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Business travel bounces back - Business Travel

As Asia slowly begins to emerge from recession, and the shock effect of 11 September wears off, business travellers are once again taking to the skies and jetting around the region--much to the relief of those in the industry.

General manager of the Portman Ritz-Carlton Shanghai Mark DeConcinis said earlier this year that "the improvement of the world economic situation will be critical to us in Asia this year".

Now, he reports an increase in foreign business travellers, particularly from North America and Europe.

"We have many small companies coming to research and the Fortune 500 companies are expanding their offices as a result of WTO (China's entry)", DeCocinis says.

Airlines are enjoying the fruits of this growth too--a recent Dow Jones report shows Asian airlines to be climbing once again, with grounded planes returning to meet increasing demand.

This positive recovery has been attributed to smart capacity management, reduced fuel costs and a strong regional economy.

Higher passenger numbers and lower fuel costs helped Cathay to report a 6.8 per cent jump in first-half net profit to HK$1.41 billion ($335.5 million), and Korea Airlines to achieve a return-to-profit in the fiscal second quarter ended 30 June.

Cathay's fuel costs came down 20 per cent in the first half, and in Singapore and Hong Kong fuel is about 16 per cent cheaper than it was a year ago. Another airline doing well is Thai Airways International PCL. Latest profit figures were not available at the time this article was produced, but the airline recently reported a proposal to acquire a large number of new aircraft, possibly up to 16, over the next few years.

Analysts welcomed the move, saying it was a necessity to accommodate growth, as well as cutting maintenance costs.

International focus

On the Australian front, Qantas is renewing its focus on increasing international travel, the company's main source of revenue.

In the six months to 31 December, Qantas' net income fell 41 per cent to $153.5 million after the 11 September slump in global air travel.

However, the failure of rival airline Ansett Holdings Ltd, in September 2001 helped Qantas raise its share of the Australian market by half to about 80 per cent, shielding it from most of external woes.

Chief executive Geoff Dixon now wants to expand Qantas' share of international traffic as more travellers fly abroad, according to analysts.

Eric Betts, an equities strategist at Nomura Australia, said that things would remain challenging for Qantas, but the company was on the ball.

"They never sit back and rely on external factors that much," says Betts.

Qantas shares have gained 45 per cent in the past 12 months, making it the second-best performing stock among airlines.

Dixon said in June that annual pre-tax profit would be at least $605 million, compared with $550 million a year earlier.

Domestic demand generated the bulk of the profit, although international passenger traffic increased 11 per cent, even as the carrier reduced the number of available seats by 5.4 per cent.

Price regulators are watching to ensure Qantas doesn't use its dominance of the domestic market to hurt remaining competitor Virgin Blue Airlines Pty. This, coupled with limited growth prospects, is prompting Qantas to look abroad.

A strong domestic base will not sustain Qantas, Dixon said in June.

"The majority of our revenue comes from our international travel market and about 75 per cent of our capacity is deployed internationally," Dixon says.

RELATED ARTICLE: Tough year for Australia.

Australia's hoteliers earned 8.7 per cent less last year than in 2000, after the nation's second biggest airline failed and the 11 September terrorist attacks reduced the number of travellers seeking accommodation, according to PricewaterhouseCoopers' 2002 Hotel Industry Report.

The firm surveyed 186 Australian hotels for the report, which also revealed that revenue for businesses providing commercial accommodation in Australia fell four per cent last year compared with 2000.

The 2000 Sydney Olympic Games and a slowdown in global economic growth also contributed to the decline in earnings before fixed charges and management fees, the report said.

Sydney had a tough year, reporting a decline in room occupancy of 4.6 per cent, compared with the national decline of one per cent, in part reflecting a post-Olympic accommodation overhang, said Peter Power, a PricewaterhouseCoopers director.

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