Amazing Race: Qantas Wins Race To Fill Airplane Seats On Route To Manila (Cebu Pacific 50.4%, PAL 70.4%)


When it comes to filling seats on international airline routes, not all carriers are equal.

Budget carrier Cebu Pacific managed to sell just 50.4 per cent of its seats on its new route between Sydney and Manila in the Philippines last year, making it the third-worst performing route by load factor. But on the same route, full-service Qantas filled 88.7 per cent of the seats on its planes, which was the best performance of any carrier on an international route.

Data compiled by aviation consultancy Aspire Aviation based on government filings and analysis of global distribution systems shows routes to Pacific Islands and Papua New Guinea are consistently the lowest performers in terms of load factors. There are, however, reasons why airlines keep those going. They are often used heavily by government and corporate clients and are also used to ferry large amounts of freight between Australia and remote areas.

Thai Airways, which faced political instability in its home market last year, managed to fill only 66.3 per cent of its flights to and from Australia, making it one of the worst performers. Garuda Indonesia was close behind, filling just 67 per cent of its seats from Australia to Bali and Jakarta.

Those poor performances contrasted with US carrier Delta Air Lines filling 86.9 per cent of the seats on its daily flights between Sydney and Los Angeles, which was ahead of the 81.2 per cent filled by its partner Virgin Australia on flights between Australia and Los Angeles.

Cathay Pacific, which has been pushing unsuccessfully to date for more air access to Australia, filled 86.9 per cent of the capacity to its Hong Kong hub last year. Just this week, the airline announced it would upgrade a second of its four daily flights between Sydney and Hong Kong to a larger Boeing 777 from a smaller Airbus A330 from October. It is prevented from adding more flights to the main Australian gateways of Sydney, Melbourne, Brisbane and Perth under the terms of its bilateral air services agreement, but it can add capacity by using bigger planes.

Etihad Airways, which is expanding capacity by placing an Airbus A380 on its Sydney route from June, was also a top performer.  The Virgin partner filled 86.7 per cent of its seats between Australia and Abu Dhabi last year. That was much better than the 73.8 per cent of seats Virgin filled on its own flights between Sydney and Abu Dhabi.

Overall, Virgin filled 74.7 per cent of its seats across its entire international operations, which compared with the 79.7 per cent filled by Qantas.

In the period between July and December, Virgin reported a loss from its international operations, while Qantas reported a profit. Virgin has faced particular pressure on flights between Australia and Bali, where it filled 68.3 per cent of its seats, while Qantas’ budget arm Jetstar filled 75 per cent.

That route will become even more competitive from next month, when Indonesia AirAsia X launches direct flights from Melbourne to Bali. Those flights had been delayed from an initial planned start date of December pending approvals from the Civil Aviation Safety Authority which were granted last week.

Virgin plans to deploy its budget arm Tigerair Australia on international flights in the future, with speculation the low-cost-carrier could take over some Bali flights from Virgin.

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Ninoy Aquino Int’l Airport T3 To Be Fully Operational After 17 Years


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The Ninoy Aquino International Airport (NAIA) Terminal 3 will finally be fully operational by the end of July, the Transportation department said, noting that it has been 17 years since the contract for the project has been awarded.

Five international carriers will transfer to NAIA-3 from NAIA-1 starting next week. Delta Airlines will fly out of the newest terminal by August 1. KLM Royal Dutch Airlines, Singapore Airlines, Emirates, and Cathay Pacific will soon follow suit.

“We are extremely pleased to confirm that full airline operations will begin at NAIA Terminal 3 next week. Our gateway airport will now be able to welcome 3.5 million more passengers with modern facilities every year, “ Transport chief Emilio Abaya said.

The contract, awarded in 1997, was supposed to have been finished by 2002. Allegations of anomalous transactions with contractor Philippine International Air Terminals Co., Inc., and cases consequently filed, have stalled project completion.

The terminal opened in 2008, but has been operating at half its intended capacity of 13 million passengers. In August 2013, the government struck a deal with the original contractor Takenaka Corp. to complete the project pending resolution of cases.

“[T]he Japanese firm has undertaken completion works for systems such as, flight information displays, computer terminals, gate coordination, landing bridges, and fire protection systems” over the past year, the Transport department said.

