Cebu Pacific, Tigerair Singapore Strengthen Partnership


MANILA – Cebu Pacific and Tigerair have received approval from the Competition Commission of Singapore (CCS) for the strategic alliance agreement that aims to boost ties between the Philippine and Singapore markets.

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In a joint statement, the airlines said the approval creates greater potential for closer coordination on sales and schedules on relevant routes, which will offer customers more flight options at good value.

“Cebu Pacific and Tigerair have an existing interline cooperation as part of the alliance and the CCS approval allows both airlines to build upon the current arrangements,” the airlines said.

Under the alliance, Cebu Pacific’s passengers, particularly from the Philippines, will be able to access connections onto Tigerair’s established network in South East Asia and India.

Tigerair’s customers, on the other hand, will be able to select from Cebu Pacific’s extensive network in the Philippines and North Asia.

Image Source: James Morgan

“Cebu Pacific’s strategic alliance with Tigerair allows both carriers to leverage on each other’s strengths and complementary networks,” Cebu Pacific president and chief execuvite Lance Gokongwei said.

In 2014, the Gokongwei-owned Cebu Air acquired the local unit of Tigerair for an estimated P665 million.

Source: http://www.abs-cbnnews.com/

Complete List of Canceled Flights During Papal Visit – Cebu Pacific & Tigerair (2 of 3)


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Cebu Pacific

January 15: Domestic Flights
5J479/480 Manila – Bacolod – Manila
5J481/482 Manila – Bacolod – Manila
5J487/488 Manila – Bacolod – Manila
5J529/530 Manila – Busuanga – Manila
5J531/532 Manila – Busuanga – Manila
5J539/540 Manila – Busuanga – Manila
5J787/788 Manila – Butuan – Manila
5J899/900 Manila – Caticlan – Manila
5J905/906 Manila – Caticlan – Manila
5J911/912 Manila – Caticlan – Manila
5J573/566 Manila – Cebu – Manila
5J569/570 Manila – Cebu – Manila
5J571/572 Manila – Cebu – Manila
5J385/386 Manila – Cagayan de Oro – Manila
5J389/390 Manila – Cagayan de Oro – Manila
5J391/392 Manila – Cagayan de Oro – Manila
5J629/630 Manila – Dumaguete – Manila
5J955/956 Manila – Davao – Manila
5J969/972 Manila – Davao – Manila
5J973/974 Manila – Davao – Manila
5J975/966 Manila – Davao – Manila
5J979  Manila – Davao
5J995/996 Manila – General Santos – Manila
5J447/448 Manila – Iloilo – Manila
5J449/450 Manila – Iloilo – Manila
5J455/456 Manila – Iloilo – Manila
5J457/458 Manila – Iloilo – Manila
5J459/460 Manila – Iloilo – Manila
5J461/462 Manila – Iloilo – Manila
5J463/464 Manila – Iloilo – Manila
5J327/328 Manila – Legazpi – Manila
5J329/330 Manila – Legazpi – Manila
5J639/640 Manila – Puerto Princesa – Manila
5J653/654 Manila – Tacloban – Manila
5J657/658 Manila – Tacloban – Manila
5J659/660 Manila – Tacloban – Manila
5J506/507 Manila – Tuguegarao – Manila
5J855/856 Manila – Zamboanga – Manila
5J857/858 Manila – Zamboanga – Manila
5J140/141 Cebu – Caticlan – Cebu
5J960 Davao – Manila

January 15: International Flights

5J929/930 Manila – Bangkok – Manila
5J118/119 Manila – Hong Kong – Manila
5J188/189 Manila – Incheon – Manila
5J828/827 Manila – Osaka – Manila
5J5038/5039 Manila – Nagoya – Manila

January 19: Domestic Flights

5J473/474 Manila – Bacolod – Manila
5J483/484 Manila – Bacolod – Manila
5J485/486 Manila – Bacolod – Manila
5J529/530 Manila – Busuanga – Manila
5J785/786 Manila – Butuan – Manila
5J891/892 Manila – Caticlan – Manila
5J893/894 Manila – Caticlan – Manila
5J895/898 Manila – Caticlan – Manila
5J907/896 Manila – Caticlan – Manila
5J885/886 Manila – Cotabato – Manila
5J561/554 Manila – Cebu – Manila
5J553/562 Manila – Cebu – Manila
5J563/564 Manila – Cebu – Manila
5J381/382 Manila – Cagayan de Oro – Manila
5J383/384 Manila – Cagayan de Oro – Manila
5J397/398 Manila – Cagayan de Oro – Manila
5J196/197 Manila – Cauayan – Manila
5J625/626 Manila – Dumaguete – Manila
5J961/962 Manila – Davao – Manila
5J963/964 Manila – Davao – Manila
5J975/966 Manila – Davao – Manila
5J991/992 Manila – General Santos – Manila
5J451/452 Manila – Iloilo – Manila
5J453/454 Manila – Iloilo – Manila
5J323/324 Manila – Legazpi – Manila
5J521/522 Manila – Naga – Manila
5J781/782 Manila – Ozamiz – Manila
5J771/772 Manila – Pagadian – Manila
5J635/636 Manila – Puerto Princesa – Manila
5J637/638 Manila – Puerto Princesa – Manila
5J513/514 Manila – San Jose – Manila
5J651/652 Manila – Tacloban – Manila
5J617/618 Manila – Tagbilaran – Manila
5J821/822 Manila – Virac – Manila
5J849/850 Manila – Zamboanga – Manila
5J851/852 Manila – Zamboanga – Manila
5J857/858 Manila – Zamboanga – Manila
5J134/135 Cebu – Caticlan – Cebu

