Philippine Airlines is set to accept the deliveries of two Boeing 777-300ER this December, 2017. The acquisition of the airlines’ two B777 is based on a long term agreement with Intrepid Aviation.
These planes are capable of flying longhaul and will have 370 seats in two classes, 42 BCL seats and 328 ECY.
“The Boeing aircraft will serve the Manila-London route, a move designed to primarily enhance the total passenger travel experience and inflight service delivery. While we already have eight B777 serving the West Coast, the incoming units will also augment other trans-Pacific flights,” according to PAL President and Chief Operating Officer Jaime J. Bautista.
On top of the two B777-300ER, PAL is expected to receive Bombardier Q400 turboprops for domestic operations and two Airbus 320NEO.
NAIA Terminals 1 and 2 will soon be connected by an elevated walkway. Philippine Airlines will shoulder the 250 million peso cost of building the 400 meter walkway. Lucio Tan had already agreed to underwrite the project but the proposal still needs the regulatory approval of Manila International Airport Authority.
Asia’s largest LCC, AirAsia, plans to create an ASEAN airline that will house Malaysia’s AirAsia Bhd, Thai AirAsia and the soon-to-be-listed Indonesia AirAsia and Philippines AirAsia. According to AirAsia’s chief executive officer Tan Sri Tony Fernandes, AirAsia’s affiliates in Indonesia and Philippines already appointed bankers in their respective countries to work on the planned initial public offering (IPO).
AirAsia Group will form the holding company once the Indonesian and Philippines affiliates joined AirAsia Bhd and Thai AirAsia in the listing club.
Starting December, PAL will increase flight frequencies to:
MNL – LAX twice daily
MNL – SFO from 11 to 14 flights a week
YVR – JFK from 4 to 5 flights a week
This is made possible due to the arrival PAL’s 7th Boeing 777-300ER aircraft this month. By December, another Boeing 777-300ER is expected to join the fleet. The B777-300ER has a seating capacity of 376 seats.
CEB-LAX route, on the other hand, will still be flown by the 254 seat-Airbus 340 aircraft. The A340 will also be used as standby aircraft to fly to Australia and Honolulu.
Philippine Airlines is considering expanding its fleet of long-range planes with the lifting of restrictions to the United States, allowing the flag carrier to expand as well as switch to more fuel efficient aircraft, company president Ramon S. Ang said.
Ang said in a text message last week that the carrier was studying whether to acquire or lease additional US-made Boeing 777 planes, which has enough range to reach the mainland United States, or the newer long-range A350 aircraft by French manufacturer Airbus.
PAL’s main long-range fleet of six Boeing 777-300ERs were set to replace ageing Boeing 747-400s plying the Manila to San Francisco and Los Angeles routes, Ang said.
The Manila-US flights typically have strong load factors except during off-peak months, aided by the roughly three million Filipinos residing in the United States. This makes the country a key part of PAL’s international expansion strategy.
The move comes as the US Federal Aviation Administration restored the Philippines’ Category 1 air safety rating following reforms at the Civil Aviation Authority of the Philippines. The country was downgraded to Category 2 in 2008 due to safety concerns.
Since PAL acquired its B777s starting 2009, a year after the downgrade, it was forced to use the aircraft for other routes like Canada and Australia, instead of the original plan to fly the planes to the United States.
Ang said that switching to fuel-efficient B777s would result in about $160 million in annual fuel and maintenance savings in the near-term.
PAL, which is jointly owned by San Miguel Corp. and the group of taipan Lucio Tan, flies 26 times a week to the mainland United States as well as Hawaii and Guam. But it would require more planes given its plans to add more flights, consultancy firm CAPA Center for Aviation.
The carrier earlier signed a $9.5-billion deal with Airbus to acquire 64 medium- and long-range planes slated for delivery from 2013 to 2019.
“With the green light now to change gauge and expand in the US, the acquisition of additional 777-300ERs through leases or new orders becomes more likely as it remains the preferred type for US routes,” CAPA said.
