By KARAMJIT KAUR & DANIELLE ANG

Taking a break used to be a breeze for the Chias. One call to the travel agent and everything - from air tickets to hotels and tours - was taken care of.

But no longer.

It took six months of trawling through the Internet, newspapers and guide books to hunt down the best deals before the family of four finally took off for a week-long holiday in Sydney.

In the end, the hard work paid off for network engineer Chia Han Ghee, 39, his 34-year old administrator wife and their two children, aged three and seven.

Their trip cost them about $5,500 - $3,604 for air fare, $780 for accommodation and the rest for shopping, transfers, food and excursions.

"Had we opted for a packaged tour, the whole trip would have cost us about $8,000, so we not only saved $2,400 but also did what we wanted to do at our own time and pace," said Mr Chia.

As airlines hit by sky-high fuel prices deal with the turbulence, travellers are bearing the brunt of fares that have shot up by as much as 30 per cent in the past year.

Feeling the pinch, many people like the Chias are spending nights and weekends scouring for online deals and downgrading.

Forget about dining on oysters and lobsters at Doyles At The Quay overlooking Sydney's Opera House. Instead, many are settling for Pad Thai in a cafe along Phuke's Patong Beach.

Miss Jocelyn Su, marketing communications manager at CTC Holidays, notes that there has been a 15 per cent increase in those going regional in the first quarter of this year compared to last year.

Many who used to head for the United States and Europe, for example, are now choosing to holiday in South-east Asia, Japan, Korea and Taiwan.

Last October, information technology consultant Javier Galvez, 36, headed to Beijing with his homemaker wife Marcela, 39, and their six-year-old daughter Zahira.

By keeping expectations modest, staying in a $65-a-night hotel room and spending less than $40 on each meal, they kept their total vacation bill to $3,500.

Others have even switched to ferry and rail travel.

Undergraduate Ruth Das, 20, used to take off for Bangkok on budget airline offers. But this year, she sailed to Bintan instead.

"It cost me $200 to get there by ferry and stay at Bintan Lagoon Resort. If I can stretch my dollar by saving on air fare, I'd rather go to such nearby islands for a vacation," she said.

Companies are making adjustments too.

Executives are either moving from business to economy class, or staying with the same class but on a less expensive carrier.

Miss Alicia Seah, vice-president (leisure) of UOB Travel Planners, said: "Some companies that used to fly their CEOs first class are now putting them in business class."

Another trend is that business-class travel is now reserved for longer flights.

"So instead of flights over four hours, for example, executives may have to travel at least seven hours to be eligible for business class," she said.

Desperate situation

Airlines are in a crisis not seen since the Sept 11 terrorist attacks in 2001.

The villain this time is jet fuel - prices of which have doubled in the past year to an average of more than US$160 (S$220) per barrel.

Oil used to make up less than 20per cent of an airline's total costs. Now, it is as much as 40 per cent.

Pressing the panic button when its members met recently in Turkey, the International Air Transport Association (Iata) - the global voice of airlines - warned that the total fuel bill for the industry could hit US$176 billion, which is US$40billion more than last year.

That is already the best-case scenario, said its director-general and chief executive officer, Mr Giovanni Bisignani.

For every dollar that the price of oil inches up, annual costs go up by US$1.6 billion.

He added: "We are in stormy waters. The situation is desperate."

Less than half of these escalating costs is now being defrayed through passenger fuel surcharges, which first reared their ugly head in 2004.

Singapore Airlines, for example, has raised its fuel surcharges from just US$5 for a one-way flight in June 2004 to between US$35 and US$150 now. The further you fly, the more you pay.

During that time, the price of jet fuel has soared over 200 per cent.

Thai Airways announced last Wednesday that from June 25, fuel surcharges will go up again - from US$120 for a short-haul trip between Singapore and Bangkok, to as much as US$562 for long-haul flights, say, to the United States.

Depending on where you go and with which carrier, fuel and other charges can now add up to more than the actual cost of the seat.

This is true especially in the short-haul market where the big boys like SIA and Thai Airways battle with low-cost carriers like Tiger Airways, Jetstar and AirAsia for turf.

Administrative officer Terrence Lee, 38, who recently booked a Tiger flight to Phuket, was charged $216.
He noted: "The base fare is $70, which is about 30 per cent of the total cost. The rest go to taxes and other charges.

