Air travel has become a necessity these days—especially for those attending business conferences, corporate events, educational tours, or going on family vacations abroad.
With more people traveling the world, the airline industry is doing its best to cope with the demand.
In the Philippines, there are now more local and international flights servicing the travel needs of its citizens.
A few years back, Filipinos traveled mainly because of overseas work. But now, many Pinoys with disposable income are grabbing the chance to visit other countries as tourists, and airline companies are working with foreign investors and the tourism sector to provide affordable flights for everyone.
Strategic Relationship
One of these airlines is Cebu Pacific Air. After becoming one of the most successful low-cost carriers in Asia, the company is seeking to elevate the quality of the airline industry by providing a training center in the Philippines. Its trainees spend time to gain all the knowledge and competence necessary to become a professional pilot.
Last October, we visited the Philippine Academy for Aviation Training (PAAT) for a media tour in Clark, Pampanga. The school is a joint venture between Cebu Pacific Air and Canadian Aviation Electronics Ltd. (CAE), known as the world’s largest manufacturer of full-flight simulators. CAE also functions as the world’s largest airline training network, with more than 35 locations worldwide.
Cebu Pacific Air
During the tour, PAAT general manager Raoul S. Perez said that the pilot training center was established not only to support Cebu Pacific’s growing fleet and future expansion plans, but also to strengthen its strategic relationship to CAE in the region. PAAT, he added, is being developed to be one of the main hubs for aviation training services in Asia, offering help to other airline companies in need of more pilots
State-of-the-Art Facilities
He also pointed out that, aside from its flight simulators and pilot training course, PAAT recently acquired the Oxford Aviation Academy, the basic flight school where one can learn to fly a single-engine aircraft.
PAAT—which has Singapore Airlines Philippines, Omni Aviation and Flying School International as clients and partners—boasts of state-of-the-art facilities. We had a good look at its classrooms, simulator briefing/debriefing rooms, CBT rooms, pilot lounge, airbus procedure transition trainer room, APT briefing/debriefing rooms and simulator bay.
Perez said that PAAT’s instructors have extensive experience as airline pilots and have likewise worked with airbus training centers abroad. The flight instructors have at least half a million of flying hours to their credit. They have been certified by airbus flight instructors from Toulouse, France.
Flight Simulator
We also had a chance to experience the flight simulator, a device that integrates mechanical, electrical, hydraulic and digital processing systems to represent, in real time, the operation of an airplane in a complex environment.
Mind-Blowing
It was a mind-blowing experience to navigate a plane through a simulator. The only difference is that you have control of the environment. You can change the time, shifting from day to night, move to different airport runways around the world, change altitude and speed, and, most of all, reset if you feel that you will be crashing the whole thing.
As a temporary pilot inside the cockpit simulator, we’ve learned that it was really a tough job. One will not just have a hard time learning all the functions of the buttons and decks; on our shoulders also lie the responsibility for the lives of the passengers inside the plane.
Discipline
Pilots, indeed, must have outstanding discipline; they have to be physically, mentally, emotionally and psychologically prepared before any flight.
Spending a day at the PAAT made us realize that the Philippine airline industry can meet the highest international aviation standards soon. This is good news for our aviation business. It can only mean that the world is truly within reach.
MANILA, Philippines – Philippine Airlines (PAL) will begin flying to Tokyo International Airport, popularly known as Haneda Airport, twice a day beginning March 30, 2014, the company said Thursday, January 23.
The new route will complement its thrice-a-day service to Narita Airport, which also serves the Greater Tokyo area, for those travelling to and from the Japanese capital, PAL said.
PAL President and Chief Operating Officer (COO) Ramon S. Ang noted how the new service they’ll be offering “makes PAL the exclusive operator on the Haneda–Manila route.”
“This route forms part of PAL’s network expansion aimed at providing our passengers more and better choices,” Ang said.
The Haneda service is PAL’s fifth gateway to Japan after Narita, Fukuoka, Osaka, and Nagoya. PAL operates 21 weekly flights to Narita, 5 a week to Fukuoka, 7 to Nagoya, and 7 to Osaka. With the Haneda connection, PAL will fly 47 flights a week to Japan.
The Haneda airport is approximately 30 minutes from Tokyo’s metropolitan area, with one domestic and two international passenger terminals. It also connects to Tokyo’s monorail.
PAL is expanding its Japanese presence due to strong market demand. As the third biggest source of tourists to the Philippines, Japan provides a significant pasenger market to the country. Japan also serves as a prime tourist destination for Filipinos.
A RECENTLY formed airline has asked the air service regulator to allot slots at Manila’s airport for new entrants to the aviation industry.