It noted that Boeing 787s and A350s could be acquired but PAL would need to wait longer for delivery slots.
Ang earlier said that PAL was keen on reviving flights to New York and Chicago within a year.
The FAA upgrade also opens up expansion opportunities for PAL’s sister firm PAL Express, Civil Aeronautics Board executive director Carmelo Arcilla said in a separate interview.
Since South Korea has also aligned regulations with that of international air safety regulators, including the FAA, the downgrade likewise halted the expansion of local carriers in the country.
With the restoration of Category 1, Arcilla said PAL Express would be allowed to use the 3,000 weekly seats it had sought to South Korea, he added.
The USFAA upgrade of the Philippines to a Category 1 safety rating opens up short-term expansion opportunities for Cebu Pacific Air and Philippine Airlines (PAL), brightening the outlook for both carriers. The upgrade removes the previous freeze on new entrants or adding capacity.
The Category 1 rating enables PAL to immediately replace ageing A340s and 747-400s with more efficient 777-300ERs on existing services to Los Angeles and San Francisco. PAL also plans to add within the next year new destinations in the continental US, giving it a potential alternative to the more risky planned expansion of its European network.
Cebu Pacific is likely to launch services by the end of 2014 to Guam and Hawaii with A320s and A330s, matching PAL on each route. Hawaii and potentially Europe, which is also now an option for Cebu Pacific as the carrier has joined PAL in being removed from the EU blacklist, gives the LCC an opportunity to slow down Middle East expansion and diversify its new long-haul operation.
Philippine Authorities Secure Category 1 Rating
The US FAA announced on 10-Apr-2014 the upgrade of the Philippines from a Category 2 to Category 1 safety rating. The Philippines has been stuck in Category 2 since early 2008, prohibiting PAL from adding flights or changing gauge on any existing frequencies in one of the carrier’s most important markets.
Transitioning trans-Pacific flights to more efficient widebody aircraft and expansion in the US has been a key component of the PAL business plan for over six years. PAL initially committed in 2007 to acquiring six 777-300ERs with the expectation of operating the type to the continental US, including existing and potential new routes. But just a few months later the US FAA downgraded the Philippines to Category 2.
Frustratingly for PAL, the Philippines remained in Category 2 when the 777-300ERs were delivered, starting with two aircraft in 2010 and followed by another two in 2012 and the final two in 2013. As a result PAL was forced to find other markets for its 777-300ERs, some of which like Australia proved to be less than ideal.
In 2011 PAL, under its prior management and ownership, even took the unusual step of hiring and paying for a consultant to help Philippine authorities meet Category 1 standards. While Philippine authorities over the last few years have repeatedly expressed confidence in an upgrade, a Category 1 rating particularly appeared imminent since Mar-2013, when ICAO concluded that Philippine oversight authorities were again in compliance with international safety standards.
The ICAO conclusion led to the EU removing PAL from its blacklist of carriers in Jul-2013. Japanese authorities also quickly lifted restrictions that had blocked PAL and all Philippine carriers since 2008 from expanding to Japan. The Philippines had to wait longer for the US to follow as the FAA first needed to schedule and conduct a new audit of Philippine authorities, which was completed in Mar-2014.
PAL Will Finally Operate 777-300ERs on US Routes
PAL stated on 10-Apr-2014 that 777-300ERs will take over within the next month its existing flights to Los Angeles and San Francisco. PAL now operates ageing 747-400s on its daily flight to San Francisco and a combination of 747-400s and A340-300s on its 11 weekly frequencies to Los Angeles. PAL also operates five weekly flights to Guam and three to Honolulu, which the carrier says will continue to be operated with A320s and A330-300s respectively.
PAL currently uses its six 777-300ERs to operate three of its 14 weekly flights to Tokyo Haneda, its five weekly flights to London and its seven frequencies to Vancouver with three continuing to Toronto, according to OAG data. Sydney had also been flown with 777-300ERs until early Feb-2014, when A340-300s were placed back on the Manila–Sydney route.