January 19: International Flights

5J929/930 Manila – Bangkok – Manila
5J108/109 Manila – Hong Kong – Manila
5J110/111 Manila – Hong Kong – Manila

Tiger Air Philippines

January 15

DG7084/7085 Manila – Bacolod – Manila
DG7829/7830 Manila – Butuan – Manila
DG7804/7805 Manila – Cebu – Manila
DG7028/7029 Manila – Davao – Manila
DG7406/7407 Manila – General Santos – Manila
DG7058/7059 Manila – Kalibo – Manila
DG7062/7063 Manila – Puerto Princesa – Manila
DG7602/7603 Manila – Roxas – Manila

January 19

DG7082/7083 Manila – Bacolod – Manila
DG7002/7003 Manila – Cebu – Manila
DG7072/7073 Manila – Iloilo – Manila
DG7074/7075 Manila – Iloilo – Manila
DG7054/7055 Manila – Kalibo – Manila
DG7042/7043 Manila – Tacloban – Manila
DG7044/7045 Manila – Tacloban – Manila
DG7902/7903 Manila – Tagbilaran – Manila

Tigerair Flies to GES


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GENERAL SANTOS CITY – Tigerair, the sister company of Cebu Pacific, Inc. (Cebu Pacific) has started to fly to General Santos City from Manila.

Following its maiden flight on Friday afternoon, November 28, Tigerair will start flying 5 times a week. This will make the average number of daily flights serving the city to 6, and will accommodate more than 1,000 passengers flying out daily of General Santos City.

Like Cebu Pacific, it will also offer budget fares, with the lowest one-way ticket starting at P2,008 ($44.78*).

“Tigeriar looks forward to offering additional flight and destination options for its guests,” Tigerair legal and corporate affairs chief Leilani de Leon said.

Department of Tourism Regional Director Nelly Nita Dillera said Tigerair’s entry into the Manila-General Santos City route will augur well for the province.

“It will boost the local economy and provide additional facilities for connectivity,” Dillera said.

Tigerair will use the Airbus 320 aircraft which has a capacity of 180 passengers.

Air passenger hub

Philippine Airlines is already serving the Manila-General Santos City route using an Airbus 330-300.

Cebu Pacific has been serving the route as well, while Air Asia is expected to fly daily to General Santos City soon.

General Santos City became the hub of air passenger traffic following the entry of budget airlines that competed against super ferries, which eventually stopped navigating the Manila-General Santos City sea route.

The entry of budget airlines in the province has boosted tourism in the SOCCSKSARGEN region with a total of 1.67 million arrivals from January to September.

Passenger traffic is seen to increase to more than 1,600 a day during the Christmas season, General Santos City Airport administration officer Dante Fernandez said.

To date, the Department of Transportation and Communications has already submitted a P900-million ($20.06 million) budget for the proposed new airport terminal building in General Santos.

The airport, funded by an USAID grant, was built in 1993 and started operated commercially in 1996.

The airport also boasted having the longest airport runway outside of the Ninoy Aquino International Airport (NAIA) with more than 3,000 meters of all-weather taxiway. Rappler.com

Cebu Pacific & Tigerair Philippines: On Track To Meet 17M Passengers for 2014


MANILA, Philippines – Cebu Air Inc. (Cebu Pacific) and Tiger Airways Philippines (Tigerair) posted a 15.7% growth by flying 13.94 million passengers from January to October this year.

For the same period last year, the budget carriers flew 12.04 million passengers.

The continuous growth was “driven by increased presence in key markets, sustained demand for air travel, and industry capacity rationalization,” Cebu Pacific vice president for corporate affairs Jorenz Tañada said.

The capacity of Cebu Pacific and Tigerair grew 13.1% to 16.56 million in the first 10 months of 2014 from 14.64 million in the same period in 2013, attributed to the delivery of 4 brand new aircraft. This also translated to a higher load factor of 84.2% for the same period this year, versus 82.3% in the same period in 2013.