Around 85 percent of the works had been completed, it added, noting that other systems “which are non-critical to full airline operations, such as the building maintenance system,” would likely be completed within the year.

The transfer of five airlines to NAIA-3 is expected to reduce NAIA-1’s annual passenger traffic to its design capacity of 4.5 million from its current rate of 8 million. NAIA-1, which has been tagged the worst airport in the world, is also undergoing renovation.

Abaya added that the five carriers transferring to NAIA-3 “have the highest volume of international flights coming in and out of NAIA, so we look forward to giving them a new home.” The move thus cuts he number of travelers affected by NAIA-1 works.

The Cabinet official said NAIA-3’s completion is part of the President Benigno Aquino’s promise of good governance. “We made sure that 17 years and 4 administrations later, the whole Terminal 3 facility may be enjoyed by the public,” Abaya said.

Source: Kim Arveen Patria

‘With Move To NAIA 3, Fraport Case Can Be Settled’


MANILA, Philippines – Germany expressed hope yesterday that the transfer of five foreign airlines to the Ninoy Aquino International Airport’s Terminal 3 would speed up the settlement of the legal dispute between the Philippine government and German airport operator Fraport AG.

NAIA Terminal 3
NAIA Terminal 3

“It’s a good window of opportunity… Once they do this step, it might also be a good idea to come to a settlement,” German Ambassador Thomas Ossowski told The STAR yesterday. “Everyone should now be interested to come to a settlement.”

Ossowski said bilateral economic and trade ties have improved and German investors like the reforms implemented by the Aquino administration to make the Philippines more business-friendly.

“We have moved a good way forward but more needs to be done,” he said.

Among the things that must be settled, he said, is the dispute with Fraport, which European officials have said has scared away investors.

“Fraport is like a lighthouse that others look at,” Ossowski said. “All the other investors see money which went down the drain.”

Airport general manager Jose Angel Honrado announced recently that Cathay Pacific, Delta Airlines, Emirates, KLM and Singapore Airlines planned to transfer operations to NAIA 3 by August as Terminal 1 undergoes repair.

Foreign carriers have reportedly resisted transferring operations to NAIA 3 for fear of becoming entangled in the unresolved dispute with Fraport.

With the planned transfer of the five major carriers, Ossowski said a settlement of the dispute with Fraport would be a good follow-up.

“If everyone acts with goodwill and determination, everything will reach a settlement that is acceptable to all sides,” he told The STAR. “Other investors will be encouraged to come.”

He expressed confidence that a legal settlement will be reached on the case that arose from the government’s termination of the contract awarded to Fraport and its Philippine partner Philippine International Air Terminals Co. Inc. (Piatco) amid allegations of corruption.

“We want to close that chapter,” Ossowski said. “It has cast a shadow on bilateral relations in the past and we want to overcome that.”

Source: philstar.com

35 Sexy Flight Attendant Selfies From Around the Globe


Foreign Airlines Moving To NAIA 3 In August


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MANILA, Philippines – Five foreign airlines are scheduled to transfer their operations to the Ninoy Aquino International Airport terminal 3 (NAIA3) in August upon the completion of the ongoing P1.9 billion retrofitting and rehabilitation project, the Department of Transportation and Communications (DOTC) said.

DOTC undersecretary Jose Perpetuo Lotilla said foreign airlines expected to move to NAIA3 in August include Singapore Airlines, Cathay Pacific, Emirates, KLM, and Delta Airlines.

With the transfer of five foreign airlines, he said the number of foreign airlines operating in NAIA3 would increase to six as All Nippon Airways (ANA) is already operating in the terminal.

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“They (airlines) have to do a lot of things such as construction of lounges and offices. I think they will transfer around August,” he stressed.

Lotilla revealed that the P1.9 billion rehabilitation of NAIA3 being undertaken by the Takenaka Corp. of Japan is already 62 percent complete.

He pointed out that the project is expected to be completed in July ahead of the August schedule.

KLM

The rehabilitation works at NAIA3 include baggage handling, flight information displays, computer terminals, gate coordination, and fire protection systems, among others to allow a faster and more pleasant experience for passengers flying in and out of Manila.