Southeast Asian Airlines International, Inc. President Avelino L. Zapanta told reporters on Friday that he has appealed to the Civil Aeronautics Board (CAB) to allow fair competition between new and existing carriers.
Mr. Zapanta said that the company has asked CAB to keep at least 10% of the slots at the Ninoy Aquino International Airport (NAIA) for budding carriers.
“I asked them to allocate a certain amount, let us say 10 or 15% of slots in Metro Manila, for the new entrants so that competition would still be alive,” Mr. Zapanta explained.
New carriers have the disadvantage of having small resources, he stressed.
“My letter to the CAB basically says that it should keep competition alive. If you would eliminate competition, public interest would be compromised,” Mr. Zapanta said.
He also said that CAB Director Carmelo L. Arcilla informed him that the Civil Aviation Authority of the Philippines and the Manila International Airport Authority are going to meet to discuss the slot issue.
“The tripartite body [of aviation agencies] will propose now that there should be proper allocation of slots,” he explained.
As of end-September last year, Cebu Pacific cornered 51.2% of the domestic market share. Philippine Airlines (PAL) followed with 12.8%; PAL Express, 22.6%; Zest Airways, 8%; Tigerair Philippines, 4.8%; and AirAsia Philippines, 0.6%.
Early this month, Cebu Pacific said that it is acquiring Tigerair Philippines for $15 million, allowing the Gokongwei-led airline to further cement its dominance in the domestic aviation industry with 56% of local market share.
“The greater impact of this is that there will be no opportunity for new entrants to gain slots; with the congestion [at the NAIA], how could new entrants join the aviation market?” Mr. Zapanta lamented.
Southeast Asian Airlines International, Inc. was formed in September 2012 after Southeast Asian Airlines, Inc. was sold to Tigerair. The newer company has yet to offer flights as it must still await a congressional franchise.
Source: Lorenz Christoffer S. Marasigan, BusinessWorldOnline
Capacity reductions in the Philippines–United Arab Emirates (UAE) market are inevitable after 24 weekly non-stop flights between the two countries were added in 4Q2013. While there is considerable traffic between the Philippines and UAE, yields are generally low and there are large seasonal fluctuations.
Three Philippine carriers entered the market at essentially the same time – Cebu Pacific, Philippine Airlines (PAL) and PAL Express – while Emirates launched services to Manila alternative airport Clark. Emirates already served Manila with three daily flights, having added the third frequency at the beginning of 2013. Etihad also serves Manila with two daily flights.
Fares between Manila and Dubai or Abu Dhabi have dropped as the three Philippine carriers have struggled to fill new A330s. Load factors have been sustainable only during peak periods. Losses for all the carriers are likely if current capacity levels are maintained year-round.
This is the first of a two-part series of analysis reports on Cebu Pacific’s new long-haul operation. This report analyses Cebu Pacific’s first long-haul route, Manila-Dubai, which launched on 7-Oct-2013, and the broader Philippines-UAE market. The second report, to be published later this week, will look at Cebu Pacific’s plans for additional long-haul routes in 2014 as it expands its A330-300 fleet from two to five aircraft.
Cebu Pacific’s Initial Dubai Performance Was Lacklustre
Image Source: T. Laurent
Cebu Pacific decided in early 2012 to expand into the long-haul low-cost sector, committing to an initial batch of leased 436-seat A330-300s. In Jan-2013 the carrier selected Dubai as its first long-haul route and began selling the new daily service nearly nine months ahead of launch with one-way promotional fares starting at PHP6,748 (USD166 based on the exchange rate at the time) including taxes and fees.
Despite ample lead time, Cebu Pacific’s performance on the route for the first month was disappointing. In its results presentation for 3Q2013, Cebu Pacific disclosed that its average load factor on Manila-Dubai was about 36% during the first month of operation. It carried about 10,000 passengers to and from Dubai during this period. Cebu Pacific also disclosed in mid-Nov-2013 that forward bookings for the next three months were relatively weak, with only 20% of available seats sold.
The route has been performing much better since late Nov-2013, with significantly higher load factors and some flights completely full. More details will be disclosed in Feb-2014, when Cebu Pacific reports its 4Q2013 results.
But December and January are peak months for the Philippines-UAE market as Filipinos working overseas typically make their trips back home during the holiday season. February and March will be more challenging months while April will see another peak for Easter. On a year-round basis the Philippines-UAE is not an easy market to turn a profit on, particularly without any ability to sell flights beyond the UAE.
The market is dominated by migrant worker traffic as the UAE has a population of about 700,000 expatriate Filipinos, making it the fourth largest overseas Filipino community (only the US, Saudi Arabia and Canada have larger Filipino expatriate communities). But Filipino migrant worker traffic to and from the UAE fluctuates significantly and during some months is extremely unbalanced with most passengers heading in one direction only.