The number of flights also rose 5.2% – from 96,563 to 101,586. For October alone, the volume of passengers carried by Cebu Pacific and Tigerair jumped 24.2% – from 1.13 million to 1.41 million in the same month in 2013.

Capacity also rose 12.8% – from 1.49 million to 1.68 million, translating to a higher load factor of 83.9% from 76.2%. Number of flights went up by 7.4 percent – from 9,605 to 10,318.

The Gokongwei airlines are also on track to meet the target of 17 million passengers for 2014.

Cebu Pacific is also beefing up its flights to 9 domestic and 3 international routes in time for the Christmas season.

By December 15, Cebu Pacific will mount additional, twice weekly Manila-Cebu and Manila-Tuguegarao routes; thrice weekly flights for the Manila-Dumaguete route; and 4 times weekly flights for the Manila-Zamboanga route.

Passengers traveling from the Visayas region to Singapore could also expect additional weekly flights for the Iloilo-Singapore route between December 17 and January 14.

Cebu Pacific will also mount additional thrice weekly flights for the Cebu-Singapore route between December 19 and January 7.

The budget carrier will also utilize the large A330 aircraft for some of its Manila-Singapore flights from December 15 to January 9. – Rappler.com

Low-Cost Carriers Mount More Int’l, Domestic Routes


MANILA, Philippines – Low-cost carriers are eyeing more international and domestic routes from the Ninoy Aquino International Airport (NAIA) in Manila and Mactan-Cebu International Airport in Cebu.

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Budget airline Cebu Air Inc. (Cebu Pacific) of taipan John Gokongwei has asked the Civil Aeronautics Board (CAB) to allow it to impose fuel surcharge for new international routes particularly in Japan and Taipei.

Cebu Pacific said it intends to fly to Narita where it intends to impose a fuel surcharge of $71 per passenger as well as Taipei where passengers would be charged $34 from Cebu.

On the other hand, the low-cost carrier also intends to mount flights to Fukuoka via NAIA where it intends to impose a fuel surcharge of $48 per passenger.

Another Gokongwei-led airline also intends to mount flights to Butuan via Manila where it intends to impose a fuel surcharge of P500 per passenger.

Cebu Pacific spent $7 million to acquire the 40 percent share of Tiger Airways Singapore Pte. Ltd. and $8 million for the 60 percent owned by Filipino businessmen in Tiger Airways Philippines.

Cebu Pacific and Tigerair made further progress on their interline agreement with the first interline flights available for sale on the Tigerair website from July 23 and available on the website of Cebu Pacific starting September.

The interline agreement between Cebu Pacific and Tiger Airways Singapore Holdings Ltd. created the biggest network of flights from the Philippines to the Asia Pacific region.

Based on its latest operating statistics, Cebu Pacific and Tigerair Philippines flew 11.26 million passengers from January to August or 14.6 percent higher than the 9.83 million passengers carried in the same period last year.

The increase could be attributed to the increase in the number of aircraft to 50 compared to the a year-ago level of 46, resulting to a 13.7 percent increase in capacity to 13.34 million from 11.73 million.

Both Cebu Pacific and Tigerair Philippines expect to fly 17 million passengers this year. It is in the middle of a $4 billion refleeting program aimed at acquiring 49 brand new Airbus aircraft.

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Meanwhile, AirAsia Zest intends to launch new routes from its Cebu and Kalibo hubs.

The low-cost carrier would fly to Davao and Cagayan de Oro from Cebu, imposing a fuel surcharge of P300 per passenger as well as to Davao from Kalibo where passengers would be charged P400.

AirAsia Zest chief executive officer Joy Cañeba said the low cost carrier is committed in connecting communities in the Philippines.

“With our newest routes between Cebu and Mindanao we would like to provide much-needed connections and tap into underserved markets, grow it, as there is definitely great tourism and business potentials between these awesome cities. Let’s paint these cities red and make traveling more affordable, fun, convenient, reliable and on time,” she said.

AirAsia Zest also services flights from Cebu to Manila, Incheon/Seoul, South Korea and Kuala Lumpur, Malaysia.

“This is just the beginning of our new plans for Cebu as we are set to expand our presence here with new international direct flights and offer ‘fly-thru’ products to connect all Filipinos to the rest of AirAsia Group’s massive network covering over 88 destinations stretching across China, India and Australia,” Cañeba added.

Philippines’ AirAsia and Zest Airways of Ambassador Alfredo Yao entered into a strategic alliance agreement last year, allowing the former to acquire an 85 percent economic interest and 49 percent voting rights in ZestAir as well as a 100 percent interest in Yao’s Asiawide Airways Inc.

In exchange, Yao’s ZestAir got $16 million as well as a 13 percent interest in AirAsia. Since then, the airline has been rebranded AirAsia Zest.

Source: Lawrence Agcaoili, Philippine Star

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


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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.

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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, InterAksyon.com

Budget Blues…Is Luxury the Way Forward?