The objective of the rehabilitation of both NAIA1 and NAIA3 is to bring NAIA1 back to its design capacity of around four to 4.5 million from the current eight million.

“We will be reducing the number of users of NAIA1 from the present eight million so it will now be back to its rated capacity of 4.5 million,” Lotilla said.

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He added that the P1.3 billion rehabilitation of NAIA1 being undertaken by construction giant DM Consunji Inc. (DMCI) is expected to be completed as scheduled in January next year in time for the Asia Pacific Economic Cooperation (APEC) Summit.

Based on latest data from the Manila International Airport Authority (MIAA), the number of domestic and international passengers increased 3.1 percent to 32.865 million last year from 31.877 million in 2012.

The number of arriving and departing domestic passengers at NAIA slipped slightly to 17.689 million from 17.738 million due to several flight cancellations due to weather disturbances led by Super Typhoon Yolanda that battered provinces in the Visayas last Nov. 8.

On the other hand, international passenger traffic reached 15.176 million last year or 7.3 percent higher compared to 14.14 million in 2012 as the number of international flights increased 9.9 percent to 87,629 from 79,685.

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Wall St. Cheat Sheet, a United States financial media company, has ranked NAIA eighth among the 10 Worst Airports in the World, citing overcapacity issues in terminals 1 and 3.

According to the report posted online, the 10 worst airports are known for their “smelly bathrooms, long lines and rude staff.” It described NAIA’s terminals 1 and 3 as “particularly crammed.”

The DOTC is looking at putting into operation a new international airport by 2027 with the joint development of NAIA in Manila and the Clark International Airport in Pampanga as a study by the Japan International Cooperation Agency (JICA) showed that the number of passengers in Greater Capital Region would hit 106.7 million by 2040 from 31.88 million in 2012.

 

Source: Lawrence Agcaoili

PAL Cancels 5 A330 Orders, Airbus Drops Behind Boeing in 1Q Jet Orders


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(Reuters) – Airbus dropped behind U.S. rival Boeing (BA.N) in the race for new airplane deals in the first quarter after a pair of wide-body order cancellations, while Boeing finalized a major Canadian sale, company data showed on Friday.

Airbus, a subsidiary of Airbus Group (AIR.PA), said it had won new 40 orders in March, led by a diplomatic deal that saw China unblock 27 orders for A330 jets during a state visit to Europe by President Xi Jinping.

However, it suffered two order cancellations, including 12 A350-800 aircraft from a company linked to struggling Italian airline Alitalia CAITLA.UL and five A330s from Philippines Airlines.

Airbus ended the quarter with 158 new orders or 103 net orders after adjusting for cancellations.

Boeing said on Thursday it had won 275 gross orders or 234 net orders in the first quarter. Cancellations for both planemakers ran at about the same level during the quarter.

Boeing leapfrogged its arch-rival in gross orders after winning an order for 61 narrowbody jets from Air Canada, marking a shift of suppliers by the Montreal-based airline. The order, first announced in December, was finalized this week.

Airbus said the canceled A350-800 order came from Aircraft Purchase Fleet, a Dublin-based leasing firm originally set up to provide capacity for Alitalia.

While the immediate effect of the cancellation is to dent Airbus’s order book, it also reflects a deliberate effort by the jetmaker to wean customers off the least-sold version of its newest aircraft as it focuses on the larger A350-900.

That may help clear the air for a possible decision by Airbus later this year to give a new lease of life to an existing model by putting new fuel-saving engines on the A330.

People familiar with the project say the revamp would be incompatible with putting much investment in the A350-800, which is a similar size but has been relatively unpopular because it is a scaled-down version of the A350-900.

Such “shrink” aircraft tend to be less efficient than planned because they inherit some unnecessary structure and weight from the larger base model.

Orders for the $261 million A350-800 peaked at more than 180 aircraft in 2008 but have dwindled to 34 following the latest cancellation as attention focused on two larger A350 models.

Aerospace analysts say the future of the smallest variant of A350 now hinges on its remaining five customers including Russia’s Aeroflot (AFLT.MM), South Korea’s Asiana Airlines (020560.KS) and Hawaiian Airlines (HA.O), who may demand concessions in return for changing their fleet plans.

