Cebu Pacific’s Muscat Flight Caught In Technicality

5J will fly to Kuwait (September 2) and Sydney (September 9). Next stop...New Zealand

SALALAH — Budget airlines Cebu Pacific’s Muscat-Manila operation is caught in the technicality of freedom rights, as the operators are waiting for clearance of ‘5th freedom traffic rights’ to operate in the sector. The airlines management is evaluating its earlier plan, as it was hoping to start the operation in the middle of this year.
“We have been looking at ways in which ‘5th freedom traffic rights’ can be allowed. For the Manila-Muscat route, we are expecting a majority of our passengers to be Filipino — those residing in Oman and returning to the Philippines for a holiday, as well as their friends and relatives coming to visit them in Oman,” said Alex Reyes, General Manager, Cebu Pacific Air — Long Haul Division, in an email response to the Observer.
According to Alex the commercial viability of services between Oman and the Philippines would be enhanced if there are ‘5th freedom traffic rights — the right to fly between two foreign countries on a flight originating or ending in one’s own country — enabling to carry passengers beyond Muscat. “The CEB is limited by the current air services, which does not allow the exercise of such traffic rights.”
There is a whole set of internationally adopted commercial aviation rights, referred to as the ‘freedoms of the air’. These rights set out scenarios in which commercial planes would operate routes for revenue. The first two rights, the first freedom and second freedom, are the most standard and over 129 countries have adopted the treaty that allow them.From there, the freedoms of the air get progressively rarer as they require approval from multiple states. This goes all the way down to the 8th Freedom, also known as ‘cabotage’, which as an example would allow a foreign carrier to fly on domestic routes.

Source: Kaushalendra Singh, Oman Daily Observer

Cebu Pacific Dominates Domestic Flights, Philippine Airlines Lords International Flights


MANILA – Cebu Pacific dominated the domestic air travel market, while Philippine Airlines (PAL) lorded it over on the international front in the first six months of the year.

Data from the Civil Aeronautics Board (CAB) show that the country’s air passenger traffic in the January to June period went up by 9.5 percent to 21.73 million from last year’s 9.31 million.

Domestic passenger traffic fueled the rise, grow by 15 percent to 12.42 million this year from 10.77 million last year.

Cebu Pacific remains the country’s leading domestic carrier with a 46 percent share of the market. It flew 5.82 million passengers this year, up by 6.98 percent from last year’s 5.44 million.

PAL’s domestic traffic increased 30.26 percent to 1.98 million from 1.52 million in 2013.

The flag carrier’s affiliate, PAL Express, flew 2.7 million passengers, up by 28.57 percent from 2.1 million last year.

AirAsia Zest carried 1.06 million passengers in the first half of the year, while Tigerair Philippines flew 575,093 passengers. AirAsia Philippines carried 168,106 passengers.

CAB executive director Carmelo Arcilla ascribed the growth in domestic passenger traffic to additional flights by the country’s budget airlines and cheaper airfare, adding that travel peaks in the second quarter.

The country’s international passenger traffic also grew albeit at a slower 2.64 percent to 9.31 million in the first six months of the year from 9.07 million in the same period last year.

Arcilla blamed the slower growth in the international market on the Ninoy Aquino International Airport’s (NAIA) limited capacity to handle traffic, which has prevented carriers from mounting more flights.

5J will fly to Kuwait (September 2) and Sydney (September 9). Next stop...New Zealand

He said the congestion should abate once the government builds a third runway for the airport.

A recent study done by Japan International Cooperation Agency (JICA) shows that NAIA would be operating beyond capacity starting 2015, by which time the airport will be handling 37.78 million passengers.

At end-2012, NAIA accommodated 31.88 million passengers, near its maximum handling capacity of 35 million a year.

PAL flew the most number of international passengers at 2.49 million in the first half of the year, up by 24.5 percent from 2 million a year ago. Its affiliate, PAL Express, carried 77,309 passengers.

Cebu Pacific carried 1.62 million passengers, 9.45 percent more than the 1.48 million last year. Zest Airways flew 377,198 passengers, followed by Tigerair Philippines, 104,467; and Air Asia Inc, 2,168.