The 777-300ER will significantly improve the efficiency of PAL’s operation to Los Angeles and San Francisco and also enable the carrier to eliminate a fuel stop on the westbound leg. The 747-400 and A340 are able to operate non-stop from Manila to California but often have to make a stop on the longer return leg.
PAL Needs To Acquire More Widebody Aircraft
The 777-300ER is the ideal aircraft for PAL’s trans-Pacific operations, as the carrier envisioned in first selecting the type in 2007. But PAL will not have enough 777-300ERs to cover all its North American flights. Based on current schedules all 25 weekly frequencies to Los Angeles, San Francisco and Vancouver would require a fleet of at least seven aircraft.
PAL will also need more 777-300ERs to add new destinations in mainland US, which it plans to launch within the next year. The carrier served Las Vegas until 2012 and previously looked at serving San Diego, which has one of the largest Filipino populations in the US. But at this point PAL’s management team seems more keen to go further east with Chicago and New York both likely destinations by early 2015.
PAL has been looking at acquiring more widebody long-haul aircraft, including additional 777-300ERs. With the green light now to change gauge and expand in the US, the acquisition of additional 777-300ERs through leases or new orders becomes more likely as it remains the preferred type for US routes. (787s or A350s could also be acquired but PAL would likely need to wait longer for delivery slots, making these types potential replacements for A340s on European routes.)
Category 2 prevented PAL from completing renewal of its widebody fleet as the carrier had no choice but to continue operating 747-400s and A340s on its US routes. PAL currently operates five 747-400s, which are 19 to 20 years old and are only used for Los Angeles and San Francisco. PAL also has been operating some of its US flights since 2008 with four long-standing A340-300s, which are 16 to 17 years old.
In addition to taking its last two 777-300ERs, over the last year PAL added five ex-Iberia A340-300s under a lease agreement with Airbus. The newly acquired A340-300s, which are 12 to 15 years old, will likely be used to operate to London (and at least some of the Vancouver frequencies) as PAL looks to free up 777-300ERs for the US market.
PAL also has taken delivery over the last year of eight A330-300s (including one at PAL Express) which were part of a large order placed in 2012 with Airbus. PAL has another 12 A330-300s on outstanding order, all of which are slated to be delivered by the end of 2015, according to the CAPA Fleet Database.
PAL has been using the A330s to expand regionally within Asia-Pacific and to the Middle East. PAL recently reduced its A330-300 order book by five aircraft in a swap for eight more A320neos, raising it A320neo commitment to 18 aircraft.
Philippine Airlines fleet summary: as of 12-Apr-2014
Source: CAPA Fleet Database
Note: *Firm orders include those placed directly by the operator and by lessors assigned to the operator
The PAL group has been ambitiously pursuing expansion in the Middle East, where it added five destinations in 4Q2013 using new A330-300s. PAL also launched the Manila-London Heathrow route in Nov-2013, quickly taking advantage of its removal from the EU blacklist.
US Expansion More Attractive Than Continental Europe
PAL has also been preparing over the last several months to add services in continental Europe, with Amsterdam, Frankfurt, Paris and Rome all cited as potential routes. PAL had been looking at launching multiple European destinations in 2014 and still has a sufficient number of A340-300s to potentially launch one or two. But new US destinations could become the priority over continental Europe.
It would be logical for PAL to focus on the US and catch up on the six years it has not been able to grow in the US market. (In fact PAL slightly reduced capacity to the US as in 2012 it dropped Las Vegas, which it served as a tag with Vancouver on three of the seven weekly flights to Vancouver. Dropping the tag allowed PAL to switch its Vancouver service to an all-777-300ER operation and add Toronto. Service to Las Vegas is not likely to be restored as the focus is instead now on the eastern US.)