U.S. carrier Delta Airlines (DAL.N) officially launched a competition on Thursday to renew the top end of its fleet with new jets and its decision could shed further light on whether Airbus goes ahead with the revamped “A330neo”.

In terms of deliveries, Boeing remained the industry leader in the first quarter with 161 commercial aircraft deliveries compared with 141 for Airbus.

China’s decision to unblock 27 A330 jet orders reflected a reduction of tensions between China and the European Union over EU policies on aviation emissions, but fell short of forecasts of a major new plane order pending final resolution of the row.

On Thursday, the European Parliament voted to exempt international flights from paying for their carbon emissions following intense pressure from national governments not to extend current rules beyond domestic air travel.

Source: TIM HEPHER, REUTERS

Cebu Pacific, AirAsia Zest, Tigerair and Philippine Airlines Race to Add Flights to Japan


Source: CAPA Center for Aviation

 

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The PhilippinesJapan market is poised to see a huge influx of capacity, driven primarily by expansion from Philippine low-cost carriers. The expansion is made possible by a new air services agreement between the two countries and the lifting of restrictions by Japanese authorities on Philippine carriers.

Cebu Pacific Air, which currently only serves one destination in Japan with three weekly flights, is seeking the biggest expansion with at least 80 additional weekly flights and eight new destinations. AirAsia is planning to enter the Philippines-Japan market with 32 weekly flights while Tigerair is looking to enter with 56 weekly flights.

Philippine Airlines (PAL) and its regional subsidiary PAL Express are seeking to add 63 weekly flights. PAL is currently the market leader with 31 weekly flights to Japan. In the total there are currently only 76 weekly flights between the two countries, a figure which should quickly double and possibly triple depending on how many of the proposed new flights are implemented.

Philippines-Japan market has been drastically under-served

Philippines-Japan has been an under-served market over the last five years due to Japanese Civil Aviation Bureau (JCAB) restrictions preventing Philippine carriers from increasing capacity because Philippine authorities were not in compliance with ICAO safety standards. Japanese authorities recently agreed to lift the restrictions, meeting a request from Philippine authorities who had been lobbying JCAB since passing an ICAO audit in early 2013.

The Philippines and Japan also agreed in mid-Sep-2013 to a new air services agreement which increases the number of weekly flights allowed between Manila and Tokyo Narita for each side from 119 to 400. New traffic rights to Tokyo Haneda have also been made available, with an initial allotment of 14 weekly flights for each side. Philippine authorities will need to distribute the Haneda rights between PAL, PAL Express and Cebu Pacific as all three carriers have applied.

Unlimited rights were granted for routes connecting any Philippine airports except Manila and any Japanese airports except Haneda. This will allow an unlimited number of flights from Japan to Philippine holiday destinations such as Cebu and Kalibo – markets where there is significant LCC potential.

PAL and other full-service carrier benefitted from previous restrictions

Under the previous air services agreement there were still available traffic rights but they have been meaningless since 2008 due to the JCAB restrictions. The restrictions were particularly harmful to the Philippines vibrant LCC sector.

Over the last five years Philippine LCCs have expanded significantly in the domestic market and to other regional international destinations such as Singapore. But Japan has been off limits despite being within narrowbody range of the Philippines. The Philippines-Japan is also a natural LCC market because Japan is one of the largest source markets for the Philippine tourism industry and has a large overseas Filipino population.

With Philippine LCCs now able to pursue expansion in Japan, the market can be stimulated with low fares and new routes. Philippine-Japan fares have traditionally been high, making it a profitable market for PAL and other legacy incumbents. The lack of expansion in the market had benefitted PAL as before the restrictions were put in place PAL already had the largest operation between the two countries.

The restrictions also have benefitted Japanese carriers and fifth-freedom carriers. Jetstar and Delta both serve the Philippines-Japan market, taking advantage of pick-up rights while Philippine carriers have been unable to expand.

Delta currently operates 13 weekly flights to the Philippines including seven from Manila to Tokyo Narita and six from Manila to Nagoya. These flights continue onto to the US but Delta is able carry a large volume of local passengers as it uses 747-400s rather than Japan-based narrowbody aircraft for both services.

