Air Asia Philippines opens for business

Flies March 28 

February 28, 2012

AirAsia Philippines on Tuesday announced it will begin flights on March 28, giving almost free fares to its first 20,000 passengers to Kalibo and Davao.

The no-frills budget airline said the fare of P275 is for a one-way ticket and already includes taxes. The seat sale is actually a zero-fare promo with the seat totally free and the guest is actually paying only P275 to cover the fuel surcharge, processing fee and government mandated fees such as aviation security fee and VAT, said AirAsia Philippines in a statement.

Kathleen Tan, regional head of the AirAsia commercial plane fleet, said they had ferried at least 2 million passengers with AirAsia Berhad, the Malaysia-based mother company which began its operations at Clark in 2005 offering flights to Kuala Lumpur and Kota Kinabalu in Malaysia.

Tan said they will utilize their two brand-new Airbus 320 for twice-a-day flights to Bangoy International Airport in Davao and Kalibo International Airport via the Clark International Airport.

Marianne B. Hontiveros, AirAsia Philippines’ president and chief executive, said in a briefing that the company has submitted applications to Singapore, Malaysia, China, Thailand, Hong Kong and Macau for airport slots and flight permits two weeks ago,

“I think it would take two to six months,” she said.

“For instance, it would depend on the diplomatic agreement between countries,” she added. Flights will be immediately launched should papers be completed, Ms. Hontiveros said.

The company fulfilled additional requirements imposed by the Philippine Civil Aviation Regulator (CAAP) such as data on its aircraft, proposed initial training for crew, documentation of maintenance system, among others.

Dornier Opens ATR MRO in Clark

Associates with Assistance Aeronautique et Aerospatiale

February 20, 2012

Iren Dornier has partnered with French company, Assistance Aeronautique et Aerospatiale (AAA) to establish a new maintenance, repair and overhaul (MRO) services for ATR aircraft in the region.

The deal was sealed Friday during the 2012 Singapore Airshow. The facility will rise at the sprawling Clark International Airport complex in Pampanga.  

David Nouvelot, AAA head for China and the Philippines, said the Clark operation is the company’s eight site, after two in France, and one each in Germany, Canada, Spain, Morocco and China.

AAA provides on-site support and technical assistance for ATR aircraft manufactured in Toulouse, France, and with over 20 years of experience in civil, military and business jet programs for all major aircraft. It has extensive expertise with Airbus and ATR aircraft.

PAL to fly Bali!

Starts A320 flight by April

February 19, 2012

Flag carrier Philippine Airlines (PAL) will start offering direct flights to Bali, Indonesia in March, President Jaime Bautista said at the opening of the 19th Travel Tour Expo 2012 recently.

“We are looking at the possibility of flying to Bali...If we get all the permits within the month, we should be able to start flying end of March or early April. We will only fly three times a week because that is part of developing the market.”

An Airbus 320 aircraft will be used for the flights that will land directly at the Bali Ngurah Rai International Airport from Manila. This will be the second airport in Indonesia where PAL is flying into whose flight is code-shared with Garuda Airlines. The airline currently offers daily flights to Jakarta.

Bautista said offering direct flights to Bali will enable the airline to maximize the use of its planes.

“There is clamor for it already. It will allow us to increase utilization of our planes because when we fly to Bali, we will fly at night because that is the time when our planes are parked in Manila. That will help us raise our revenues,” he said.

The airline is also on the final planning stage of connecting Davao to Singapore and Hong Kong on a midnight run also on the same A320 aircraft.

The Travel Tour Expo is an annual travel and tourism event organized by the Philippine Travel Agencies Association (PTAA) and the Department of Tourism (DOT) to showcase domestic and international products and services in the tourism sector. -  with reports from the Philippine Star.

Sokols Arrived in Philippine Airspace

Its about time, finally...
February 15, 2012

The Philippine Air Force's newest bird.PZL W-3 Sokół helicopters

The Philippine Air Force has a new bird. And they are brand new. The first equipment to be bought first hand after more than 50 years.

The delivery flight was flown in by Volga-Dnepr Airlines, a cargo company registered in Russia, using its heavy lifter Antonov AN124-100 Ruslan to Air Force City in Clark Airbase, Pampanga from Rzeszów-Jasionka International Airport in Poland, the Air Force said.