The US represents a better opportunity than Europe as the US has by far the world’s largest population of overseas Filipinos. There are over 3 million Filipinos living in the US while there are about 700,000 Filipinos living in Europe. The European population is also spread out, making it easier for Gulf carriers to penetrate the Philippines-Europe market as they are able to offer a wider array of destinations in Europe, particularly as PAL does not currently have a European partner.
The Philippines-US market is also competitive but PAL does not have to contend with the Gulf carriers and has an advantage as it is the only carrier with non-stop service. Delta and United serve the Philippines but neither operates non-stops. Delta currently serves Manila via Nagoya and Tokyo in Japan while United operates from Guam, where it has a small base.
Despite offering an outdated product on ageing aircraft, PAL’s load factor to Los Angeles and San Francisco in recent years has been consistently above 75% except during the off peak months of September to December.
PAL’s position in the US should strengthen further as its transitions its California flights to its flagship product, the 777-300ER. About half of the Filipinos living in the US reside in California.
Expansion of the network to the east should allow PAL to be able to further grow its overall share of the Philippines-US market. There are currently about 200,000 Filipinos living in the New York City area and about 100,000 in the Chicago area. This segment of the community is generally flying with North Asian carriers as there is no convenient PAL option.
Cebu Pacific Poised to Enter Guam and Hawaii
Cebu Pacific also is keen to serve the US market but currently does not have the aircraft with the range to reach the mainland US. The LCC is expected to initially focus on Guam and Honolulu with both routes likely to be launched by the end of 2014.
Cebu Pacific has long been interested in serving Guam with its A320 fleet but has been precluded by Category 2 restrictions. The carrier even previously looked at wet-leasing aircraft from a US carrier to serve Guam but ruled out that option as it was cost prohibitive.
Manila-Guam is currently served by United with 10 weekly 737-800 flights along with the five weekly A320 flights from PAL. With LCC stimulation the Manila-Guam should be able to support a significant increase in capacity.
Guam has been keen for some time to attract LCC service from the Philippines. The Guam airport has seen the Korea-Guam market grow following the entrance of Jeju Air, which is the only LCC currently serving Guam.
The Honolulu-Manila market has only been served by PAL since Hawaiian Airlines dropped Manila in mid-2013 after five years on the route. Cebu Pacific should be able to be more successful than Hawaiian at stimulating demand as the Honolulu-Manila market is price sensitive – as are most Filipino expatriate markets.
Hawaii has the second largest Filipino community after California among US states, with about 300,000 residents.
The opening up of the US market comes at an ideal time for Cebu Pacific as the carrier has not yet decided on routes for the three A330-300s it is adding in 2014. The carrier’s new long-haul unit took delivery of its first two A330s in 2013, one of which was used to launch service to Dubai in Oct-2013 with the other aircraft used for regional services to Seoul and Singapore. Cebu Pacific has been using its third A330 in the domestic market since taking the aircraft in Feb-2014.
Hawaii Gives Cebu Pacific The Option Of Slowing Down Middle East Expansion
With another A330 delivery expected in May-2014 followed by one more in 3Q2014, Cebu Pacific needs to quickly move forward with selecting additional long-haul routes. Australia is under consideration and Sydney will likely be launched by the end of 2014. As CAPA previously reported, Cebu Pacific also has been considering two destinations in Saudi Arabia as well as Kuwait, Qatar and Oman.
Hawaii represents a potentially more appealing option. The Middle East market has become extremely competitive as PAL also has launched services to Saudi Arabia, Qatar and the UAE. In addition several Middle Eastern carriers have large operations at Manila.
As Cebu Pacific’s initial performance in Dubai has been somewhat disappointing, the carrier’s long-haul unit could be better off focusing on a more balanced network featuring a mix of Australia, Hawaii and two or three Middle Eastern destinations. Previously the long-haul plan was for five to six destinations in the Middle East and one in Australia by the end of 2014. Cebu Pacific will still likely launch one or two additional Middle Eastern routes in 2014 but now has the option of deferring some of its Middle Eastern expansion until at least 2015 in order to free up capacity for Honolulu.