Foreign carriers carried 4.63 million passengers.

Source: Darwin G. Amojelar,

Cebu Pacific, Tigerair Notch Double-Digit Growth In Combined Passenger Traffic In July


MANILA – The combined passenger traffic of Cebu Pacific and affiliate Tiger Airways Philippines grew by double digits at the start of the second half of the year amid an improvement in the number of occupied seats per flight.

Data from Gokongwei-owned Cebu Air Inc (CEB) show that Cebu Pacific and Tigerair Philippines flew 1.33 million passengers last July, up 16.3 percent from 1.14 million in the same period last year.

This brought year-to-date traffic to 9.85 million, up 14.3 percent from 8.62 million in the same seven months of 2013.

Cebu Pacific targets to carry in excess of 15 million passengers this year. Including the traffic of recently acquired Tigerair Philippines, Cebu Pacific expects more than 17 million by yearend.

Cebu Pacific and Tigerair Philippines’ combined load factor also went up by 3.5 points to 80.8 percent in July from 77.3 percent a year ago.

Load factor pertains to number of seats occupied per flight. Year-to-date, load factor also grew by 0.7 points to 85 percent from 84.2 percent last year.

Jorenz Tanada, CEB spokesperson, attributed the higher passenger traffic to the increase in the number of flights and seat capacity.

“We continue to offer low fares to an extensive route network covering Asia, Middle East and Australia. We have also increased our presence in key markets,” he said.

Cebu Pacific and Tigerair Philippines recorded a total number of 9,985 flights in July, up 4.4 percent from 9,560 in the same period last year.

In the first seven months, the combined number of flights reached 71,133, also up from 68,130 last year.


Cebu Pacific has 51-strong fleet comprises 10 Airbus A319, 28 Airbus A320, 5 Airbus A330 and 8 ATR-72 500 aircraft. It is one of the most modern aircraft fleets in the world.

Between 2014 and 2021, Cebu Pacific will take delivery of 11 more brand-new Airbus A320, 30 Airbus A321neo, and 1 Airbus A330 aircraft.

In March, the shareholders of Singapore’s Tiger Airways Holdings Ltd and the Civil Aeronautics Board separately approved the 100 percent acquisition of Tigerair by Cebu Pacific. The transaction was valued at $15 million.

Source: Darwin G. Amojelar,

‘Bullet train’ Connecting NAIA, Clark ‘too expensive’, Says Japanese Consultant


MANILA – A Japanese consultant of the Department of Transportation and Communications (DOTC) is reluctant to recommending a “bullet train” that will connect Metro Manila to the Clark International Airport.

“Very expensive. I don’t suggest it,” Shizuo Iwata, project manager of the Japan International Cooperation Agency (JICA) told reporters last week.

According to him, the project would cost between $6-7 billion.

The Aquino administration is studying a proposal to build a high-speed train to connect Clark and the Ninoy Aquino International Airport (NAIA).

The Japanese consultant still recommends developing Clark as an alternative to the NAIA.

“It’s viable, so we are proposing a twin airport, one in NAIA, and [another in] Clark. Clark has its own catchment area because Central Luzon, Northern Luzon and Clark Green City are going to be developed and Manila has its own, ” Iwata said.

But instead of an airport express train, Iwata recommended a commuter rail.

“People are living in the corridor, so more demand for the commuting rather than just go to the airport,” he said.

To recall, JICA proposed to build a new international gateway that would require a total investment of P435.93 billion to replace the old NAIA.

The new international airport, which the JICA study recommended at Sangley Point in Cavite, is capable of accommodating 55 million passengers per year and 400,000 aircraft movements.
The proposed airport is projected to be operational by 2025.


NAIA, Clark Among 8 Major PHL Airports To Be Privatized


The government is set to bid out the operations and maintenance of eight major Philippine airports, including Ninoy Aquino International Airport (NAIA) and Clark International Airport, a Cabinet official revealed on Tuesday.