Jetstar offers eight weekly A320 flights from Manila to Osaka, according to Innovata data. Four of these flights originate in Singapore and are operated by Jetstar Asia and four originate in Darwin and are operated by Australia-based Jetstar Airways.

Japanese carriers currently only operate 21 weekly flights to the Philippines. It is somewhat surprising they have not responded to the opportunities created by the inability of Philippine carriers to expand.

Japan Airlines (JAL) currently operates two daily flights between Manila and Tokyo Narita while All Nippon Airways serves the route with one daily flight. Both carriers use 767s on the route.

LCCs have less than a 10% share of the Japan-Philippines market

PAL’s market leading 31 weekly flights to Japan include one daily flight from Manila to Tokyo Narita using 777-300ERs, one daily flight from Manila to Nagoya using A330s, six weekly flights from Manila to Osaka Kansai using A330s, five weekly flights from Manila to Fukuoka using A320s and five weekly flights from Cebu to Tokyo Narita using A330s. Cebu Pacific’s only route to Japan, which it launched in 2008, connects Manila with Osaka using A320s.

PAL currently has a 43% share of seat capacity between Japan and the Philippines. Delta has a 24% share followed by JAL with 16% and ANA with 8%. Jetstar has about 6.5% and Cebu Pacific about 2.5%, giving LCCs only a 9% share of total capacity. Jetstar, which began serving the Manila-Osaka route in 2012, has accounted for nearly all the limited growth the Philippines-Japan market has seen over the last two years.

In comparison, LCCs currently account for 38% of seat total capacity between the Philippines and South Korea, 50% of seats between the Philippines and Singapore and 50% between the Philippines and Malaysia. All these markets along with Philippines-Japan consist of flights in the three to four and a half hour range, making them ideal for LCCs.

Japan is currently the Philippines’ fourth largest international market after Hong Kong, Singapore and South Korea. With more LCC penetration, the market could easily overtake South Korea and Singapore. There are currently about 43,000 weekly return seats between the Philippines and Japan compared to about 63,000 seats for Philippines-South Korea and Philippines-Singapore.

The Philippines-China market also has huge potential but growth over the last 18 months has been set back by a rocky political relationship between the two countries.

See related report: Philippine carriers see huge opportunities in China once restrictions are lifted

With China growth unlikely for the short-term and most other short-haul international markets already penetrated, Philippine LCCs are relying heavily on the Japanese market to support their growth ambitions. Philippine LCCs need to expand internationally as the domestic market has become extremely competitive with over-capacity on some routes and at times irrational pricing.

Cebu Pacific plans a huge expansion to Japan with eight new destinations

Cebu Pacific stated in early 2013 that it could allocate the equivalent of two A320s to new Japanese routes once the Philippines-Japan market opens up. Cebu Pacific has the advantage over other Philippine LCCs in that it is already in the Japanese market and has the largest portfolio of slots at Manila Ninoy Aquino International Airport. This gives the carrier an opportunity to launch flights from Manila to Japan by juggling its slots.

See related report: Cebu Pacific sees bright outlook for 2013 as rationality returns to Philippines market

Cebu Pacific recently applied to the Philippines Civil Aeronautics Board to serve eight new destinations in Japan from Manila: Fukuoka, Hiroshima,Ibaraki, Nagoya, OkinawaSapporo, Tokyo Haneda and Tokyo Narita. Cebu Pacific would be the first carrier to link Hiroshima, Ibaraki, Okinawa and Sapporo with the Philippines while it would provide new LCC competition to the bigger markets of Fukuoka, Nagoya and Tokyo.

The carrier is also expected to expand on the Manila-Osaka route, which it currently only serves with three weekly flights. Cebu Pacific did not apply for additional Manila-Osaka entitlements as it already holds additional rights for Osaka that were previously allocated but it was unable to use due to the JCAB restrictions.

The carrier’s proposed Tokyo services, both Narita (twice daily) and Haneda (daily), would begin in Feb-2014. Cebu Pacific has been eager to enter the Tokyo market for several years as Tokyo is the only major Asian capital the carrier does not yet serve. (Cebu Pacific already servesBangkokBeijingHanoiJakartaKuala LumpurSeoul and Singapore.)