Maj. Gen. Roy Deveraturda, AFP deputy chief of staff for plans, said they received 4 choppers, with tail numbers 310919, 310920,310921, and 310922, from PZL Swidnik of Poland that won the bid for Combat Utility Helicopter (CUH) project in 2009.

Teams from the Department of National Defense (DND) and the Philippine Air Force (PAF) assessment team are currently inspecting the shipment.

Deveraturda said that much as they would like the new helicopters to be deployed immediately for disaster response, they cannot do so and fly immediately because of some procedural requirements needed for its acceptance.

He said the choppers has been delayed for delivery due to some circumstances beyond the control of the manufacturer. It would have been delivered late last year but was flown in only yesterday due to workers strike at Swidnik plant. Deveraturda would not say if delay was compensated, but sources within the AFP confirmed the existence of penalty clause in the contract for delays in delivery.

Public Information Office Director Lt. Col. Miguel Ernesto Okol said the “Sokol,” is NVG (Night Vision Goggle)-capable and is equipped with an SN 350 Autopilot, making it more capable utility platform than the UH-1H Huey helicopters. While the Huey can carry only seven passengers, the Sokol can accommodate 10 passengers for 3 hours and 19 minutes and can reach a maximum range of 402 nautical miles in a single flight with airspeed of 140.5 knots.

The Sokol is also fitted with gun mounts for the M60D MG on both sides and when used in search and rescue or over water operations, it can be equipped with pilot-controlled Emergency Floatation Gear attached to the lowest portion of the aircraft.

The AFP is expecting delivery of 4 more PZL W-3 Sokół helicopters in the last quarter of the year. The entire CUH project costs P2.8 billion.

Sokols Delivery flight

SIA Engineering To Offer Widebody Maintenance In The Philippines

Prepares CEB's entry into Widebody market

by  Neelam Mathews

 

February 15, 2012,

Philippines carrier Cebu Pacific is starting construction of a new heavy maintenance hangar at Clark International Airport. 

The facility, which is a joint venture with SIA Engineering (SIAEC), is due to open later this year, according to Garry Kingshott, advisor to the airline’s chief executive, speaking at the Low Cost Airlines Asia conference in Singapore last week.

The joint venture, known as SIA Engineering (Philippines), is 65 percent owned by SIAEC, with Cebu Pacific controlling the rest. 

The present narrowbody hangar accommodates single-aisle aircraft with capabilities including scheduled heavy maintenance checks, airframe structural inspections, repairs, modifications, paint-stripping, painting of aircraft exteriors and nondestructive testing checks.

“Engineering and maintenance are the second largest costs after fuel, and need to be managed,” said Kingshott. SIA Engineering (Philippines) plans to build three hangars that will span 290,000 sq ft when completed.

With space at Singapore’s Changi International Airport at a premium, the facility­­­–which is located within 15 minutes’ flight time of Manila’s Ninoy Aquino International Airport and within four flight hours of major north Asian markets such as China, Korea, Japan and Hong Kong–is expected to offer a lower-cost maintenance alternative for airlines. 

Current clients of Clark-based SIA engineering include Mandala Airlines, Tiger Air and AirPhil.

Airphil Overshots Kalibo

February 14, 2011

An Airphil Express Airbus A320-200 carrying more than 140 people overshot Kalibo airport runway yesterday morning, aviation officials said.

The Airbus A320 plane with  registration RP-C3227 and performing flight 2P-969 from Manila overshot runway 05 by 60 meters (200 feet) while it was attempting to land around 10:30 am," Civil Aviation Authority Kalibo Manager Percy Malonesio said.

The plane was piloted RR Gonzaga.

No weather disturbance was reported in the area. No further details are available as to the cause of the incident, the airline and aviation authorities said. Initial cause of the incident was reported to be pilot error as it landed in the middle of the runway.

Airphil Express is a low cost subsidiary of national flag-carrier Philippine Airlines, offering budget, no-frills flights.

The aircraft was able to stopped safely but was disabled with all gear on soft ground, no injuries and no damage occurred. The runway was closed for about 4 hours until the aircraft was towed off the runway.