Budget has been the travel buzz but when all you’ve got is low prices, where do you go when Plan A doesn’t work?

That’s a dilemma the budget travel sector is facing right now.

Being cheap is proving to be a fatal flaw and begs the question: could investors have been looking in the wrong direction – is luxury travel the better long business model?

Think about the advantages – lots of room to move on prices, up or down, plenty of opportunity to value-add, and high barriers to competitor entry.

Add to that strong growing demand among travellers from all income brackets and backgrounds for a luxury experience.

An interesting argument, don’t you think.

Let’s pause, let’s take a step back and look at the pros and cons of each sector.

Low Cost Carriers hit the travel industry like a slap in the face. Not just innovative – revolutionary.

Ryanair led by provocative CEO Michael O’Leary got the party started by slashing airline operating costs and airfares while expanding at breakneck speed.

It was a spark that lit a fire.

Millions of people who previously could not afford to travel due to high prices charged by the so-called legacy carriers were now able to do so.

Other airlines followed before branded budget hotels got in on the act quicker than you could say “ancillary charges”.

Budget – the travel business model of the future!

This line of thinking was further bolstered by the 2008 Global Financial Crisis.

However time has proved that budget travel businesses have severe limitations.

Exhibit one are low cost carriers.

They were once considered innovative but are now looking short of ideas, while their aspirations in terms of product delivery are low.

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For example, Cebu Pacific flew into Australia for the first time this week and created some media buzz, but not in a good way.

Coverage focussed on Cebu’s main claim to fame, which is that it crams more passengers into its A330-300 aircraft than any other airline.

– 436 economy seats compared with 255 (plus 30 business) for Singapore Airlines.

To do this Cebu has reduced seat size and pitch, enabling it to stuff nine passengers abreast rather than the standard eight across configuration.

Sustainable idea – I’m not so sure.

Headlines included:

  • $99 flight for those who like to be tight (Daily Telegraph)
  • ‘Most cramped’ aircraft takes to our skies (The Australian)

Not the kind of coverage to build a long-term, sustainable business.

Interesting to note the change in how low cost carriers are covered.

Media is now focussing on the discomfort endured by passengers rather than just a low price.

The speed of change within the low cost carrier environment is hard to comprehend.

The Centre for Asia Pacific Aviation (CAPA) estimates there are 47 low cost carriers in Asia-Pacific with up to another 12 on the way.

It says low cost carriers now have 58% of the Asia-Pacific aviation market, up from 0% only a few years ago

This has created a brutal hyper-competitive operating environment where carriers like Jetstar, Tiger Airways and Air Asia X are losing money.

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Tigerair

Of course, legacy carriers are probably doing worse – witness the recent dreadful Qantas result – but the point here is that low cost carriers were supposed to be the solution.

Instead, they have become a major part of the problem, forcing down prices to uneconomic levels for all players, at the same time operating costs for everyone are increasing.

Meanwhile, some budget hotel brands have also run into problems for many of the same reasons.

The big one of course is over-supply. As with budget carriers, there are simply too many operators in key markets.

For developers, the cost of entry is low with smaller rooms and lower operating costs, so they opt for that rather than a more upmarket brand.

Indonesia is a prime example of what’s happening now. Investors have been attracted by its large population and growing middle class.

As with aviation, the budget branded hotel sector has come from nowhere in just a few years and there are now 45 budget hotel brands in Indonesia.

Will they all last? Probably not.

Analyst Matt Gebbie from Horwath believes that there will be attrition, call it consolidation, and that those with the deepest pockets will survive.

One of the survivors will surely be Pop!, operated by Tauzia Hotels.

Irene Lin, Brand Director of Pop! Hotels, said competition has been intense, particularly in Indonesia’s major tourism market of Bali with heavy discounting from an already low base.

None of the budget operators are making money in Bali and operators have found that if price is your only selling tool there’s nowhere else to go.

Luxury, on the other hand, can go anywhere – even to the moon – and there’s no limit to either aspiration or expense.

That’s always been the case but the world was supposed to be entering a period of prolonged austerity following the GFC.

Yet that turned out to be only partly true.

Markets like China continued to pump, fuelling the never-ending Asian boom, while the rich of Europe and North America kept spending but with their heads down.

And so luxury is travel has been doing surprisingly well, proving incredibly resilient.

It’s also being propelled by a new breed of global consumer who may not be wealthy but is determined to experience the high-life.

Hang the expense, and exclusivity, all you need is money, which is leading to a redefinition (or definitions), of what luxury is in today’s world.

As Ross A. Kelin wrote on the Huffington Post, “What does luxury mean in a world where almost every other person at airport security is toting Louis Vuitton or Gucci?”

He says “accessible luxury” is the new buzzword.

“Luxury as we know it is becoming the possession of the middle classes.