Cebu Pacific also now has the option of serving the EU as it was removed from the EU black list on 10-Apr-2014, ironically the same day it received good news with the US FAA announcement. But Hawaii is a more likely option for 2014 with services to Europe and potentially the continental US to be added later as new generation widebody aircraft are considered. Most European destinations are not within range of Cebu’s A330s without payload limitations although Moscow is an option and has been considered.
PAL and Cebu Pacific Improve as Japan Opens Up
US Category 1 along with the removal from the EU blacklist significantly improves the outlook for both main Filipino carriers. PAL and Cebu Pacific are also now pursuing rapid expansion in Japan, taking advantage of the lifting of restrictions by Japanese authorities.
For Cebu Pacific the opportunities in Japan and the US are particularly key as the carrier was previously limited to operating only three weekly flights to Japan while it was completely shut out of the US. PAL benefited in Japan and to a lesser extent the US as it was already in both markets with relatively significant operations.
Japan is currently PAL’s largest market, accounting for about 25% of its total international seat capacity while the US is its fourth largest market accounting for about 10%. On 30-Mar-2014 PAL significantly expanded its Japanese operation as it launched two daily flights to Tokyo Haneda, introduced a second daily frequency to Osaka and added two weekly frequencies to Fukuoka for a total of seven.
PAL Can Now Look for US Airline Partners
While it benefited from limits on Cebu’s expansion, PAL needed to grow in both Japan and the US as the carrier enters a new expansion phase under San Miguel, which acquired a majority stake in PAL in 2012 and has invested significantly in new aircraft. The Category 1 rating also allows PAL to pursue code shares with US carriers, which would give it domestic connections beyond its gateways.
While attracting a partnership with a US major may be challenging, Hawaiian Airlines, Alaska Airlines and Virgin America are all potential suitors which would provide sufficient offline access beyond the main PAL gateways of Los Angeles, San Francisco and Honolulu. JetBlue could also be a potential partner if PAL opts to launch services to New York.
PAL also has been discussing a potential partnership with ANA, which could provide access to some US points beyond Tokyo as well domestic connections in Japan.
Category 1 will offer a huge boost for PAL as it opens up online and offline opportunities in the US. While an ambitious PAL is still keen to grow further in the Middle East and Europe, where it did not have a single destination just six months ago, the US should now get priority.
MANILA, Philippines – Legacy carrier Philippine Airlines (PAL) has announced the introductory fares for its direct 13-hour Manila-London flights starting November 4.
On its website, PAL priced its one-way Manila-London economy flights at US$442, equivalent to about P19,385. It includes taxes, surcharges and other fees.
Business class seats start at $1,292, or about P56,655, also all-in.
PAL president Ramon Ang had said their fare structure will be competitive against other airlines that service routes between different points in Asia and London.
“Whenever you start a new destination, you should expect a strong competition from any airline that servicing those destinations at the moment. For example, I think one of them had already reacted and lowered the price of tickets already, but it’s ok, we foresee that and definitely, we are here to stay and we will compete with them,” he told reporters no Tuesday, September 17.
He was referring to the airlines from the Middle East that are heavily subsidized and know for slashing fares.
PAL’s return to London after 15 years will be via a wide-bodied Boeing 777-300ER aircraft, which can seat up to 370.
“Leave Manila in the morning, make it to London in time for afternoon tea,” its website ads stress.
The flights are between Ninoy Aquino International Airport in Manila and Heathrow International Airport in London.
Both airports are main gateways and are congested. PAL will mount the direct flights 5x a week to and from the world’s busiest airport, Heathrow.
This also highlights the first time a Philippine carrier is mounting flight to Europe after the European Union lifted its safety ban on Philippine carriers in July after the local aviation regulator met the safety standards of the 27-member economic bloc.