The airport was back to regular operations around 2 in the afternoon.

Kalibo is the 4th busiest airport in the country with 12 domestic and 10 international incoming and outgoing flights daily, according to Malonesio. It is a gateway point to international tourists destination point Boracay Island.

The 17th Philippine International Hot Air Balloon Fiesta

A panda-shaped and sunflower-shaped balloons are seen before they were flown during the first day of the Hot Air Balloons festival at Clark airbase, a former U.S. base in Pampanga province, north of Manila February 9, 2012. At least 26 hot air balloons, including six specially shaped balloons were flown on Thursday. Aside from hot air balloons, military aircraft, kites and radio-controlled turbine jets also occupy the sky during the festival. The Hot Air Balloon Fiesta, an event that started in 1994, is considered the biggest aviation event in the country, a local media reported. Reuters

Russian Relief Arrived at NAIA

February 12, 2012



A cargo plane from the Ministry of the Russian Federation for Civil Defense, Emergency Management and Natural Disasters Response (EMERCOM) arrived at the Ninoy Aquino International Airport yesterday to provide humanitarian aid and assistance to survivors of the recent major earthquake in Negros Oriental and victims of the recent flash floods in Cagayan de Oro and Iligan Cities.

The Russian team flew in with 60 tons of relief goods composed of tents, blankets, sugar and preserved fish and meat on board Ilushin Il-76TD RA-76845. Another batch of aid is set to arrive on February 15 via the same airplane.

Representatives from the Ministry of Russian Federation for Civil Defense, Russian Embassy, Department of Social Welfare and Development and the Office of Vice President Jejomar Binay met the humanitarian mission group at the cargo ramp of Terminal 1.

Russian Ambassador to the Philippines Nikolya Kudashev formally turned over the relief goods to Philippine government officials. He was accompanied at the airport by Russian Deputy Chief of Mission Artem Kudoyarov.

Undersecretary Benjamin Martinez, chief of staff of Vice President Jejomar Binay, received the donation in behalf of the Philippine government together with Undersecretary Parisya H. Taradji from the Department of Social Welfare and Development (DSWD).

“We expect this to launch a good tradition of interstate cooperation to fight emergencies,” he added.
According to Kudashev, the relief goods are coming in two batches which include blankets, tents and preserved meats and fish. “We believe they would be of use for the victims of “Sendong,” the earthquake and other unfortunate natural occurrences,” Kudashev said.


“The Philippine government is grateful to the Russian Federation for the assistance they extended and I am honored that it had tapped my office to assist in the distribution of the relief goods to our less fortunate countrymen,” says Vice President Jejomar Binay in a statement.

Relief goods were immediately airlifted by PAF C-130 to Dumaguete City on the same day leaving the airport around 5pm together with 584 boxes of water bound for the disaster stricken areas in Negros Oriental. Another C-130 flight was flown this morning to deliver relief goods from the same aircraft.

LTP Opens A380 Checks

February 12, 2012

By Recto Mercene
Correspondent

Qantas A380 to make port of call in April

President Aquino pushes the throttle of amake-believe A380 during the inauguration of the $30-million Lufthansa Technik Philippines hangar on Friday night. Among his “passengers” were (from left) LTP Chairman Washington Sycip, Lucio Tan (partly hidden), Transportation Secretary Manuel Roxas II and LTP Chairman of the Executive Board August Wilhelm Henningsen.

PRESIDENT Aquino  on Saturday piloted a make-believe Airbus A380 during the inauguration of Lufthansa Technik Philippines’s (LTP) maintenance hangar, throwing the wooden throttle of the giant airplane into full power, and taking to the skies to tour a virtual world projected on a giant screen.

The plane soars to the skies and took them to Australia, South America, Africa, Europe and the United States before finally landing in the Philippines.

Sitting behind him as passengers were the entire executive board headed by Chairman Washington Sycip, and board members Lucio Tan, August Wilhelm Henningsen, Joseph Chua, Dr. Peter Jansen, Soeren Stark and Gerald Frielinghaus.