Emirates, Etihad and airlines serving the Philippines-UAE market with a one-stop product have an advantage over the Philippine carriers as they can respond to these fluctuations by focusing more on other markets to fill their Manila capacity during periods of weak Philippines-UAE demand. Cebu Pacific and the PAL Group are only able to offer connections beyond Manila, primarily only in the Philippine domestic market, providing limited options to fill their Manila-UAE flights during periods of low demand.
Cebu Pacific, PAL and PAL Express Launches Drive Over 70% Increase in Total Capacity
Cebu Pacific also has been impacted by the 6-Nov-2013 launch of services to Dubai by PAL Express and by the 1-Oct-2013 launch of services to Abu Dhabi by PAL mainline. The PAL service contributed to Cebu Pacific’s lacklustre October performance as both carriers were new to the Philippines-UAE market and offered very low promotional fares in an attempt to stimulate demand. But this attempt was unsuccessful as October is an off-peak month.
The subsequent PAL Express launch has provided more direct competition for Cebu Pacific. PAL Express operates its A330-300s in similar all-economy configuration to Cebu Pacific while PAL has a three-class configuration including premium economy and business. Cebu Pacific and PAL Express are also both serving Dubai while PAL is serving Abu Dhabi – although both airports have similar catchment areas and with the right pricing Dubai services can attract Filipinos working in Abu Dhabi while Abu Dhabi services can attract Filipinos working in Dubai (both emirates have sizeable Filipino communities and are only about 150km apart.)
PAL, PAL Express and Cebu Pacific added a combined 6,900 weekly one-way seats in the Philippines-UAE market. Meanwhile Emirates’ capacity increased from about 7,800 to 10,400 weekly one-way seats after it launched service to Clark. Factor in Etihad’s approximately 5,300 weekly seats, which has remained stable, and total capacity shot up by over 70% practically overnight from about 13,100 to about 22,500 weekly one-way seats.
The increase in capacity allocated to the local market was even more pronounced as most of the additional capacity is being provided by Philippine carriers that do not offer any connections beyond Dubai.
Previously the market was under-served with Cebu Pacific claiming that 70% of passengers travelling between Manila and Dubai were opting for one-stop flights (as Emirates was mainly carrying passengers beyond Dubai and being undercut in the local market by carriers such as Cathay Pacific). But with Cebu Pacific, PAL and PAL Express all entering at once, the market has quickly swung from under-served to over-served, putting pressure on all players (including the one-stop carriers) to reduce prices.
Impact of Overcapacity Could Hit Harder in February
As PAL Express did not launch its Dubai service until just before the start of the peak season, the full impact of all the additional capacity will not be felt until the next off-peak period, which typically starts in late January. Cebu Pacific’s online booking engine reveals it has cut back services to Dubai to five weekly flights for the remainder of Jan-2014 and all of Feb-2014. This would be an indication of soft demand and a potential return of the unfavourable conditions that were experienced in Oct-2013 – although this time potentially even worse as PAL Express is also now competing in the Manila-Dubai market.
For now Cebu Pacific is selling six weekly flights for most of Mar-2014 and a full daily service for the rest of the year. But the carrier will likely need to look at implementing further cuts at the conclusion of the Easter season.
Even with the slight reduction in capacity from Cebu Pacific, fares for Feb-2014 remain extremely low. Cebu Pacific is currently offering a one-way fare of PHP7,549 (USD167 based on the current exchange rate) including taxes and fees for travel in the second half of Feb-2014.
New Competition Between Manila and Dubai/Abu Dhabi Drive Down Fares
PAL’s website is currently offering one-way all-inclusive fares for Feb-2014 starting at USD311 to Abu Dhabi and USD341 to Dubai. PAL and PAL Express both offer complimentary meals, drinks and checked baggage while Cebu Pacific charges for these items.
PAL also offers in-flight entertainment (IFE) across all classes, a business class cabin, premium economy and roomier economy seats. PAL Express does not have any IFE and squeezes 414 seats in its A330-300s, making it only slightly less dense than Cebu’s 436 seat configuration. Cebu Pacific has the world’s densest A330-300 configuration, packing in only four fewer seats than the aircraft’s certified limit. PAL Express and Cebu Pacific both have nine-seat abreast 3-3-3 layouts while PAL uses the more typical eight-seat abreast 2-4-2 layout in economy.
Emirates is now selling on its website return all-inclusive fares starting at USD960 for Manila-Dubai and starting at USD911 for Clark-Dubai. Etihad’s online fares for Manila-Abu Dhabi are higher, starting at USD1296 for a return ticket. (One-way fares online on Emirates and Etihad are significantly more expensive).