Daily Manila-Fukuoka services would follow in Apr-2014, breaking the monopoly on that route held by PAL. Cebu Pacific is aiming to become the first carrier on the Manila-Okinawa route with daily flights beginning May-2014. It has applied for three weekly flights from Manila to Nagoya from Jun-2014. (This service is also likely to be daily as Cebu Pacific already holds some rights to Nagoya it was previously unable to use due to the JCAB restriction.)

Daily services from Manila to Hiroshima and Sapporo would be added in Oct-2014. A launch date for Ibaraki has not yet been provided.

Cebu Pacific is also seeking to launch daily services from its second largest hub Cebu hub to Tokyo Narita, Osaka Kansai and Nagoya. These routes would all begin in 4Q2014.

Cebu Pacific may not initially use all the entitlements

Cebu Pacific could potentially serve the Japan market by the end of 2014 with as many as 14 daily flights. This assumes daily services on 12 routes and double daily on Manila-Tokyo Narita. This would give Cebu Pacific about 35,000 weekly seats in the Philippines-Japan market.

It seems doubtful Cebu Pacific would launch so many routes in just one year. Eight new international destinations would be unprecedented for the carrier, which will also be busy in 2014 adding new medium/long-haul destinations as it grows its new A330 fleet. Cebu Pacific’s current international network consists of 21 international destinations.

Cebu Pacific is also only planning to grow its A320 family fleet by one aircraft in 2014, from 38 to 39. But the carrier does have flexibility to accelerate narrowbody expansion by extending aircraft leases. Currently its 2014 fleet plan includes five new A320 deliveries and four lease returns. Some of these leases could be extended to support the expansion in the Japanese market. Cebu Pacific could also use some of its A330 fleet, which will grow from two to four aircraft in 2014, to serve some of the new Japanese routes, particularly Haneda and or Narita.

If Cebu Pacific follows through on the proposed new routes, Japan would easily become its largest international market – roughly double the size of its operations to Hong Kong and Singapore. This sounds difficult to believe, but Japan does have the potential to develop into this kind of market for Cebu Pacific.

Japan is already PAL’s largest single market based on seat capacity. Cebu Pacific has more capacity than PAL in other short-haul international markets, including Hong Kong and Singapore. This further illustrates the huge potential Japan has for Cebu Pacific.

PAL seeks to expand in Tokyo

PAL currently has about 18,700 seats in the Japanese market and could add as many as 17,000 weekly seats if it uses widebodies for the proposed four additional flights from Manila to Tokyo. PAL said in its recent application that it would add two daily Narita flights from 27-Oct-2013 and launch two daily flights to Haneda on 30-Mar-2014.

PAL Express could also add about 12,000 weekly seats to and from Japan if it launches the five daily flights it is seeking. This includes two daily flights each from Manila to Tokyo Haneda and Tokyo Narita and one daily frequency on the Cebu-Tokyo Narita route.

PAL Express, formerly known as AirPhil Express, operated under the LCC model until early 2013. It now provides a full service but has kept elements of the low-cost model and is used by the PAL Group to compete against LCCs.

PAL Express could emerge as the main PAL Group competitor in the Manila-Tokyo market for Cebu Pacific as well AirAsia and Tigerair. AirAsia and Tigerair have applied for seven weekly and 14 weekly Manila-Tokyo Narita entitlements, respectively.

The prospect of eight carriers competing between Manila and Tokyo Narita, double the current four (ANA, JAL, PAL and Delta), could quickly lead to over-capacity. There is demand to support more capacity in the market but not necessarily so many players.

The opening up of the Manila-Haneda market could exacerbate the situation as some of the demand in the Manila-Narita market migrates to more convenient Haneda. While the Japanese carriers are unlikely to respond to most of the new flights by the Philippine carriers, ANA and JAL will almost certainly look to use the 14 weekly entitlements that will be made available to Japanese carriers in the Manila-Haneda market.