The venue is the newly built, $30-million A380 hangar, one of only four in the world, and at 8,500 square meter area, with a height of 35 meters, is dubbed the largest hangar in the country. It offers space to work simultaneously on one widebody and two narrowbody aircraft.

Mr. Aquino lauded the hard work and the vigorous planning of LTP and Philippines MacroAsia Corp., a joint venture between the German firm, which has a 51 percent stake, and Lucio Tan’s MacroAsia Corp. with 49 percent share.

“I want to emphasize that this is not just any hangar. This is a hangar built to service the Airbus A380—the biggest passenger airliner in the world,” Mr. Aquino said.

He added that the hangar makes the Philippines one of the few locations around the world capable of providing maintenance service to the A380.

Earlier, Executive Board Chairman August Wilhelm Henningsen said that with the new hangar, the country would be able to keep up with the increasing demand for technical services for long-haul Airbus aircraft, particularly in the Asian market.

Washington Sycip, chairman of LTP Philippines, said “the opening of the new hangar service reaffirms the Filipino aviation worker’s place among the world’s best and underscores LTP’s long-term plans of operating in the Philippines.

The hangar is the fourth maintenance bay in the same location at the former Villamor Air Base. It’s specialty is the maintenance, repair and overhaul of all types of the Airbus family, the A320, A330, A340 and A380.

The joint venture started with a capitalization of P5 million in 2000 and 1,300 personnel, which has now grown to 2,700 of which 99 percent are highly skilled Filipino technicians and engineers.

“This is a big step for LTP. Since initially investing more than P5 billion here in the country in 2000, you have invested billions more, and have given livelihoods to thousands of our countrymen.” Mr. Aquino said. The hangar’s first customer would be an A380 from Qantas, which would undergo cabin modification in April this year.

Sky Pasada overans Basco

Blames wind for Pilot Error





By Yolanda Sotelo
 February 11, 2011

Basco - One of the Sky Pasada planes servicing Batanes was almost pushed off the island’s unpaved runway by unusually strong winds on Thursday, a company press statement said on Friday.

Ramon Guico III, president of WCC Aviation Co., which operates the Sky Pasada, said no one was hurt when the twin-engine, short-range LET 410 was dragged by strong winds toward the end of the runway, moments after it landed at Itbayat island.

“The landing gear was destroyed and we do not know yet what other damages there could be. But we are thankful that not one of the passengers was hurt,” Guico said in a telephone interview.

The plane flew from Basco, Batanes capital town, to Itbayat. Guico would not say how many passengers were on the plane but the LET 410 could accommodate 19 people.

Guico said the plane was one of the two aircraft approved by the manufacturer to fly the Batanes route.

The Civil Aviation Authority of the Philippines (CAAP) has certified that the two Sky Pasada planes are outfitted for the peculiar slopes of the Basco runway, he said.

Guico said the company would continue servicing the route because it would be difficult for Batanes residents to move from Basco to Itbayat without the Sky Pasada.

“But I do not know yet when we could resume operations. It all depends on how long the aircraft will be repaired. We will also try to have a cost-benefit analysis, whether it would still be feasible to have it repaired,” he said. In July 2010, Sky Pasada planes were grounded when the CAAP required airline companies to introduce additional safety features on their fleet to comply with European Aviation Security Agency standards. 

LTP Opens A380 Maintenance Hangar

February 10, 2012

Lufthansa Technik Philippines (LTP), one of the largest providers of aircraft maintenance services in Asia, has opened a third hangar in Manila for work on widebody aircraft. With this step, the company is preparing for the technical support of the world's largest commercial aircraft.

Lufthansa Technik Philippines, a joint venture between Lufthansa Technik (51%) and the Philippine MacroAsia Corporation (49%), invested USD 30 million in the construction of the new hangar, which is 8,500 square meters large and 35 meters in height. The new hangar offers space to work simultaneously on one widebody and two narrowbody aircraft.

"With the new hangar, we will be able to keep up with the increasing demand for technical services for long-haul aircraft, particularly in the Asian market," said Lufthansa Technik Chairman of the Executive Board, August Wilhelm Henningsen. "By adding A380 capability, it underscores Lufthansa Technik Philippines' role as global aircraft overhaul center."

