Australian airline Qantas, which last week announced a five per cent reduction in domestic capacity, now plans to scrap or reduce several of its services to Japan and Southeast Asia.

Qantas will trim its thrice-weekly Melbourne-Tokyo service and the Sydney-Tokyo flights as rising fuel prices and operating coasts start biting.

The airlines said maintaining the existing schedule to Japan would cost it an extra A$ 100 million ($95million/£49million) at current fuel pieces.

Qantas said it will now work with individual markets and look for opportunities as conditions improve. The airlines also said it would  reduce staff and ground some aircraft.

Qantas expects its fuel bill to go up by 35 per cent to A$2 billion in the 2008-09 financial year.

Qantas' budget carrier Jetstar will end its service from Cairns to Osaka and Nagoya. It will also replace 14 flights a week from Cairns to Tokyo on Qantas with daily flights on Jetstar.

The airline will also withdraw Jetstar's Sydney to Kuala Lumpur service and use its discount carrier to replace Qantas on routes from Perth to Denpasar and Jakarta.

Airlines the world over are cutting services and grounding fleet as oil prices shot above $135 a barrel. Several airlines, including Qantas, British Airways and Virgin Atlantic, have increased their fuel surcharges.

US carriers American Airlines, United Airlines, Delta Airlines all have lined up cost cutting plans, involving lay offs, service reductions and even grounding of fleet.