Cathay Pacific is also extremely competitive, offering on its website Manila-Hong Kong-Dubai return fares that start at only USD605 including taxes. Cathay is the largest one-stop carrier in the Philippines-UAE market and has traditionally moved a large volume of migrant workers between Manila and Dubai as well as Abu Dhabi. Manila-Hong Kong-Abu Dhabi is currently priced at USD920. The launch of non-stop services to the UAE by Philippine carriers has impacted Cathay, pushing down the carrier’s already low economy yields on the route.
Singapore Airlines also offers a one-stop product between Manila and Dubai but has not generally been a high volume mover in this market. Singapore’s online return fares for Manila-Singapore-Dubai currently start at USD992 including taxes. Singapore Airlines no longer serves Abu Dhabi.
While it appears Cebu Pacific is now undercutting PAL/PAL Express and Cathay Pacific by about 50% (and Emirates and Etihad by even bigger margins) this is not an accurate indication of the cheapest fares available in these markets. The full-service carriers serving the Philippines do not rely much on online distribution channels and often provide big discounts to agents, particularly for high volume migrant worker contracts. In fact some one-stop carriers in the market, such as Royal Brunei Airlines, only sells tickets between Manila and Dubai through agents.
Stimulating new demand in Philippines-UAE market will not be easy
Cebu Pacific’s initial weak performance to Dubai could be an indication it is still learning about the rather complex world of migrant worker contractor/agent purchasing patterns. While Cebu Pacific has been serving several short-haul international destinations that have large Filipino worker populations, such as Hong Kong and Singapore, these markets are different in that many of these workers purchase their tickets independently. For long-haul destinations that see significant Filipino migrant worker traffic almost all the purchasing is done through their contractors.
Cebu Pacific got a jump on its competitors by starting to sell Dubai tickets nine months ahead of launch compared to six months for PAL and only about two months for PAL Express. But it turned out that the earlier start of ticket sales was not an advantage as almost all tickets in the Philippines-UAE market are purchased with short notice by labour contractors. The number of Filipinos who buy their own tickets is very small, even with Cebu Pacific trying to stimulate demand by offering very low advance purchase fares.
Cebu Pacific’s inability to initially stimulate new demand in the market is not an encouraging sign. The carrier should be able to improve its load factor on Manila-Dubai as it becomes more experienced at selling to the contractors and agents that control most of the Philippines-UAE market. But this market is generally a zero sum game, meaning any additional passenger Cebu Pacific gets is likely coming at the expense of another carrier (and at a very low yield).
Capacity rationalization is likely. The PAL Group initially planned to serve Abu Dhabi and Dubai daily but likely adjusted capacity plans, removing two weekly frequencies, in response to weak forward loads. Cebu Pacific may also have to settle for a less than daily service on a permanent basis and drop consideration of also serving Abu Dhabi.
The PAL Group should consider rationalizing by using one rather than two brands for the Philippines-UAE market. Having the PAL and PAL Express products operate almost side by side is confusing. (The Dubai and Abu Dhabi airports are only 130km apart.)
The PAL Express product is a better fit for this particular market. The carrier’s higher density A330s and lower unit costs allows it to compete better with Cebu Pacific. Business class demand is limited and competition with Emirates and Etihad for premium traffic is fierce.
Emirates doubles capacity in Manila market while Etihad smartly does not follow
Emirates has the advantage of adjusting seat buckets and fares in the local Manila-Dubai market depending on the time of year as it can backfill with passengers heading to other parts of the Middle East, Africa, Europe and the Americas. But with four daily flights now in the Manila market Emirates will at least be somewhat impacted by the new capacity that has been added by the Philippine carriers.
In selecting Dubai, Cebu Pacific stated that 70% of passengers flying between Manila and Dubai were using one-stop carriers rather than Emirates. But this data was based on origin and destination figures from 2012 – before Emirates added its third daily flight to Manila in Jan-2013. While a majority of its Philippine passengers transit in Dubai, as Emirates has added more and capacity in the market inevitably it is able to offer a larger number of seats to agents or migrant worker contractors at competitive fares.
Emirates further expanded capacity in the Manila market at the end of Oct-2013, when it launched a daily service to Clark, giving it twice as much capacity in the Philippines compared to late 2012. Manila and Clark are Emirates’ only destinations in the Philippines while Etihad only serves Manila. Cebu Pacific, PAL and PAL Express have the advantage of offering domestic connections but this is limited as almost all Filipinos heading to the UAE fly from Manila as Manila is where the labour contractors are based and where their visas are processed. Cebu Pacific previously estimated that only 10% of its Dubai passengers would not originate in Manila.
Etihad has not increased capacity to Manila since Nov-2011, when it introduced its second daily flight. The carrier has likely looked at adding a third daily flight – which it could only implement by following Emirates to Clark as there are no available slots and traffic rights at Manila.