"The continuous growth of the company leads to up to 400 new highly-technology and high-skills jobs in addition to the existing 2,700 jobs," explained Gerald Frielinghaus, President and CEO of LTP.

Eleven years after its founding, Lufthansa Technik Philippines, located at Manila's Ninoy Aquino International Airport, offers comprehensive technical services including lease return checks and cabin modification for the Airbus A330/A340 and A320 families and now also for the Airbus A380.

LTP has 30 overhaul customers including Philippine Airlines, Lufthansa, Qantas, Virgin Atlantic, LAN Chile and AirAsia X. It has about 20 approvals from aviation authorities including the American FAA and the European EASA.

Lufthansa Technik

The Lufthansa Technik Group, with more than 30 subsidiaries and associates and over 26,000 employees worldwide, is one of the leading manufacturer-independent providers of technical services for the aviation industry. Its portfolio encompasses the entire spectrum of services for commercial aircraft: maintenance, repair, overhaul, modification and refit, engines and components.

All set for AirAsia Philippines Flight

February 9, 2012

Air Asia Philippines to start Flying in March 2012

The Civil Aviation Authority of the Philippines (CAAP) has granted AirAsia Philippines its Airline Operating Certificate (AOC) that would allow it to fly commercially in the Philippines and particularly out of the Diosdado Macapagal International Airport (DMIA) in Clark, Pampanga.

CAAP Director General Ramon Gutierrez has said that the application took a long process as airlines are required to submit data on its aircraft, proposed initial training for crew, documentation of maintenance system, among others.

CAAP had to review the documents submitted as well as conduct an inspection of the airline’s facility as part of the process for granting an air operator certificate, he added.

AirAsia Philippines is 60-percent owned by Cojuangco, Romero and former broadcast journalist Marianne Hontiveros in equal shares, while the rest is owned by Malaysia-based AirAsia Bhd. led by Tony Fernandes. AirAsia Bhd is one of the world’s most successful budget carrier.

Romero said AirAsia Philippines will be mounting flights to new destinations one after the other as it grows its fleet to 16 Airbus 320's in the next five years to service domestic and international destinations all from Clark International Airport, the airlines hub.

The new carrier plans to use its first A320's to fly to Singapore, Hong Kong and Macau and vice versa from Clark, according to AirAsia Philippines (AAP) President and CEO Marianne Hontiveros. The second A320 is bound to fly from Clark to Kalibo, Puerto Princesa, Incheon in South Korea, and Bangkok in Thailand.

AirAsia Philippines is expecting delivery of another two A320 this year bringing their fleet to four, Hontiveros said saying that they are already slated to fly Malaysia, Cambodia and Japan which rights were granted to the airline in the last quarter of 2011 in addition to introducing more domestic flights.

The carrier was granted 1,260 seats a week on the Clark-to-Kuala Lumpur route, seven flights per week on the Clark-to-Cambodia route, and six flights per week either on the Clark-Osaka route or Clark-Nagoya route.

Family Flies together

ROSE-AN JESSICA DIOQUINO
GMA News 

February 8, 2012

Captain Antonio Halagueña always wished one of his four children would follow in his footsteps and become a pilot.

His two sons seemed to be the obvious choices.

Halagueña, however, gave up the idea because one of his sons complained: "You were always out… You never saw me learning to ride a bike."

One day youngest daughter Andrea or Iya suddenly said she wanted to fly planes like her father and maternal grandfather, a pilot during the Second World War.

Today, the father-and-daughter tandem flies planes together as captain and first officer for the airline company ZestAir.

Halagueña’s time onboard is almost up because he is retiring soon.

Father and daughter are scheduled to fly together for the last time on February 17, two days before the captain’s 65th birthday.

Father-daughter tandem on air. Captain Antonio Halagueña (left) and his daughter, Andrea or Iya, have been flying commercial planes together since the latter decided to change career paths and become a pilot like her father. Photo by Dir. Art Alejandrino, courtesy of Risa Halagueña

Surprised by decision

Halagueña— who has been in the airline industry for nearly four decades— said Iya’s decision caught him by surprise.

“When she said she wanted to become a pilot, I said, ‘What? Are you sure?’ And her answer was, ‘It’s in my blood: you and my lolo.' When I heard that, I had to agree, but I wanted to be sure,” he said.

