November 19, 2008 AIRLINES will look to aggressive promotions,...

November 19, 2008

AIRLINES will look to aggressive promotions, such as Qantas' two-for-one international sale, to stem the fall in demand for air travel.

And it is not only Australian airlines feeling the pinch on international travel. Cathay Pacific and Singapore Airlines recently reported a slowdown in growth and painted an ominous picture of their prospects.

"With fuel and aircraft related payments in US dollars, the sharp appreciation of the US dollar and the concurrent depreciation of the euro, UK pound and Australian dollar … is an adverse development," Singapore Airlines said this month. "Although advance bookings for the immediate next quarter are holding up reasonably well, there are signs of weakness beyond that."

Those comments have been echoed by Qantas, which has extended its two-for-one deal until midnight tonight.

Under the Qantas deal, two Melburnians can fly from here to Los Angeles return for $2974 or to London return for $3036, the average price of a single return ticket.

Qantas executive general manager John Borghetti told BusinessDay that the global financial crisis had resulted in fewer people travelling.

However, the two-for-one promotion had sold "many thousands of seats", which prompted the decision to extend the offer.

"You could call it Qantas' own stimulus package," Mr Borghetti said. "We have seen booking rates weaken over the last few weeks and we saw this as a good way to stimulate demand, not just out of Australia but globally."

Mr Borghetti denied that Qantas was bleeding money on the offer, saying the deal would prevent flights taking off with empty seats. Last week Qantas reported a 7.2% drop in passengers travelling overseas and a 4.9% fall in domestic travel.

However Qantas budget offshoot Jetstar, which put more seats into the market, experienced a 12.1% increase in domestic travel and a 36.5% increase in international passengers.

Tiger Airways Australia's managing director, Shelley Roberts, said budget-conscious passengers were starting to turn to the low-cost carriers.

"That is what our experience has shown in Europe and, given that our forward-booking process is strong and the low fares that we have in the market, I would say that that is playing out in Australia," she said.

Ms Roberts said Tiger would launch today a "free ticket" promotion to coincide with its first anniversary of flying in Australia on Sunday. Passengers will only have to pay taxes and charges of up to $39.90, and credit card fees, to fly on most Tiger routes between February 1 and June 30 next year.

Virgin Blue said it planned to reveal its strategy for the new year at its annual meeting on Friday next week.