The Manila market is an extremely important market for Etihad. The Abu Dhabi-based carrier recently stated that Manila was its second busiest market after Bangkok in 2013, with 547,000 passengers. Even London was smaller.
Assuming Etihad operated all its Manila flights in 2013 with its two-class 412-seat 777-300ERs, which is the densest aircraft in its fleet, the carrier had an average load factor to and from Manila of 91%. With such high load factors Etihad should not be significantly impacted by the additional capacity from the Philippine carriers as there should be sufficient demand in connecting markets to further reduce its already low reliance on local passengers.
While adding more capacity to Manila is tempting, Etihad would be smart to give Clark a miss and continue only with its two daily Manila flights. The UAE is now the fifth largest international market for the Philippines, accounting for 9% of total international seat capacity. More capacity is the last thing the market can use.
With just two daily flights, Etihad will be able to focus more on connecting passengers beyond Abu Dhabi. Competition in the Philippines-Europe market is also increasing with PAL launching non-stop services to London in Nov-2013 and planning multiple new destinations in continental Europe for 2014. But PAL will not be able to come close to matching the network of Etihad (and Etihad alliance partners) or Emirates.
Making money in the current capacity environment will be challenging
For several years PAL did not serve the UAE, recognising the challenges of competing against Emirates and Etihad and their ability to offer Philippine passengers unmatched networks beyond their hubs. PAL instead chose to codeshare with both carriers.
The resumption of services to the UAE is part of an ambitious expansion plan under new PAL owner San Miguel. Unfortunately for Cebu Pacific, the expansion at the PAL Group comes just as the LCC moves into the long-haul sector with UAE the logical first market for the new widebody low-cost operation.
The Philippines-UAE market does have opportunities for Philippine carriers. But the yields are low and the market has huge seasonal fluctuations.
There is risk of large losses as Philippine carriers start to realise it is not a market where new demand can be easily stimulated. Philippine carriers will need to rely on wooing passengers – or labour contractors – away from very competitively priced one-stop products. But there are not enough of these passengers to go around outside the peak periods. At current capacity levels there will be no winners.
MANILA – Tobacco and airline magnate Lucio Tan is in talks with foreign companies interested to acquire 51-percent stake in flagship carrier Philippine Airlines (PAL).
The majority stake in Asia’s oldest airline is still on the selling block, Tan said on the sidelines of the annual reception for the banking community hosted by the Bangko Sentral ng Pilipinas.
“Foreign parties. Local wala,” Tan said when asked about the profile of companies interested in PAL. Tan, one of the richest men in the country based on the Forbes list, is also involved in tobacco, banking, property, and liquor enterprises.
Diversified conglomerate San Miguel Corp. (SMC) owns 49 percent of PAL and is in charge of the carrier’s management, while Tan controls the remaining 51 percent.
Early this month, SMC president and chief operating officer Ramon S. Ang said the conglomerate is unlikely to boost its stake in PAL.
“The investment of SMC in PAL is 49 percent. I don’t think we will increase anything,” Ang said.
“SMC will only stick to that 49-percent investment,” Ang said.
San Miguel Main Headquarter
In April 2012, SMC’s wholly-owned subsidiary San Miguel Equity Investments Inc. acquired a 49-percent equity interest in Trustmark Holdings Corp. for $500 million. Trustmark owns 97.71 percent of the airline’s parent firm PAL Holdings Inc., which in turn owns 84.67 percent of PAL through PR Holdings Inc.
Since the entry of SMC, PAL has embarked on a massive re-fleeting program aimed at acquiring 100 new aircraft to replace its existing fleet. It expects to save as much as $400 million from fuel and maintenance costs per year as part of its re-fleeting program.
It has entered into a $9.5-billion contract with EADS Group for the delivery of 65 aircraft. PAL also signed a $7-billion deal to buy 45 A321 and 10 A330-300 last August while it exercised an option to purchase 10 more A330-300 worth $2.5 billion in September.
To help PAL return to profitability this year, PAL is banking on the ongoing re-fleeting program involving the acquisition of fuel efficient aircraft as well as the lifting of the ban on local airlines to fly to Europe.
As of last year, PAL had a fleet of 48 aircraft composed of five Boeing 777-300ER, five Boeing 747-400, six A340-300, eight A330-300, 18 A320-200, four A319-100 and two A321-200 while budget carrier PAL Express has a fleet of 14 A320, four Bombardier Q300 and four Q400.
Source: Neil Jerome C. Morales, The Philippine Star
MANILA – Talks are under way to transfer five international air carriers from the old Ninoy Aquino International Airport (Naia) Terminal 1 to Naia 3 to decongest the airport, and also in preparation for the Asia-Pacific Economic Cooperation (Apec) summit in 2015.