Some of Japan’s new group of LCCs could also eventually compete in the Manila-Narita market, particularly Jetstar Japan as the Jetstar Group is already competing in the Manila-Osaka market. But this is not likely in the short to medium term as Japan’s LCCs are still focused on building up their domestic operations and on international flights within North Asia.

LCCs could stimulate growth in the Philippines-Japan markets outside Manila

With so much capacity being poured into Manila-Tokyo, the opportunities to launch services in markets other than Manila may become more appealing to LCCs.

PAL’s Cebu-Tokyo service is currently the only route between the two countries which does not touch Manila. With over 400,000 tourists from Japan visiting the Philippines in 2012, more direct services to holiday destinations can be supported. (There are also about 300,000 Filipinos living in Japan.)

Cebu, which is a bigger tourist destination than Manila, could particularly support a lot more capacity. In addition to Cebu Pacific seeking to launch daily flights from Cebu to Tokyo Narita, Osaka Kansai and Nagoya, AirAsia and Tigerair have applied to link Cebu with Japan. AirAsia aims to serve the Cebu-Osaka market with four weekly flights while Tigerair has applied to serve Cebu-Tokyo Narita with an aggressive double daily service.

AirAsia and Tigerair are also both seeking to launch services to Japan from Kalibo, which is a gateway to the popular resort island of Boracay. Tigerair is proposing daily services from Kalibo to Tokyo Narita and AirAsia is proposing three weekly flights to Nagoya and four weekly flights to Osaka.

All the proposed AirAsia-branded flights would be operated by Zest Airways, which is in the process of being re-branded as AirAsia Zest. All the Tigerair-branded flights would be operated by Tigerair Philippines, previously known as SEAir.

AirAsia Zest and Tigerair Philippines need Japan market

Zest is very eager to launch Japan services within the next couple of months as AirAsia expands its Philippines-based fleet of A320s in 4Q2013 from 13 to 16 A320s. In addition to the Kalibo and Cebu flights, Zest is seeking to launch daily services from Manila to Tokyo Narita, Osaka and Nagoya. Zest has stated it plans to launch all six of its planned Japan routes by the end of 2013.

The 32 weekly flights to Japan are an important part of an attempt by the AirAsia Group to turn around its unprofitable Philippine operation. Currently AirAsia mainly operates domestic services within the Philippines along with international flights to China, Malaysia and South Korea.

See related report: AirAsia seeks to turn around Philippines operation with new focus on Zest Air and Manila

Tigerair Philippines also has been struggling financially and could use new markets to diversify its current operation, which includes domestic services as well as international flights to China, Hong Kong, Singapore and Thailand. In addition to Cebu and Kalibo to Tokyo Narita, Tigerair Philippines is seeking to serve Narita from Manila and Manila alternative airport Clark with two daily and one daily flight respectively. It is also seeking to launch daily services from both Manila and Clark to Osaka.

But Tigerair Philippines did not propose a launch date in applying for entitlements for six routes to Japan. This is likely because the Tigerair group, unlike AirAsia, has not yet committed to expanding its Philippines-based fleet. Tigerair Philippines currently operates five A320s and has not been allocated any additional aircraft from the Tigerair order book for the fiscal year ending 31-Mar-2014. A decision on adding aircraft, or dropping some existing routes, could come after Tigerair Philippines secures the requested route authorities.

The Philippines-Japan market could see over-capacity – but huge growth potential exists

All the requests from Zest and Tigerair Philippines should be approved as there is now space in the bilateral for significant expansion from Manila while the non-Manila flights, including Clark, are not subject to any cap. The only battle for rights will be for Haneda, which Zest and Tigerair Philippines are not seeking.

But the carriers could re-consider some of the routes after securing the authority to operate, depending on market conditions and how quickly their competitors move. The Philippines-Japan market will not be able to support all 231 of the proposed additional flights from Philippine carriers, or 210 when factoring in that 21 of the 35 proposed Haneda flight will need to be rejected.

There are huge opportunities in the Philippines-Japan market, particularly for LCCs. The opening of the market comes at a critical time as some of the country’s carriers have limited expansion opportunities. But there is a risk that the Philippines-Japan market could quickly swing from under-supplied to over-supplied, leading to the irrational competition that has at times plagued the Philippines domestic market.