During the Philippine Economic Briefing in Pasay City, Transportation Secretary Joseph Emilio Abaya disclosed that the government will bid out the operations and maintenance component of the airports before President Benigno Aquino III’s term ends in 2016.
Aside from NAIA and Clark, the airports that will be up for privatization are:
  • Laguindingan Airport
  • Panglao Airport
  • Puerto Princesa Airport
  • Davao Airport
  • Iloilo Airport
  • Bacolod Airport

The National Economic and Development Authority (NEDA) Board has given the green light for the Laguindingan and Panglao, while feasibility studies are in the process for NAIA and Clark.

“In the next NEDA Board meeting, the four other [airports] are due for approval. We see no problem with that,” Abaya told reporters.
The operations and maintenance will be bid out separately and not bundled, he said.
Source: VS, GMA News


Philippine Airlines , 4 Airlines Must Face Price Fixing Claims

Five international airlines, including Philippine Airlines, must face a class-action lawsuit from passengers accusing them of fixing the prices of tickets on trans-Pacific flights, a U.S. judge has ruled.

But in doing so, U.S. District Judge Charles Breyer in San Francisco on Tuesday narrowed the suit somewhat, ruling that certain fares to the Philippines and Japan are exempt from price-fixing claims under federal law.

Christopher Lebsock, an attorney for the proposed class of passengers, said most passengers’ claims would not be affected by the ruling.

Attorneys for the airlines – Air New Zealand Ltd, Philippine Airlines Inc, Japan’s All Nippon Airways Co Ltd and Taiwan’s China Airlines Ltd and EVA Airways Corp – could not immediately be reached for comment.

The first class-action suits over alleged price-fixing of trans-Pacific fares were filed in 2007, and multiple cases were consolidated in a multi-district litigation in San Francisco in 2008. The plaintiffs claimed that airlines used alliances, trade associations and other means to fix prices.

The suit originally named 13 airlines, but eight of those have settled for a total of $39.5 million, according to Lebsock.

The remaining five airlines asked the judge to toss the case, arguing that all the passengers’ claims were pre-empted by federal regulation, which requires airlines to file certain international fares with the U.S. Department of Transportation.

Breyer ruled that claims over fares that were not filed with the DOT, as well as claims over fuel surcharges, can go forward. He dismissed only claims over fares that were filed with the DOT.

The International Air Transportation Competition Act of 1979 treats countries differently depending on their trade agreements with the United States. As a result, fares to New Zealand and Taiwan are not filed with the DOT, while only non-discounted, one-way economy class fares to the Philippines are filed, according to court documents. Certain fares to Japan were filed until a change in the law 2012.

The case is In re: Transpacific Passenger Air Transportation Antitrust Litigation, U.S. District Court, Northern District of California, MDL 08-1913.

Source: Brendan Pierson, Reuters

The Captain’s Seat

By Cito Beltran, CTALK, The Philippine Star


A man who has spent all of his life at work will never be at home anywhere else.

That to my mind was why Mr. Lucio Tan simply had to get back control of Philippine Airlines. Contrary to the many rumors spread by ugly souls about losing face, losing control of businesses and the even uglier lie that commissions were being made from the company’s re-fleeting, Dr. Tan’s angst circled primarily around the proverbial “seller’s regret” and perhaps the discovery that many retirees like him have made: Having all that money can bore you to death.

Ramon Ang must have come to terms that there can only be one pilot and he was not willing to be co-pilot. He realized he could not “fly” PAL to even greater heights if he constantly had to carry the unwanted baggage of envy, distrust and being discredited by a cabal of operators only too willing to give Lucio Tan an excuse to claim back PAL. To quote RSA: “Yung samahan hindi na maganda after the first year.”

PAL was a business challenge, an opportunity to prove that under right management PAL could be better and “It was in the interest of the country’s reputation that the flag carrier looked good.” Ang of course is only too shy to admit that proving his critics wrong and putting his knowledge as a pilot and business guru to the test in aviation has long been in his bucket list of business challenges.

The two parties certainly had a management honeymoon in the first year where Lucio Tan had full control of the Board of Directors but was relieved of some U$300 million in collectibles, labor problems and an airline in the red. In addition to his board, Lucio Tan also had his original managers playing tag with the professional management team of San Miguel.