The media got wind of report that Manila International Airport Authority (Miaa) General Manager Jose Angel Honrado had asked the five international carriers—Singapore Airlines, Cathay Pacific, Delta Air, KLM and Emirates Airline—to transfer operations as soon as possible to Naia 3.
When the concerned carriers reportedly asked Honrado to furnish them a contract before they transfer operations to a new office, the airport manager said: “It’s only a piece of paper.”
But when pressed to provide one, Honrado gave them a draft document where the air carriers would indicate their comment so that a final draft would be amenable to everyone.
The concerned airlines’ reluctance to transfer without a contract is understandable; although the courts ruled that the Miaa owns Naia 3, it has yet to comply with its obligations to fully compensate the Philippine International Air Terminals Co. Inc. (Piatco), the terminal’s builder.
The BusinessMirror tried to get in touch with Honrado by SMS but did not get any reply.
In December 2004 the government expropriated the terminal project from Piatco through an order from the Regional Trial Court in Pasay City. But the court only allowed the Miaa to take over the terminal upon payment of an initial amount of P3 billion (approximately $64 million) to Piatco.
According to the government, Naia 3 was 98-percent complete and required at least an additional $6 million to complete.
The government, on the other hand, has sealed a P1.9-billion deal with Japanese contractor Takenaka Corp. to make Naia 3 fully operational next year, but the rehabilitation itself could take longer than initially expected.
Last year the Department of Transportation and Communications (DOTC) said it had “reached an agreement” with Takenaka with an eye toward having Terminal 3 fully operational by August 2014. Under the terms of the agreement, Takenaka would complete the work within 12 months, which include the baggage handling, flight-information display, computer terminal, gate coordination and fire-protection systems.
Naia 3 is currently operating at half its annual capacity of 13 million passengers due to certain structural issues, which Takenaka is bound to address.
The Naia terminals are the main gateway to Metro Manila and are projected to serve a total of 34 million passengers this year, the Miaa said last month.
Honrado has been in the limelight lately because of charges of incompetence for alleged failure to make the premier airport an attractive and efficient place for air travelers.
He was also criticized when assassins gunned down Zamboanga del Sur Mayor Ukol Talumpa and members of his family shortly after debarking from an airplane and while waiting for their vehicle at the curbside. The killings happened without any footage evidence because of the failure of the Miaa to install a closed-circuit television (CCTV) camera as part of the airport’s security system.
The 30-year-old Naia Terminal 1, built during the term of the late strongman Ferdinand Marcos, is getting refurbished to the tune of P1.6 billion.
Workers are seen busy scraping the old concrete cladding of the building’s façade and replacing them with a smooth coating of concrete.
Charges of congestion from air traffic and passengers have long been leveled against Naia, which had overgrown its design capacity.
The airport is named for the late Sen. Benigno “Ninoy” Aquino Jr., who was assassinated at the airport in 1983. In 2012 all terminals at Naia handled a record-breaking annual passenger traffic of 31,558,002, making it one of the busiest airports in Asia.
The tourism department says it expects tourist arrivals of up to 10 million, in time for the Apec summit in Manila in 2015.
MANILA – Tiger Airways Philippines on Friday said it is preparing to roll out a marketing campaign that is in sync with new owner Cebu Pacific.
In a statement, Tigerair Philippines said among the initiatives are the development of its network, enhancement of ancillary services and the upgrade of its website to make the customer experience better.
“Having a new owner does not mean that we stop generating ideas to enhance our customers’ experience. Leveraging our partnership with Cebu Pacific, I believe that there is much more that we can do,” Olive Ramos, Tigerair Philippines president and chief executive said.
The budget airline will continue to operate under the Tigerair brand, while tapping Cebu Pacific’s website as a sales and distribution platform for all its routes, and vice versa.
Both airlines are now working to upgrade their websites to facilitate such cross booking of flights.
“Our intention is to grow Tigerair Philippines as an independent franchise. We are reviewing opportunities to increase Tigerair Philippines’ fleet. We are very excited to embark on this partnership and we look forward to working closely with Olive, who will continue with her leadership position at Tigerair Philippines,” Lance Gokongwei , Cebu Pacific president and chief executive said.
With a stronger presence in the Philippines, Tigerair will continue to operate from the Ninoy Aquino International Airport Terminal 4 and from Clark International Airport.
From its bases in Clark and Manila, Tigerair flies to both domestic and international destinations that include Cebu, Bacolod, Iloilo, Kalibo, Puerto Prinsesa, Tacloban, Hong Kong, Bangkok, and Singapore.
