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Australia's flying future grim as fuel prices -

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ELEANOR HALL: The future of flying in Australia is looking grim today as the rising fuel price cuts
deeply into the balance sheets of the country's airlines.

QANTAS has raised its ticket prices twice just this month, grounded some of its planes and
cancelled routes, Tiger Airways which only took off in Australia six months ago has now announced
that it will charge passengers to check in their baggage, and many analysts say this is just a
taste of what's to come as the industry grapples with fuel bills that have more than doubled since
the beginning of last year.

Emma Alberici has our report.

EMMA ALBERICI: One hundred QANTAS engineers went on strike this morning in Sydney. The company says
it has been forced to ground flights but it's been scant on detail.

For six months, the Australian licensed aircraft engineers have been demanding a five per cent pay
rise. QANTAS has agreed to three per cent with a one per cent contribution to superannuation.

It's hardly an opportune time to be demanding more money. QANTAS says its fuel bill this year will
be more than $2-billion, or more than 35 per cent of its costs.

The blow-out in the price of petrol has forced it to retire five aircraft and cancel one of
Jetstar's new A321s.

Five routes have also been dropped from the QANTAS schedule, including the high traffic service
between Sydney and the Gold Coast as well as Jetstar's Sydney-Whitsundays service.

QANTAS will no longer fly as often as it has been between Sydney and Alice Springs and Jetstar is
in the process of scaling back its offerings out of Melbourne's Avalon airport, Adelaide and
Cairns.

Peter Harbison of the Centre for Asia Pacific Aviation says this is likely to be the start of a
flood of routes cut across the Australian airline industry.

PETER HARBISON: The criteria for the ones which are predominantly tourist, ie, discretionary
travel, they're the ones that have low yields and in most cases they'd be the ones who have
generated a whole lot of new traffic over the last two or three years.

EMMA ALBERICI: Areas like Queensland and north-western Australia?

PETER HARBISON: Those are potentially at risk, particularly long, thin routes which are very, very
much tourism routes.

EMMA ALBERICI: To make matters worse for QANTAS, the credit ratings agency Standard and Poor's,
while not changing its credit rating per se, has revised its outlook for the airline from stable to
negative.

The travelling public has also had to stomach two price rises in the space of one month. Peter
Harbison again:

PETER HARBISON: We're starting to see just the early stages of it. Korean Air this week announced
two international cutbacks. Air New Zealand is talking about perhaps grounding some aircraft if
things continue.

The US is looking like a junk heap right now. Its airlines are really in big trouble with costs
going up and demand going down just as fast in the opposite direction.

Europe is heading that way but much, much more economically soundly based at present and the
economy is nowhere near as soft as the US.

EMMA ALBERICI: Do you think QANTAS is likely to remain in profit this next financial year?

PETER HARBISON: They had a great profit in this current year. Next year I'd be surprised if things
continue this way if they even make half that level.

EMMA ALBERICI: It's a sign of the times worldwide. Rising oil prices and inflation hitting double
digits in some quarters of the globe has seen slower growth and a reluctance to indulge in
discretionary spending, especially on holidays that involve flying.

The evidence is in the troubling statistic - 12 airlines have already collapsed this year.

Tiger Airways which entered the Australian market in October last year is already being forced to
tighten its belt. From today, the airline which is 49 per cent owned by Singapore Airlines is
charging for all check-in baggage - $5 for 15 kilograms, up to $40 per item over 30 kilograms. But
it's amazing how they've tried to spin that story into a plus for travellers.

Steve Burns is the company's chief operating officer.

STEVE BURNS: I think the announcement that we've made about our baggage charging is a further
extension of what we've seen in the market in the last few years, of a continued unbundling of what
people traditionally consider to be a core part of the airfare.

So I think people are now used to, for example, not getting a free meal in-flight. I think a
further extension of this is now that only people who take check baggage on board, check baggage
into the hold, will pay for it. So those people who don't, will get the lowest airfare, the lowest
Tiger airfares.

ELEANOR HALL: Steve Burns is the chief operating officer of Tiger Airways. He was speaking to Emma
Alberici.