Iya, at the time, just graduated from the Ateneo de Manila University, where she majored in Development Studies.

She initially wanted to work for environmental organizations but figured she just didn’t fit the mold of an office-bound worker.

“Because of my mom (a flight purser) and dad—we’re in the industry—I was somehow led into it. Wala namang pressure from [my parents]; I really wanted to become a pilot,” she said.

As he was already an instructor for younger pilots at the time, Halagueña said he told Iya to “remove all your gimmicks!” and study hard because the profession’s first requirement is discipline.

His daughter did not disappoint, he said.

“She was studying up to 3:00 a.m. I saw that and thought, ‘Ah, she will make it.’ She really studied well. And all of the pilots that flew with her [told me], ‘She did it all on her own,’” he said.

Bonding up in the air

Aside from fulfilling her father’s dream, Iya’s decision led to a different bond between them,  making up for the times when the captain was barely home as she was growing up.

“How did I cope then? Through YM (Yahoo! Messenger), nagcha-chat kami! Pero super hirap [kasi] I had a long-distance relationship with him,” she said.

For his part, Halagueña admitted that even though he was not like other overseas Filipino workers (OFWs) who had to be away from home for years, his absence still affected his children, particularly the two boys.

“Well, we had flights to Europe, so I would be away for 21 days and then be back for just two days, so it was really not good for a family man. From there, I tried hard to attend father-and-son sharing for eight years to be able to bond with my two sons,” he said.

But the sacrifice had to be made to pay for the family's expenses, the captain added, and the work provided for a good life for the family.

“I came from a poor family, so when I was able to build a nice house for them, I took a chair to the lawn, opened a beer, and gave a toast to myself and said ‘I made it,’” he told GMA News Online.

“I have four children who were able to finish school. I can remember Andrea telling me, ‘It is your duty to send me to a good school.’ All of them finished their degrees. That’s already an achievement for me. When I retire, my wife and I can just travel and we are sure that our children will be able to support themselves financially,” he added.

Proud father

Halagueña said he felt very proud to be flying with his daughter, especially on their first flight out to Puerto Princesa, Palawan.

“I listened to the cabin crew announcement. I felt really good when the crew mentioned, ‘Flying this aircraft is Captain Halagueña, assisted by First Officer Andrea Halagueña.’ I was like, ‘Wow!’ That was really something,” he told GMA News Online.

For Iya, it was “really just like any other flight, except that I was calling my captain ‘Papa’.”

“I was telling her, ‘Hey, you’re supposed to call me sir!” the captain teased.

“I had no inkling that I would be a pilot; I was a flight steward before in Philippine Airlines, where one of the captains told me to train,” Halagueña shared. “At the very least, you have to really enjoy flying. Flying to me is like a sport, it’s not a job. I earn more, but then I enjoy my work. Same with my daughter here—the only problem is waking up in the morning!”

For Iya, flying planes fulfills her thirst for adventure, though it can get “really stressful” and a bit “repetitive.”

“There’s pressure, pero sa lahat naman meron. Mas enjoy ako. Hindi ko masyadong nafi-feel ‘yung pressure because I enjoy it,” she said.

The captain said he could see that his daughter would do well in the industry because she already knows what she wants.

“You know, when she was just starting out, she was already asking me, ‘When will I become captain?’ That was nice! When I was co-pilot and reached [the requirement], I already applied for captain. That was my aim. So when she said that, I was so happy!” he said.

As he nears his retirement—and his chance to take the sidelines as instructor—Captain Halagueña advised his daughter: “Don’t relax.”

“You know being a pilot is a continuous study, you don’t let your guard down because you’re not flying alone—you’re flying with other lives in your hands,” he said.

Even with the challenge, Iya is not paying attention to the pressures that lie ahead. Instead, she said she is grateful for the opportunity to work alongside her father.

“Of course I’m proud of him. Super proud!” she told GMA News Online. “Tuwing kailan ba nabibigyan ng chance na lumipad with your dad or a family member? I’m really happy. I feel blessed that I get to fly with my dad.” 