Image Source: Carlos Primcias
Earlier, Tiger Airways Holdings said it entered into a strategic alliance with Gokongwei-led Cebu Pacific, with the latter acquiring 100 percent of Tigerair Philippines, including the 40-percent stake of its Singaporean parent firm.
The acquisition of the entire stake of Tiger Airways will cost $15 million.
MANILA – The decision to lift the ban of the European Union on the Philippines’ second airline Cebu Pacific is expected to be released on the first half of this year, an EU official in the country said.
Julian Vassallo, political counselor of the EU Delegation to the Philippines, said the request for lifting of EU ban on Cebu Pacific is now being reviewed.
After the EU lifted the ban on Philippine Airlines last year and the company’s inaugural flight last November, the ban on the Gokongwei-owned company is now being reconsidered.
“We are happy now that people from both Europe and the Philippines can experience ease of travel with direct flights after more than a decade,” said Vassallo in an interview Friday at the EU office in RCBC building in Makati.
“We are currently helping Cebu Pacific get off the list of EU ban on airlines. I expect a decision on the first half of 2014,” said Vassallo.
He said reestablishing direct flights from the Manila to European destinations will strengthen the bilateral relations between the Philippines and Europe with the ease of flow of people from both sides.
Vassallo said the lifting of EU ban on the country’s airlines will also increase European visitors to the Philippines.
He said the biggest hurdle for many Europeans in going to the Philippines is the long hours of travel and transfers in regional hubs such as Singapore and Hong Kong.
Earlier, Philippine Tourism Secretary Ramon Jimenez said there were 3,867,386 foreign tourists who arrived in the country from January to October 2013 – a double-digit gain of 11.19 percent compared to 3,478,285 over the same period in 2012.
The top ten tourists who visited the Philippines remain from the main source countries such as South Korea, US, China, Japan, Australia, Singapore, Taiwan, Hong Kong, Canada, and United Kingdom.
Consolidation in the airline industry seems to be a widely-accepted trend nowadays in order to compete in the crowded low-cost carrier sector.
Cebu Air Inc.’s intention to fully acquire the local affiliate of Singapore’s Tigerair seems to bode well for the low-cost carrier and its frequent passengers in the domestic market, analysts noted.
This is second case of consolidation in less than a year after the Philippine unit of Malaysia’s AirAsia Bhd bought 49 percent of Zest Airways in March 2013, according to Reuters.
On a wider scale, consolidation has also been the path to competition in Asia-Pacific among budget airlines, with Singapore’s Tigerair partnering with India’s SpiceJet and Singapore Airlines’ long-haul low-cost subsidiary Scoot, according to aviation think-tank Center for Asia Pacific Aviation (CAPA).
Cebu Air, the operator of Cebu Pacific – intends to expand its scale of operations and market share with the buyout of Tigerair in Tigerair Philippines, lending the Gokongwei-led airlines the assurance of capturing a lead position in the Philippine market.
As of the third quarter of 2013, Cebu Pacific cornered 51.2 percent of the domestic market, PAL and PAL Express with 35.4 percent, AirAsia and AirAsia Zest with 8.6 percent and Tigerair with 4.8 percent, based on Civil Aeronautics Board (CAB) data.
Once approved by CAB – and in the absence of any regulatory impediment it would seem so – the acquisition of Tigerair Philippines by Cebu Air will leave travelers with three choices, namely Cebu Pacific, Philippine Airlines (PAL) group and AirAsia Zest.
In a January 7 report, CAPA said having three main competitors “is probably sufficient” given the size of the domestic market, which had been plagued by over-capacity and irrational competition.
“The consolidation could leave each group stronger which is a more healthy situation for the industry long-term,” Brendan Sobie, a Singapore-based analyst at CAPA, said in an e-mailed response to GMA News Online.
3 groups, 6 airlines
There will still be six airlines – but three groups with each group having two air operators’ certificates (AOCs). “So, three players, excluding some very small regional carriers that don’t operate on the main routes anyway,” said Sobie.
For now, the Philippine domestic market does not need more players, especially in the congested Manila gateway.
“The Manila airport has peak times which is congested and the domestic market at these times is already saturated,” CAB’s Hearing Examiners Division chief Maria Elben S.L. Moro said in a phone interview.
“If there are more players in the market, it will be better for passengers but what we encourage is more players in other routes and since we’re an archipelago, there are still other areas to be offered,” she said.
High oil prices is also a factor for a new market player to consider, apart from the stiff competition in the low-cost carrier, said Gregg Adrian Ilag, equity analyst at AB Capital Securities Inc., said.
“I do not see the need for more market players in the industry. The higher price of jet fuel has made it hard to earn profits in the industry and less industry competition will be helpful in generating profits,” he said.
