Demand yet to peak on airfare cuts

Airlines in the Middle East are offering lower fares on some European and regional sectors but demand is yet to step up, according to travel executives.

Effective January 4, 2009, some airlines in the region have reduced fares by about 20 per cent for the economy class and up to 45 per cent for the business class, with varying validity.

Emirates, for instance, reduced airfares for most markets by between 10 and 20 per cent. "We need to adapt to market dynamics and requirements. For now most of the fares in the system will be valid until the end of the financial year ending March 31," Adnan Kazim, Emirates' Senior Vice-President, Commercial Operations, Gulf, Middle East and Iran, told Emirates Business.

He added that the airline has revised fares to Europe, the Americas, Africa, the Middle East and Asia Pacific. "There is no fixed formula. Fare revisions differ from market to market. In some cases we have revised fares downwards by more than 20 per cent of prevailing prices," said Kazim.

Abu Dhabi-based Etihad Airways said it has introduced promotional fares for January. The spokesperson, Thomas Clark, said: "Etihad's January fares are just promotional fares and no a result of any reduction per se."

However, the fare cut has not enthused travel agents who don't see a surge in bookings or increase in business happening in the near future. According to them airlines should reduce the fares further and in proportion to the drop in crude prices. In fact, most agents are anticipating a further drop in prices.

Waseem Rahmany, Senior Manager, Sales and Marketing, Al Rais Travel, said: "If the demand for travel has to pick up, the airlines should reduce the prices further… at least by another 30 per cent to stimulate the market." He said: "Compared to last year, the travel bookings in Dubai are likely to be down by almost 35 per cent in the first few months."

In a similar move, last week, Indian airlines cut fares on domestic sectors, which resulted in a surge in bookings especially on, travel websites.

Iain Andrew, Divisional Senior Vice-President, Travel Services, said: "We do not anticipate the reduction in airfares will offset the cut in travel spend expected because of the current economic climate."

Recently, the Dubai Tourism Commerce Marketing and Sharjah Commence and Tourism Development Authority held discussions with hotels for the downward revision of rack rates. Travel trade sources said that they felt that only if key industry sectors revived would air travel increase. They say, it was too early to tell if fare reduction would increase traffic, as January first week was the lean period in the region.

Samer Ascha, General Manager Skyline Travel Tourism and Shipping agreed. "It was too early to predict whether the fare reduction would encourage people to travel," he said.

Rahmany said: "Business travel is down by almost 30 per cent compared to the same time last year."

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