CAAP failed to prepare the country for the FAA review

Roxas tagged CAAP Officials Incompetent

February 5, 2012

 

Manila -  The US Federal Aviation Administration (FAA) has rated the Philippines anew as "FAILED" in its aviation compliance directive, and recommended that the country should remain further under heightened surveillance (CAT 2), according to initial reports submitted to Washington.

"It (the Philippines) failed  to pass our technical review" says one of the members of the FAA team that went to the Philippines two weeks ago. He was speaking on conditions of anonymity as he was not authorized to speak on the matter.

Among the FAA Technical Team that went to the Philippines were Jacque Astre, FAA Team Leader; Beverly Sharkey, Team Attorney; Craig Michael, Operations Team Member; Andre Lamarre, Airworthiness Team Member and Julianna Kim, State Department International Transportation Officer, as observer.

"We told the Secretary of Transport the real score and he was disappointed with our report" says the source. The FAA Audit Report was already shipped to the Philippines last week.

Department of Transportation and Communications (DOTC) Secretary Mar Roxas was reported to have walked out during an exit conference last January 27, 2012 conducted by Operations Inspector Specialist Jacques Astre, head of the FAA technical team, when he was mislead by CAAP officials as to its readiness to take on the FAA audit.

Secretary Roxas hurriedly left the CAAP building in Pasay City around 11:30 in disgust followed by some CAAP officials pleading to him to come back to the meeting but his face showed how the progress review went. Sources from inside DOTC said that the Secretary was so disgusted with CAAP officials, saying the officials failed to prepare the country for the FAA review.

Press briefing later that day showed a sanitized report as it contained contradictory statement to the real score of Philippine Aviation announcing a complimentary remark from Jacques Astre.

In the announcement, CAAP declared that the Federal Aviation Administration’s Technical Review team tasked with assessing the country’s readiness for an International Aviation Safety Assessment (IASA) audit complimented the CAAP on its progress, saying the agency had accomplished “more in six months than in the previous five years.” 

The FAA representative however stopped short of declaring the Philippines eligible for Category 1 status, pointing out that issues in Legislation, Licensing & Certification Obligations and Resolution on Safety Issues still has to be resolved.

FAA inspectors was very concerned on CAAP’s certification processes for aircraft and personnel, and should accordingly focus its efforts in resolving the problem, the report said.

FAA said that the next audit will be done by The International Aviation Safety Assessment Program (IASA) sometime in February but the specific date was not announced to CAAP. The FAA report said another technical review is necessary before another formal audit could be conducted.

The International Aviation Safety Assessment Program (IASA Program) is a program established by the U.S. Federal Aviation Administration in 1992 designed to appreciate a country's ability to adhere to standards and recommended practices for aircraft operations and maintenance. 

Upon hearing Astre's remarks, DOTC Secretary Mar Roxas became infuriated with the CAAP officials in attendance at the briefing, berating them for failing to adequately prepare for the FAA review before walking out of the meeting. 

Sec. Roxas was interviewed later by the Inquirer who hinted that the Aquino Administration might consider giving up on the issue of upgrading our aviation status, explaining that “It’s our decision to invite them [the FAA] back,” based on the findings of the technical review team’s report.

The FAA told CAAP that it should focus more its attention to the five phases in certification process: application, submission of documents, review of submitted documents, demonstration of capability and issuance of certificate.

When pressed for comment, CAAP said that they were “minor issues” that can easily be resolved.

“The technical review is meant to prepare us for the IASA audit. Minor issues need to be rectified. We ask questions and they provide answers and recommendations. In the actual audit, there will be no questions. It’s either pass or fail,” said CAAP director general Ramon Gutierrez Saturday.

New Cebu Pacific long-haul operation could push out Philippine Airlines but may require hybrid model

February 2, 2012
SPECIAL FEATURE

Cebu Pacific President and CEO, Mr Lance Gokongwei

The new plan from leading low-cost Filipino carrier Cebu Pacific to offer long-haul services from 3Q2013 represents not just the fourth low-cost long-haul operation in Asia, but the first time such a carrier has potential to force a full-service rival – Philippine Airlines (PAL) – out of business.