“Whether it be some extra-ply loo roll, some red-soled stilettos or ostentatiously priced smart-phone, the exclusivity aspect is becoming redundant thanks to our own evolution as consumers.

“We’re moving away from conspicuous consumption towards consumption with a consciousness; and as a result the balance of power is shifting away from the luxury houses who previously dictated to us what products defined extravagance year-by-year.”

How does this apply to travel? For Singapore Airlines it means space. The carrier has just launched private Suites on some of its aircraft and by all accounts the product is doing well.

Ask an hotelier and they struggle with a straight answer, even though luxury is a defined accommodation category, and one is growing very quickly.

Accor for example plans on opening a luxury hotel in Asia-Pacific every month for the next five years.

The company has moved the headquarters of its luxury brands to Singapore and believes the region will soon become the world leader in luxury consumption.

Rick Harvey Lam, Senior Vice-President Global Marketing Luxury & Upscale Brands – Accor Group says that luxury is in the eye of the beholder.

“There is no standard definition of Luxury, as it depends on the person experiencing it,” he said.

“Ask ten people about their definition and most probably you will receive at least seven different answers, across a wide range of specifics.

“Within Accor we refer to Luxury according to the 4 E’s: Experience, Exclusive, Emotion and Engagement.”

The big one seems to be experience – something people are prepared to pay extra for.

European cruise operators for example are finding that they are selling “from the top down”, while prices for high-end properties have been hitting new highs over the past few years.

Don’t believe me? Just try booking a top hotel in an iconic tourism destination and you’ll find the price of entry starts at USD500 a night and up.

Clearly demand is outstripping supply for these luxury products while for low cost travel and accommodation the reverse is true, there are more seats and beds than customers.

Yet everyone’s still trying to get on the budget bandwagon.

It seems strange when you consider the present set of circumstances which suggests the real long-term future for travellers and industry investors is luxury.

Quality not quantity…

 

Source: Martin Kelly, http://www.traveltrends.biz

Tigerair Destinations Now Available on Cebu Pacific Air Website


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The Philippines’ leading airline, Cebu Pacific Air makes its network wider, now that its interline agreement with Singapore’s largest low-cost carrier, Tigerair Singapore, has reached its final phase.

Starting September 3, 2014, destinations such as Bangalore (India), Yangon (Myanmar), Perth (Australia), Male (Maldives), and Dhaka (Bangladesh), among others are available through the CEB website.

CEB flights became available in the Tigerair Singapore website.

“We are very happy to offer our guests more travel options and easy connectivity through the Manila and Singapore airports. With the final phase of this interline agreement in place, cross-booking flights on a single itinerary to the Asia-Pacific and the Middle East becomes very convenient,” said CEB VP for Marketing and Distribution Candice Iyog.

Both Tigerair and CEB operate out of Singapore’s Changi International Airport Terminal 2.

Guests taking CEB’s direct flights from Manila, Cebu, Clark or Iloilo can avail of the CEBConnect product upon landing in Singapore, for a fast and seamless transfer.

Guests who purchased CEBConnect simply have to collect a boarding pass for the onward flight at Changi Airport Transfer Lounge E. There is no more need to clear through Immigration, pick up bags or check in again. This is applicable for flights with a minimum of two hours connecting time at Changi Airport.

“We continue to work on providing travel options and opportunities for our guests. With this enhanced low-cost network, we hope that we can enable even more Juans to fly,” Iyog said. 

Source: 

Tigerair Philippines Makes Up For Lost Capacity with Cebu Pacific’s A320s


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Cebu Pacific Air (5J, Manila) has leased out four of its A320-200s to its Tigerair Philippines (DG, Clark) subsidiary to make up for the recent decrease in capacity. Tigerair (TR, Singapore Changi) has begun withdrawing its fleet of A320-200s leased to the carrier in the wake of Cebu’s successful USD15million bid for Tigerair Philippines earlier this year.

According to the ch-aviation database, the aircraft that have so far been transferred to Tigerair Philippines are: RP-C3263 (cn 4574), RP-C3267 (cn 4927), RP-C3269 (cn 5250), and RP-C3270 (cn 5320).

Cebu Pacific Long-Haul LCC Hybridises By Pursuing Transit Traffic, Starting With Sydney-North Asia


5J1Cebu Pacific Air’s long-haul unit is entering a new phase of growth which will also see it evolve to pursue more transit traffic. Cebu Pacific initially envisioned a pure LCC model for its long-haul low-cost unit, relying almost entirely on point to point traffic, but is now looking to build up connections, particularly to feed its new ManilaSydney route.

In Sept-2014 Sydney and Kuwait will become Cebu Pacific’s second and third long-haul destinations afterDubai, where its performance has improved in recent months following a dismal start in 4Q2013. The carrier’s A330 fleet, which now consists of four aircraft with a fifth to be added by the end of Aug-2014, has until now been primarily used to upgauge short-haul routes.

