Seair enjoys Caticlan monopoly

Set to add more flights as it try to offset losses last year

Written by Ma. Stella F. Arnaldo
16 July 2009

Southeast Asian Airlines, the country’s premiere leisure airline, presently flies up to 18 flights a day to Caticlan which the airline intend to increase frequency to 27 flights a day by August 14 on the arrival of its 2 new Do328. SEAIR will be increasing flights to Caticlan using four Do328 turboprop and two Let 410 aircraft to up to 32 flights per day on October 15,2009.

SOUTHEAST Asian Airlines (Seair) may be able to recoup its revenue losses last year now that it remains the sole operator of the Manila-Caticlan route.

Already, Seair officials are saying the carrier will be increasing its flights to the said destination, which is the gateway to the resort island of Boracay, including taking over the Cebu-Caticlan route previously held by Cebu Pacific (CEB).

Despite the Caticlan monopoly, Seair cofounder and managing director Nikos Gitsis has assured the public the carrier would not unduly jack up its airfares for the route.

On July 9, Philippine Airlines (PAL) and CEB canceled their Caticlan routes after the Civil Aviation Authority of the Philippines (CAAP) adopted a new runway configuration for the Caticlan airport, which effectively shortened the distance planes could land or take off from the airport’s runway. Both carriers, including Zest Airways, now fly passengers going to Boracay via Kalibo, leaving Seair to dominate the route.

In an e-mail to the BusinessMirror, Gitsis said: “What we are planning now is to maximize the fleet and spooling up the organization from a lean-season setup to a peak-season gearing.” The peak season in Boracay usually begins in mid-October and runs almost straight through the summer season, which ends in May. At present, the carrier flies seven to 10 flights a day to Caticlan.

“It will take about another two to three weeks, but we will be able to add more flights to the route. Since there is also no other traffic at the airport, we can maximize our turnarounds and be more efficient,” Gitsis said. The airline uses either a 32-seater Dornier 328 or a 19-seater LET-410 for the route.

Seair officials are quick to admit that the entry of PAL and Cebu Pacific has eaten into its market share, coupled with the fact that the current economic crisis and the A (H1N1) virus breakout has resulted in a general easing in the local tourism market. Despite this, they said revenue losses have been cut owing to restructuring and redeployment the carrier underwent this year.

In 2008, Seair flew 217,885 passengers, down 11 percent from 245,020 in 2007, according to data from the Civil Aeronautics Board (CAB). For the period January to May 2009, Seair president Avelino Zapanta said its passenger traffic dipped 39 percent, “mostly on account of the debacle in Caticlan. Inevitably, the other airlines offering bigger and newer fleet took part of our traffic.”

Seair executives had expected that to happen, and as such “we had to take drastic steps to survive the competition,” Zapanta added. “Among others, we had to redeploy some of our aircraft to new destinations in pursuit of a Blue Ocean strategy. Our entry into the much-longer air sector Manila-Basco proved to be very helpful.”

Zapanta also noted the carrier underwent some restructuring “to keep Seair as a lean setup. Because of this, we had a very strong performance in the first half of this year, compared to last year, even in a smaller-size passenger count-wise. We are not after passenger growth, but rather sustained profits with priority on safety and service.”

Aside from trying to improve the top line through redeployment of resources to other revenue-generating routes, the carrier also drastically cut expenses. Zapanta explained: “Since the major carriers hubbed-and-spoked in Cebu, we decided to pull out rather than be trampled upon by the elephants. We reduced Busuanga [Palawan] because the competitors also concentrated their resources there. But we gained much in Basco [Batanes] where we are now the sole operator, as well as in El Nido [Palawan] where, other than the resort owner’s limited air operation, Seair is the only other airline in operation.”

So despite the drop in passenger traffic in the first five months of the year, Zapanta said its revenues only dipped by 18 percent. “At the onset of 2009, while the other airlines continued to bleed, Seair has stopped the bleeding. We are happy to even have just a slim margin for the whole, but with the new development in Caticlan, we will have to revisit the plans for the rest of the year.”

Zapanta stressed: “Lean, mean and small is our aim through the current business climate we are experiencing, and awaiting opportunities as they come to assess how we move.”

In terms of new routes, Zapanta said the carrier will be taking over the Cebu-Caticlan route which the CEB had to cancel because of the CAAP ruling on the runway configuration in Caticlan.

On the financial outlook for the rest of the year, he said: “Remember that we are talking of a period following the big losses of the airlines in 2008. And because of the difficult economic environment and the swine flu, the economy and most of the industry are pessimistic about the year’s performance. I think that is basically still true for most. For Seair, we will have to revisit the plans for the rest of the year in view of the unexpected development in Caticlan. But yes, we’ll try very hard to recover those revenue losses.”

Meanwhile, Gitsis said there are no plans at the moment for the carrier to raise its airfares now that it has monopoly of the Caticlan route: “It’s the lean season. Our prices will stay competitive and at the levels we have been at.”

The airline has announced it will extend its “P350 all-in” promo to Caticlan until October. Passengers are encouraged to book their tickets online at During the peak or summer seasons, Seair airfares can go as high as P6,000-plus per passenger for a roundtrip ticket.

According to its web site, the airline has travel packages, as well, offering the public three days and two nights’ accommodation, inclusive of airfare, for as low as P7,595 per person, twin-sharing basis.

Joaquin Po, an aviation-industry analyst, said if Seair decides to increase its flights to Caticlan now that it is the sole operator of the route, “they may be able recover their losses.” He added that from his experience managing the former Asian Spirit, which pioneered the Caticlan route, “people will pay for the convenience of landing in Caticlan.”

But he believes it won’t be long until Seair will raise its airfares, given the edge it has over the major carriers. “In time, it may increase its airfares. It just makes economic sense. You are giving passengers the ease and expedience of flying virtually direct to Boracay,” he said.

As an example, when the former Asian Spirit was also flying to Basco, the airfare was competitive at P7,000 for a roundtrip flight. When Zest Air (whose owners took over Asian Spirit) pulled out of the route in early 2009, Seair started charging about P13,000-plus per roundtrip flight to said destination.

Po added, however, “Seair must realize there is a certain point at which passengers will no longer pay for that convenience of reaching their destination directly. And given the current economic conditions in the country, I believe if they do increase their airfare to Caticlan, especially in view of the upcoming peak season, this will be tempered by those conditions.”

Separetely, Zapanta clarified that contrary to common perception, the CAAP ruling also affects the airline, although admittedly not as significant as the other carriers. “We are the least affected,” he said, but given the shorter runway configuration, “at a certain intensity of the tailwind, we may incur some payload penalty, although we still can operate.” In such cases, a plane has to carry less passengers or baggage so it can still land or take off safely, or in Seair’s case, “we also divert [to Kalibo], but it seldom happens.”

According to the World Aeronautical Database, runway 06 in Caticlan has a landing distance of 2,952 feet and a takeoff distance of 3,117 feet. Its runway 24 has a landing distance of 2,900 feet and takeoff distance of 3,117 feet.

The web site of ATR, manufacturer of the ATR 72-500 aircraft used by CEB, shows the plane needs at least 3,500 feet to either land or take off.

According to Bombardier Inc., its Q300 Dash 8 plane, which is used by PAL, needs a distance of 3,608 feet to take off and 3,313 feet to land.

As such, CEB and PAL had to carry less passengers and baggage so their turboprops could use the short runway in Caticlan.

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