal see: South East Asia on a 21st-century shoestring
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