The upcoming launch of services to Australia and Kuwait will be followed by Saudi Arabia in 4Q2014 and Hawaii in early 2015. Sharjah may also be launched in 2015 as Cebu Pacific considers leasing additional A330s.

This is the first in a two part series of analysis reports on Cebu’s now 14-month-old widebody operation. This part focuses on the new Manila-Sydney route and connection opportunities beyond Manila. The second part, to be published later this week, will look at Cebu’s plans for Saudi Arabia and the prospects of a Sharjah service. It will also examine the overall PhilippinesUAE market including Cebu’s performance in Dubai.  

Cebu Pacific currently has just one long-haul route

Cebu Pacific began operating A330s in Jun-2013, becoming the fourth LCC in the Asia-Pacific region with widebodies after Jetstar, AirAsia X and Scoot. Daily services to Dubai were launched in early Oct-2013 after an initial period of operating the first two A330s on regional routes.

Cebu Pacific currently uses its A330-300 fleet for Dubai and several short-haul routes. Some frequencies from Manila to Singapore, Seoul, Cebu and Davao are operated regularly with A330s. The A330 is also being used to Tokyo Narita during select days for the peak northern summer season and has previously been used to serve Hong Kong during peak periods. (Cebu Pacific is unable to use the A330 regularly on the Manila-Hong Kong route due to bilateral capacity constraints unless it reduces frequencies, which is not a sensible alternative as slots at Hong Kong are at a premium and Cebu Pacific would like to maintain its current Manila-Hong Kong schedule of four daily flights.)

Cebu Pacific currently operates four A330-300s in single-class configuration with 436 seats. Cebu Pacific is the only long-haul LCC with an all-economy configuration. Jetstar, AirAsia X and Scoot all offer a premium product, with Jetstar and Scoot providing a recliner style seat and premium economy-like product while AirAsia X offers an angled lie-flat business seat.

Cebu Pacific still does not see a need to introduce a premium product as its target market is overseas workers. The Philippine market is extremely price sensitive with limited premium demand.

Cebu Pacific long-haul low-cost model evolves to focus more on transit traffic

Cebu Pacific however is starting to recognise the value of feed. Its initial long-haul model envisioned relying on point to point traffic with a focus on the Manila-Middle East market. This market consists predominately of Filipino workers and to a lesser extent visiting friends and relatives (VFR) as Cebu Pacific’s low fares stimulate more frequent visits by families living back in the Philippines as well as more frequent trips home by the expatriates.

Cebu Pacific for several years has offered a transit product which, for an additional fee, offers a through check-in including transfer of checked bags. But the carrier’s overall portion of transit traffic is very low – less than 5% – including from widebody flights. Cebu Pacific has no intention of migrating to an origin and destination pricing model or starting to work with global distribution system providers, initiatives AirAsia X has adopted in pushing up its transit traffic component to nearly 50%.

Cebu Pacific plans to stick with a traditional sum of sectors LCC approach in pricing connections. The airline, however, is hybridising to some extent by promoting more connections between Cebu Pacific flights and onto flights operated by other airlines.

Cebu Pacific recently began interlining with Tigerair, its first interline partnership with another LCC. It also recently worked with Middle Eastern LCCAir Arabia to promote connections beyond Sharjah, which it served for 12 weeks during the recent runway closure at Dubai, but not through a formal interline or IT link. (The potential of a deeper relationship with Air Arabia will be examined in the second part of this series of analysis reports.) 

Cebu Pacific sees its Manila-Dubai route, which resumed in late Jul-2014 after the Dubai airport fully reopened, as continuing to consist nearly entirely of point to point traffic. But Cebu Pacific is aiming to generate a larger portion of transit passengers on its new Sydney-Manila route, which it plans to launch on 9-Sep-2014 with four weekly flights. The general manager of Cebu Pacific’s long-haul division, Alex Reyes, told CAPA prior to CAPA’s recent Australia Pacific Aviation Summit in Sydney that the carrier is particularly pushing connections to Hong Kong.

Cebu Pacific has opportunity to stimulate demand in Sydney-Hong Kong market

Sydney-Hong Kong is a large local market served with five daily non-stop flights, including four from Cathay Pacific and one from Qantas. But the market has not grown over the past several years due to bilateral constraints.

The Sydney-Hong Kong market generally suffers from higher average fares than other large Sydney-Asia city pairs such as Singapore, Kuala Lumpur and Bali because it lacks a non-stop LCC option. (Singapore, Kuala Lumpur, Hong Kong and Bali are all top 10 international destinations from Sydney based on current seat capacity.)

Singapore Airlines long-haul LCC subsidiary Scoot serves Singapore-Sydney while AirAsia X serves Kuala Lumpur-Sydney and Jetstar serves Bali-Sydney. AirAsia X’s new Indonesian affiliate is also expected to launch Bali-Sydney service by the end of 2014.

