KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
In a significant shift from the post-pandemic fare surge, airlines worldwide are cutting ticket prices as international flight numbers rise and travelers become more cost-conscious. This trend is expected to continue throughout the year, according to Flight Centre Travel Group Ltd.
Key Points:
Falling Fares:
- International fares globally fell 6% in the first six months of 2024 compared to the same period last year.
- Flights from Australia are 13% cheaper, and fares to popular destinations like Bali have dropped by 18%.
Airline Discounts:
- Qantas Airways Ltd. has cut prices more than six times this year, with recent domestic fares as low as A$109.
- Virgin Australia is averaging at least one fare sale per month.
- Ryanair Holdings Plc reports that flights are getting cheaper, with a cut in their outlook for summer ticket prices.
Market Dynamics:
The decline in fares reflects a re-balancing of power from the post-Covid demand surge. Initially, airlines had significant control over pricing as travel restrictions lifted and demand outstripped the reduced number of available seats. This resulted in premium fares exceeding $20,000. Now, with more international flights available, particularly in Asia and Europe, airlines are adjusting prices to attract a more cost-sensitive traveling public.
James Kavanagh, CEO of leisure at Flight Centre, highlighted this as a global trend, noting that airlines no longer hold all the power. He emphasized that the cost-of-living crisis is making consumers more price-sensitive, prompting airlines to offer deals to fill planes well in advance of departure.
Airline Strategies:
Promotions and Sales:
- Greater Bay Airlines recently offered hundreds of return flights for just HK$20 ($2.56).
- Qantas's latest sale includes over a million seats on domestic flights priced as low as A$109.
Economic Impact:
- The Bloomberg World Airlines Index, which includes major airlines like American Airlines Group Inc., Air China Ltd., and Deutsche Lufthansa AG, has fallen around 15% in the past year.
- Ryanair shares are down about 26% this year, reflecting investor concerns over the impact of falling fares on profitability.
Industry Challenges:
Despite the overall trend, not all airlines are following suit. Qatar Airways CEO Badr Mohammed Al-Meer reported accelerating passenger demand. Additionally, a shortage of commercial aircraft and supply chain disruptions are constraining capacity. Airbus SE is facing a huge backlog, with wait times for popular aircraft extending for years.
Emirates President Tim Clark criticized the sudden fare cuts by some airlines, warning of a potential "race to the bottom." He emphasized maintaining price points aligned with business segments to ensure a sustainable growth story.
Conclusion:
The current environment presents a mixed picture for airlines and investors. While falling fares are a boon for travelers, they pose challenges for airline profitability and investor confidence. The continued adjustment in pricing strategies will be crucial for airlines as they navigate this evolving landscape.
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