Wihte knight?
Wihte knight?

Given their peaceful coexistence, the San Miguel group quickly went to work to deal with “mistakes” such as Air Philippines directly competing for flights with PAL while posting an annual loss. The subsidiary was suppose to compete with the LCC or Low Cost Carriers but a very independent management went and bit the mother company in the butt by flying same routes, same time and lower rates than PAL.

Then followed the rationalization of aircraft size and design to routes and revenues. Ang’s group saw that PAL was using 55% of its revenues for fuel and maintenance above the maximum industry peg of 40%. PAL also had 7 types of aircraft and by the time the SMC group came in, some 16 planes were due for a “D” check or major maintenance work each costing $3 million or a total of $48 million in their first year of management. For 6 months the players computed maintenance, fuel inefficiency and utilization and eventually convinced Lucio Tan and his board to re-fleet and junk 16 planes.

Reacting to ugly rumors regarding purchases and commissions made on the Airbus planes, Ramon Ang, along with PAL CFO Jorge San Agustin and Mr. Andy Lee, who personally headed the study and negotiations for the new aircraft categorically denied such possibilities and backed this up with a certification and challenge from no less than Airbus for anyone to come forward and show proof. Apparently the entire process went under the magnifying glass of Lucio Tan and the Board and it was Lucio Tan who signed on the dotted line.

The management team also debunked claims that Lucio Tan felt insulted because the new management had stripped Tan and his family of long held businesses supplying PAL. Apparently the Tan group continued to hold on to engineering and maintenance contracts, Macro Asia ground handling, personnel staffing, Sky logistics check in and kitchen as well as being entitled to airline privileges that were not even enjoyed by Ang or his executives on their watch.

Rumor has it that at one point Lucio Tan had offered to sell out his shares, then changed his mind and offered to buy back SMC’s shares in PAL, but the white knight of the LT group bailed out. Then SMC was offered to buy out Lucio Tan until someone from the LT group suspected the entry of PAL into a code sharing agreement with Etihad Airlines as the first step into the eventual entry of Etihad as partner to replace the Lucio Tan group.

Rather than being cooked in their own fat, the LT group figured it would be smarter to buy out SMC and bring in Etihad whose investment can refund Lucio Tan’s expense while giving him control of an airline back in the black and tied up with a strong partner in the Middle East.

Question is: will Etihad come in with the necessary investment? If not, Tan’s only hope would be to convince Manny Pangilinan to be a white knight or turn to his contacts in Mainland China for financing. Any of the 3 options must happen because PAL will soon need added capital to pay for their planes for 2015 and 2016, that bill will be due in 90 days. According to the SMC team, the loan that Mr. Tan took out from BDO is just bridge financing also collectible in 90 days. In other words, after borrowing a lot of money, PAL and Mr. Tan will be needing even more to move forward or else it will eventually bring back the airline to square one.

Even worse if the LT group fails to cover the BDO loan, it could cost them control of PNB which covers the loan, while losing out to Lance Gokongwei whose airline Cebu Pacific could gain dominance all over again. As for SMC, the company apparently did not make money on the sale and were ecstatic to get their money back and get out of the Captain’s chair because the PAL overhaul distracted SMC management from concentrating on its core businesses.

The happy ending is that PAL has made money in the last 5 months, safety and maintenance standard of PAL is at industry level, the re-fleeting and purchase of Airbus planes solicited the indispensable support of Airbus so PAL could fly into Europe as well as the US once again and the country’s flag carrier now flies proud. That’s certainly Mission Accomplished for San Miguel and for Ramon Ang.

Air Passenger Volume Up 9.5% in H1


MANILA, Philippines – Air passenger traffic rose to 21.73 million in the first half of 2014, attributed to the continued increase in the number of foreign and domestic tourists, the Civil Aeronautics Board (CAB) reported.

Volume of airline passengers grew by 9.5% from January to June this year compared to 19.84 million in the same period in 2013.

Domestic airline passengers surged 15.32% to 12.42 million in the first half of 2014 from 10.77 million in the same period last year.