Scoot and AirAsia now offer a one-stop product in the Sydney-Hong Kong market but routing passengers via Singapore or Kuala Lumpur is more circuitous than Manila. Currently the fastest connections on AirAsia/AirAsia X from Sydney to Hong Kong is about 16 hours (with a layover in Kuala Lumpur of about three hours) while the fastest connection from Hong Kong to Sydney is about 14 hours (with a layover of only slightly more than one hour). Scoot connections are generally longer, ranging from 15 to 19 hours (includes Singapore-Hong Kong flights operated by Scoot and Scoot partner Tigerair).

In comparison, Cebu Pacific will offer a total journey time of about 12 hours in both directions (slightly less than 12 hours on Sydney-Hong Kong and slightly more than 12 hours on Hong Kong-Sydney). Cebu’s Sydney-Manila flight lands at Manila at 17:30, or 100 minutes before the last of Cebu Pacific’s flights from Manila to Hong Kong. The third of Cebu Pacific’s four daily flights from Hong Kong lands in Manila at 21:30, or just under three hours before the new 00:15 departure for Sydney.

Cebu Pacific is also offering an array of domestic connections at Manila, which will particularly be targeted at Australians going on holiday because the main leisure destinations in the Philippines (such as the islands of Boracay and Palawan) can be only accessed by domestic flights. Cebu Pacific is hoping to stimulate demand in the outbound Australian market – which grew by 25% over the last two years – although the Filipino worker and VFR segment is its main focus. Cebu Pacific says there are about 170,000 Filipinos living in Australia, including about 70,000 in New South Wales, while in 2013 only 56,000 Australians visited the Philippines.

Manila well positioned as hub for Australia-North Asia market flows

There are huge opportunities for the Philippines’ emerging tourism sector to attract more Australians, particularly as lower fares make holidays in the Philippines as inexpensive as Bali. But there are likely more growth opportunities for Cebu Pacific in carrying passengers beyond Manila – both Australians and North Asian residents.

Manila is geographically well positioned for connections between Sydney and North Asia in addition to the obvious example of Hong Kong. In his presentation at the CAPA Australia Pacific Aviation Summit on 6-Aug-2014 Mr Reyes said there is a big opportunity to carry Sydney passengers beyond Manila and added: “We want to get people to hop to North Asia.”

Mr Reyes singled out Beijing, Seoul, Shanghai, Taipei and Tokyo as well as Hong Kong. He pointed out that flight times from Manila to all these destinations are two or three hours less compared to Kuala Lumpur.   

But quick connections will only be available in both directions for Hong Kong. Beijing, Seoul, Shanghai, Taipei and Tokyo are only served by Cebu Pacific from Manila with one daily flight or less, making it more difficult to offer a competitive product from a schedule perspective. AirAsia X generally provides faster transit times as it serves most of these destinations as well as Sydney with two daily flights. Among these five destinations Scoot currently only provides a one-stop product in the Sydney-Taipei market.

AirAsia X has become a major player in the Australia-North Asia market over the past year as it has added a second daily flight to Sydney,Melbourne and Perth, providing a huge increase in capacity that could be not supported entirely by the Malaysian market and connections withinSoutheast Asia. The entrance of Cebu Pacific adds even more LCC capacity in the Australia-Southeast Asia market, providing another increase which once again will require a significant share of connecting traffic to North Asia to be sustainable.

With the launch of services from Cebu Pacific, Australia will have all four long-haul LCCs from the Asia-Pacific region with over 100,000 weekly seats. This includes about 50,000 seats from Australia-based Jetstar Airways, which has roughly two thirds of its international capacity at its long-haul unit. There are also about 45,000 weekly short-haul LCC seats in the Australian international market operated by Jetstar Airways, Jetstar Asia,Indonesia AirAsia, and Tigerair.

Cebu Pacific could attract Taiwan, South Korea, Japan and China traffic at Sydney but needs to improve schedules

Cebu Pacific could still attract some price sensitive customers in the Sydney-North Asia excluding Hong Kong market who do not mind long layovers or stopovers in Manila in one direction. But the real volumes would come if and when the carrier adds frequencies in its North Asian markets.

Cebu Pacific has the setup in Manila to offer fast connections but without the schedules this will not be fully utilised. Mr Reyes says Cebu’s integrated operation at Manila Terminal 3 enables connections in as little as one hour with through baggage.

Taipei, which is already a large connection market for the Australian long-haul low-cost operations of Scoot and AirAsia X, could particularly be attractive if Cebu Pacific expands on the Manila-Taipei route. Currently Cebu Pacific’s only flight from Taipei arrives in Manila at 03:05, or three hours after the Sydney flight departs (requiring a 21 hour connection time), while from Sydney to Taipei a transit time of just under five hours is available. There are currently only four non-stop weekly flights from Sydney to Taipei, all on full-service flag carrier China Airlines.