"At the end of the day, it's the total cost that matters, of course. It seems rather bizarre to me that the extras are so high."

As airlines attempt to recover what they can from the consumer to cushion the impact of sky-high fuel prices, a few are tweaking the extras too.

In some cases, it's not even clear what the passenger is paying for.

Tiger, for example, has no fuel surcharges but last year introduced a $4 'convenience fee' for every one-way flight paid for online.

Its spokesman said the fee is to recover part of the costs incurred in providing customers with greater payment security.

Tiger has also recently started charging a minimum of $5 for checked-in luggage, when it used to give a complimentary 15kg before.

All these are driving the cost of flying up.

A return Singapore-Hong Kong SIA ticket, which cost about $785 a year ago, is now $900 - a 16 per cent increase.

The base fare is up 15 per cent, but the fuel surcharge has seen a 50per cent jump from $40 to $60.

It's not all bad news though.

Yes, normal published fares are higher today. But there are still some good deals, especially on competitive routes, like Singapore-Bangkok and Singapore-Hong Kong, serviced by plenty of carriers.

To stimulate demand, it is now common for flag carriers like SIA, Malaysia Airlines, Thai Airways and Indonesia's Garuda to put out promotional fares - albeit with strings attached like 'two to go', and for selected flights only.

SIA, for example, is now offering special all-inclusive round-trip fares of under $350 per person, if two travel together, to Asean cities like Kuala Lumpur, Bangkok and Jakarta; and about $600 to $700 to destinations in India and China.

Low-cost carriers, not to be outdone, are also redoubling their efforts.

Tiger recently had promotional one-way fares starting from $39 for Singapore-Kuala Lumpur, and $89 for travel between Singapore and Bangalore, Guangzhou, Haikou, Shenzhen or Xiamen.

Competitor Jetstar Asia also offered special deals to various destinations including Bangkok and Medan, which were going for about $20 to $30 one-way, excluding taxes and surcharges.

But what all the airlines will never tell you is how many low-fare seats are on offer.

Industry watchers reckon that on some flights, it is just a handful. The rest go for normal fares.

Everything is in a state of flux right now, said Asia Pacific Carlson Wagonlit Travel president Berthold Trenkel.

Air fare pricing is much more dynamic today with carriers 'playing' with fares and offering different rates at different times of the year or for different routes, to stimulate the market.

The quantum of fare increases also has to do with an airline's financial position, he said.

Carriers mired in losses like Thai Airways and United Airlines, for example, are desperate to recover as much as they can from travellers, which means their fares tend to jump faster than those with better financial health like SIA, British Airways or Qantas.

Industry players believe that things will get worse before they get better.

Many airlines are now sitting on hedging contracts - an agreement that locks the purchase price for a stipulated amount of time - and still operating on fuel prices below real current prices.

If fuel prices do not ease when these contracts expire, hedging will become more expensive, which means even more stress on the bottom line.

Despite the crisis, Australian carrier Qantas still expects to make a record profit in excess of A$1.5 billion (S$1.94 billion) this financial year, due largely to its fuel hedging programme, which has seen it pay US$76 a barrel for fuel.

But from July 1, the airline will have to pay US$112 a barrel until the end of December, and substantially more thereafter if fuel prices remain high.

Mr Trenkel said: "We have not reached the peak yet, so be prepared to see prices continue to rise."

How high is anyone's guess.

Adjust and adapt

Still, few players believe air travel will revert to the occasional luxury it once was about a decade ago.

UOB Travel Planners' Miss Seah is among those convinced that travellers will adjust to higher fares and surcharges, and continue taking much-needed holidays. The same goes for business trips.

To encourage more travel, she also expects airlines to continue pushing out their promotional fares and offers from time to time.

"What you will then end up with is different people on the same flight paying a range of different fares."

Housewife Kiran Singh, 48, said: "That's the reality of air travel today. You book early with a budget flight hoping for the best deal and, three months later, they come up with a to-die-for promotion.

"It's very frustrating but, I guess, in the end, you win some, you lose some. It's a gamble, really."

Meanwhile, she diligently trawls for deals six months before trips, determined to emerge a winner.

Have you cut down on air travel because of higher air fares? Share your story in the travel forum.

This article was first published in The Sunday Times on June 15, 2008.

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