$15-million deal
Image Source: Carlos Primcias
On January 8, Cebu Air announced it is buying Tigerair Philippines for $15 million as part of a strategic alliance forged with Singapore’s Tigerair for codeshare and interline arrangements.
Tigerair Philippines is 40 percent owned by Singapore’s Tiger Airways Holdings Ltd., through Roar Aviation II Pte. Ltd., with 60 percent in the hands of Filipino partners.
Cebu Pacific president and CEO Lance Gokongwei earlier said the Tigerair brand will remain as an independent operation while the management will be retained after the takeover.
Initially, Civil Aeronautics Board (CAB) sees no negative impact in terms of competition in the Philippine aviation industry.
“Tigerair is a small airline and there are still other competitors in the market,” CAB’s Moro said.
Acquisitions and buyouts of airline companies go through CAB’s Hearing Examiners Division.
Moro said they have yet to receive the details of the buyout even after Cebu Pacific filed an application to acquire 100 percent of Tigerair.
“In our evaluation, we will look at how will Cebu Pacific will takeover operations of Tigerair Philippines and how will the latter continue to operate, which include slots, traffic,” she said.
Expanded market
With Tigerair under its wings, Cebu Pacific is expected to have an expanded market share in the domestic market.
“I see more advantage for Cebu Pacific on the domestic routes as its market leadership will be strengthened and pricing flexibility should help generate better margins on a longer horizon,” AB Capital’s Ilag said.
Data from CAPA showed Tigerair Philippines operates a total of 12 domestic routes, eight of which are major routes also served by Cebu Pacific. The remaining four are not covered by Cebu Pacific and are served not on a daily basis.
Apart from a bigger market share for Cebu Pacific, Ilag said the merger will definitely decrease the competitive pressure in terms of pricing.
“I also think that this will be accretive for Cebu Air’s market share in domestic routes. Passengers will likely stick with Cebu Air given better pricing flexibility from the additional seat capacity,” he added.
Cebu Pacific and Singapore’s Tigerair strategic alliance also allows both airlines to brand each other as partners, to collaborate on other common destinations in Asia and to leverage on networks spanning from North Asia, ASEAN, Australia, India, all the way to the Middle East.
However, CAPA’s Sobie said Tigerair and Cebu Pacific currently only have two overlapping routes, which are Singapore to Cebu and Manila.
He said the more important thing about the interline agreement is it opens up South Asia and over 10 additional destinations in Southeast Asia to Cebu Pacific.
‘Virtual expansion’
The Tigerair group currently serves over 50 destinations while Cebu Pacific has a network of 24 international destinations and 33 domestic points in the Philippines.
“As for the interlining, indeed this is virtual expansion and it’s not the same as expanding with your own aircraft. But it’s impossible for each carrier to viably serve every market on its own,” Sobie said.
“Pursuing partnerships is a smart strategy as it provides improved network access for your passengers without having to invest in expanding your own assets,” he added.
The alliance also allows both airlines to use their respective websites as sales and distribution platforms to market all routes.
“CEB could benefit from Tigerair’s network and have flights towards new routes. This should improve both their competitive stance towards other airlines,” Ilag said.
The US Federal Aviation Administration may push through with an audit of the Philippines’ air safety standards this month—an exercise seen as a key step for the country in getting a coveted US aviation upgrade, a government official said Monday.
Civil Aviation Authority of the Philippines (CAAP) deputy director general John Andrews said in a text message that the audit would likely happen this month.
“There is a schedule but we will have to confirm the dates,” Andrews said without elaborating.
The exercise did not push through in the fourth quarter last year as anticipated by CAAP, thus delaying the upgrade to Category 1 status.
CAAP had suggested that an upgrade from its current Category 2 status was all but certain.
Nevertheless, the delay meant that local carriers had had to wait longer before being allowed to expand in the United States.
The FAA downgraded the Philippines five years ago due to safety concerns.
Currently, only flag carrier Philippine Airlines mounts flights to the US but Cebu Pacific Air, the country’s largest budget carrier, said it was eyeing expansion there as well.
“There are no more safety issues as far as we are concerned. This has been confirmed by no less than the EU (European Union) and ICAO (International Civil Aviation Organization),” Andrews said in a previous interview.
The Philippines passed the ICAO assessment early last year, which led to the lifting last July of a ban imposed by the European Union. This allowed Philippine Airlines to fly to points in Europe.
As noted, the restoration to Category 1 status would allow carriers like Philippine Airlines, the only domestic carrier with flights to the United States, to expand flights within that country. It also opens the door for other carriers to fly to the United States.
The FAA move is also seen as beneficial for Philippine Airlines, as it could use newer and more efficient planes to ply its lucrative US routes.
The downgrade to category 2 prevented the flag carrier from doing this.
Aviation News Philippines 