In the Sydney to Beijing, Shanghai and Seoul markets a long connection (15 to 20 hours) is similarly required on the return. Tokyo has about a 12 hour connection from Sydney and about an eight hour connection on the return. Connections to Japan could improve as Cebu Pacific has been expanding rapidly in the Japanese market since a new bilateral agreement last year opened up opportunities for Filipino carriers. Cebu Pacific over the past year has launched services to Tokyo Narita and Nagoya, while upgrading Osaka, which had been its only Japanese destination, to daily and is now seeking to take over one of the two daily flights to Haneda recently dropped by PAL.

Narita is currently the only Japanese airport served non-stop from Sydney, according to OAG data. The route is served only by full-service carriers, with Qantas and oneworld partner Japan Airlines each operating one daily flight on the route. Jetstar serves Tokyo from Cairns, Gold Coast and Melbourne with domestic connections at both ends, using Jetstar Airways from the three Australian gateways (including to Sydney) and Jetstar Japan from Narita.  

Opportunities for Cebu Pacific in the Sydney-mainland China market, which has emerged as a large target market for AirAsia, are more limited as Cebu Pacific doesn’t have as large a network in China. It currently serves the three major Chinese cities – Beijing, Guangzhou and Shanghai – with less than daily flights and has only one secondary destination – Xiamen, which is served with only two weekly flights. Growth in China is not likely at least for the short to medium term given the current state of relations between China and the Philippines.

But Hong Kong – and potentially other North Asia connections as Cebu’s schedule thickens – will clearly play a big role in Cebu Pacific’s performance in the Sydney market and be a factor in potential expansion into other Australian markets. Mr Reyes says that since ticket sales for the new Sydney-Manila route began in mid-Jun-2014 booking have been “quite good”.

Further Australia expansion possible if bilateral is extended

Cebu Pacific plans to increase Sydney from four to five weekly flights from Dec-2014. A further expansion to Australia is possible in 2015 but requires an expansion of the Australia-Philippines air services agreement.

See related report: Cebu Pacific’s Australia launch falls victim to old fashioned protectionism and mercantilism

The current bilateral is capped at 6,000 weekly seats, with 2,200 now allocated to Cebu Pacific and 3,800 to Philippine Airlines. This cap applies only to Melbourne, Sydney, Perth and Brisbane; Philippine carriers are free to serve other Australian airports with unlimited capacity.

PAL is expected to fully utilise its capacity allocation from Dec-2014, when it plans to upgrade Sydney from four weekly to daily flights. Philippine authorities are keen to expand the bilateral which would enable both Cebu Pacific and PAL to expand. Mr Reyes says Cebu Pacific is interested in serving multiple destinations in Australia.

With additional traffic rights Cebu Pacific could launch Melbourne as early as 2015 and upgrade Sydney to daily. PAL has said it is interested in launching non-stop service to Perth and Brisbane. (Brisbane is now served three times per week via Darwin while Perth was also briefly served via Darwin in 2013.)

Cebu Pacific could also eventually serve Perth and Brisbane but Melbourne is more likely in the near to medium term. Cebu Pacific sees Perth as a potential destination for its future fleet of A321neos as the market is likely too thin to support an A330. It does not believe the A321neo will have the range to serve Brisbane although this could be re-examined after the new type enters service.

Cebu Pacific faces huge challenges as Sydney service commences

Cebu Pacific however first needs to build a sustainable business case in Sydney, which could prove to be challenging. Cebu Pacific will have to overcome stiff competition and potential overcapacity on the Manila-Sydney route.

Qantas serves Sydney-Manila with four weekly flights while PAL’s recent decision to increase Sydney to daily in response to Cebu’s entrance puts pressure on a market which has traditionally been relatively small with large seasonal fluctuations. While PAL has been in Australia for decades Cebu Pacific is a relatively unknown brand in the Australian market.

Sydney has a relatively large Filipino population but the community is not large enough to support 16 weekly flights except during peak travel periods such as Christmas and Easter. The 16 flights will provide about 2,200 one-way seats, nearly double current capacity levels.

Transit traffic to North Asia should help but Cebu Pacific will face stiff competition in the Sydney-North Asia market from more established long-haul LCCs, particularly AirAsia X, which is now the fourth largest foreign carrier in the Australian market. Cebu Pacific will need to increase frequencies in several key North Asia markets in order to offer attractive connections from Sydney to cities other than Hong Kong.

To be competitive and build a sustainable operation in Australia Cebu Pacific may also have to consider adopting an origin and destination pricing model and pursuing stronger relationships with travel agents, including online travel agents. Cebu Pacific is entering the Australia-Asia market at a time competition is extremely intense, pressuring yields and load factors at all airlines. It will take a lot more than low fares and a low cost structure to carve out a profitable niche.

Source: CAPA, Centre for Aviation