Foreign passengers inched up by 2.6% to 9.31 million from 9.07 million, CAB reported.


Air traffic in the Philippines has been recovering from flat growth last year amid the reforms being implemented by the Aquino administration, CAB executive director Carmelo Arcilla said.

Air traffic in the country has been growing by double-digit levels since 2005, except for 2013, Arcilla said.

“We are reaping the benefits of the deregulated policy adopted by the Aquino administration,” Arcilla said.


Budget airline Cebu Air Inc (Cebu Pacific) of taipan John Gokongwei dominated the domestic market after flying 5.82 million passengers in the first half of the year.

Philippine Airlines (PAL) Express came second with 2.77 million, national flag carrier Philippine Airlines Inc with 1.98 million, AirAsia Zest with 1.06 million, and Tiger Airways Philippines with 575,093.

PAL, which used to be jointly owned by tycoon Lucio Tan and diversified conglomerate San Miguel Corporation (SMC), dominated the international market after flying 2.5 million passengers from January to June this year.

Cebu Pacific came second with 1.62 million, followed by AirAsia Zest with 377,198, Tigerair Philippines with 104,467, and PAL Express with 77,309.


Agreements, projects to boost air traffic growth

Arcilla said there is further room for growth of the country’s air traffic as the Aquino administration is pushing several projects, including the proposed P2.4 billion ($53.92 million*) parallel runway to help decongest the Ninoy Aquino International Airport (NAIA).

Arcilla added that the proposed runway optimization program could raise the capacity of the country’s main gateway to 50 to 60 events per hour from the current 40 to 42 landings and take-offs per hour.

Likewise, the CAB official said several airports are being expanded and developed in the provinces including the P17.5-billion ($393.17 million) Mactan-Cebu international airport being undertaken by the tandem of Megawide Construction and Bangalore-based GMR Group, and the expansion of the Clark International Airport in Pampanga.

“There are foreign airlines waiting in the wings,” Arcilla said.


Arcilla also said that the air agreements signed by the Philippines over the past few years led to more tourist arrivals. CAB hopes to conclude agreements with 3 more countries, including Australia, this year.

So far this year, the Philippines concluded air talks with France, Singapore, New Zealand, Myanmar, Canada, Macau,and South Africa. Air talks with Malaysia were called off twice.

Last year, the Philippines signed air agreements with Japan, Macau, Brazil, Australia, Israel, and Italy.


The Aquino administration is pursuing air talks as part of its open skies policy. Under Executive Order No. 29, airports other than NAIA would be opened to more foreign traffic, in line with the target to lure 10 million tourists by 2016.


ASEAN Single Aviation Market: Manila, The Last Odd Man Out


PETALING JAYA: Indonesia has signed a deal to allow Asean airlines to make unlimited flights to Jakarta, The Straits Times has learnt – a move which could lead to cheaper fares and more flight options for travellers flying within the region.

The move follows a campaign which started about a decade ago to get the 10 Asean nations to remove all restrictions on flights from their countries and push to become one aviation market – similar to the European Union’s “single sky”.

Indonesia had been reluctant to sign up to the agreement but now that its capital is on board, aviation experts are confident that other Indonesian cities will follow suit.

The Philippines’ capital Manila is the only other Asean capital yet to join the agreement, although the country has already removed restrictions on flights to other cities.

Aviation law academic Alan Tan of the National University of Singapore told The Straits Times that Indonesia’s agreement is “very significant”.

He said: “It signals Indonesia’s desire to liberalise market access into its cities and to support the Asean single aviation market ambition.”

Asean transport ministers began the push for liberalisation in the air travel sector in an effort to boost trade and tourism, setting a deadline for unlimited flights within the region by the end of next year.

If the move goes ahead, it would mean, for example, that Singapore Airlines could fly to any part of the region as often as it wants – without any flight restrictions – as long as it believes there is demand and it can get landing slots from airports.

Typically, the number of flights a carrier can operate to a destination is determined by deals between the government of the country where the carrier is registered and the government of the country it is flying to.

Such negotiations can be complicated because not all airlines are equal and governments worry that their national carriers may not be able to compete effectively with airlines from the other country.

Although Indonesia and the Philippines have yet to fully sign up to the agreement, Singapore’s transport ministry is confident that next year’s deadline will be met.

A spokesman said: “Given that all Asean member states have reaffirmed commitment to work towards 2015 obligations, we can expect Indonesia and the Philippines to fulfil their outstanding obligations by end-2015.”

The spokesman added that transport plays a “vital role” in the economic development of the region, and liberalisation will benefit all carriers within the bloc by giving them growth opportunities and enhancing their competitiveness.

However, Prof Tan stressed that there are other milestones to be achieved if Asean is to truly exist as a single aviation market.

These include removing restrictions that prevent a carrier from setting up a wholly owned subsidiary in a different Asean country and allowing an airline from one country to operate domestic flights in another.

Tony Tyler, chief executive officer and director-general of the International Air Transport Association, said earlier this year that another big challenge for the region is to ensure “the availability of efficient infrastructure” such as adequate airport and runway capacity.

Source: The Straits Times/ANN

Philippine Airlines: SMC Lost Investment

San Miguel Corp. did not make a profit on its investment in Philippine Airlines (PAL) despite having turned around the moribund flag carrier during the two years when the diversified conglomerate was running the firm.

In fact, SMC president Ramon S. Ang said yesterday that the conglomerate—the country’s largest business group in terms of asset value—did not even break even on its PAL venture owing to its failure to recover its cost of funds.

“SMC lost money in this deal,” he said, breaking his silence for the first time since the airline was reacquired by tycoon Lucio Tan—its former controlling shareholder —two weeks ago.

Ang said he was willing to forego a long drawnout negotiation process with Tan because it was in danger of turning hostile, with frustration on both sides running high after a year of flip-flopping decisions by PAL’s former owner.

All told, the SMC group invested $1.36 billion in PAL—an amount Ang recovered, minus the interest that he should have charged for it over two years.


“If we fought over it, it would destroy the value of PAL,” he said, adding that adopting a hardline negotiating stance would result in a “lose-lose” situation for both sides and eventually erode the value of both tycoons’ holdings. “So I agreed to sell.”

Ang described the poor state of the airline’s finances when he assumed its presidency in 2012 after a $500-million deal with Tan gave SMC 49 percent of the airline, including management control.

He said that, on average, airlines spend 40 percent of total revenues on fuel and maintenance costs.

However, for PAL, which was saddled with older, gas-guzzling aircraft, fuel and maintenance expenses were as high as 55 percent of revenues when SMC came in. It was at this point when the new management decided to embark on a massive refleeting program and ordered a fleet of newer, more fuel-efficient planes from European plane-maker Airbus.

It was also at this point when allegations surfaced that Ang was supposedly earning commissions from PAL’s refleeting program. In response, Ang released a certification issued by Airbus  upon his request to debunk the rumors.

“Both parties hereby represent and warrant that they have not paid, agreed to pay, authorized the payment of or caused to be paid, directly or indirectly in any form whatsoever any commission, percentage, contingent fee, brokerage or other similar payments of any kind, in connection with the establishment or operation of the agreement [to purchase 54 new aircraft] to any employee of the other party or to any person or entity in the other party’s country or elsewhere,” said Airbus senior vice president Cristophe Mourey in a July 23, 2012, letter to PAL.

“Idon’t have the heart to make money from PAL,” Ang said, responding to allegations of profiting from aircraft orders.

Asked about the airline’s prospects going forward, Ang said it would be crucial for Tan to bring in a strategic partner to help buttress PAL’s books.

“Assuming the strategic investor would need to bring in $1 billion in equity, they would need up to $1 billion more for the airline’s working capital and to pay for aircraft deliveries in 2015,” he said. “So the new partner needs around $2 billion.”

The SMC chief said that he has effectively relinquished control of the airline since Sept. 15, describing his two-year stint at PAL’s helm as “mission accomplished.”

“We improved the image of the country overseas, we restored the airline’s profitability and we got the country taken out of the blacklist of both Europe and the US Federal Aviation Administration, with a lot of help from Airbus,” he said.

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