Cebu Pacific will benefit from the Philippines’ extremely price sensitive market that has seen LCCs achieve a staggering 80% share of the domestic market and a fast-growing share of the regional international market.

Demand for low-cost long-haul services will come primarily from the large visiting friends and relative (VFR) and migrant worker market. But Cebu’s new low-cost long-haul operation will also benefit from growing tourism and potentially the ability to transfer passengers over a geographically convenient hub if Cebu decides to stray from its original point-to-point model.

While PAL is the nation’s sole long-haul carrier, its lack of global alliance membership, relatively small domestic operation and higher cost base create low barriers for entry. National sentiment for Asia’s oldest airline may run high, but as seen in the Philippines’ domestic market, passengers vote with wallets.

Publicly-traded Cebu Pacific plans to launch its new long-haul operation in 3Q2013 with leased A330-300 aircraft. Four A330s are expected by the end of 2014 and eight aircraft by 2016. Although Cebu had not mentioned a fleet beyond eight, additional aircraft are likely, including more efficient A350s.

The decision to offer long-haul services is a swift change from remarks as recent as last year that long-haul services were not being considered. Cebu’s management team has previously insisted it wanted to stick with a very pure LCC model, ruling out a long-haul operation, a connection product and codeshares or interlines out of a fear that such distractions would add complexity and cost. The new long-haul division will have a different management team.

Cebu targets the 10 million Filipinos living outside Asia

Destinations, Cebu CEO Lance Gokongwei said, will focus on expatriate communities. There are about 11 million Filipinos living overseas, including about 3 million in the US and about 2.5 million in the Middle East. Only a little over one million expatriate Filipinos live in Asia, a market Cebu has targeted with its fast-growing regional international operation and has stimulated by offering low fares that allow these workers to return home much more frequently. The fact an overwhelming majority of the expatriate Filipino population lives outside Asia shows the huge potential of a low-cost long-haul operation in the Philippines.

Largest regions for overseas Filipinos: Dec-2009

Region	Population
Africa	64,736
Americas	3,582,879
Middle East	2,415,896
North Asia and South Asia	1,074,496
Europe	722,427
Oceania	388,520
Africa	64,736

Source: Commission on Filipinos Overseas

The lower fares and in some cases better connections that will be generated by the new low-cost long-haul operation should lead to more frequent trips home for the 10 million Filipinos living outside Asia, as well as more trips by Philippines residents to visit their family and friends overseas. “We are exploring serving cities where large Filipino communities reside: Europe, Middle East, Oceania and the USA,” Mr Gokongwei said.

Cebu will undoubtedly also attract tourism traffic and potentially some corporate traffic. Mr Gokongwei estimated Cebu’s long-haul fares will be 35% cheaper on normal tickets and 80% cheaper during special promotions.

Long-haul Cebu to be markedly different from AirAsia X, Jetstar and Scoot

Even before considering passenger composition or fares, it is clear Cebu’s long-haul division will be different from Asia's three other low-cost long-haul carriers: AirAsia X, Jetstar and Scoot, which will launch later this year. AirAsia X is based in Kuala Lumpur while Jetstar and Scoot have bases in Singapore (Jetstar also has a long-haul base in Australia). Those bases rule out narrowbody services to North Asia whereas Cebu’s Philippines base enables it to serve north and southeast Asia with its existing A320 fleet.

Cebu now has a distinct advantage over Southeast Asia’s other LCCs in this regards. Unlike most other Southeast Asian countries, from the Philippines all major Asian cities are within reach of A320s.

Four hour flying range from Asian hubs

Manila	Kuala Lumpur

Source: Greater Circle Mapper

The AirAsia and Jetstar groups now limit narrowbody flights to about four hours and let widebodies handle flights beyond that. Scoot does not have a short-haul division but owner Singapore Airlines (SIA) has a stake in Tiger Airways, which operates low-cost short-haul routes from Singapore. As a result once Scoot launches in mid-2012, SIA will be able to cover the short and long-haul spectrum with LCCs, although with separate brands and not nearly as integrated as AirAsia X and Jetstar.

Cebu says its long-haul division will serve points beyond the range of its existing narrowbody fleet, suggesting the new long-haul operation is not intended to have North Asian destinations, which would be the low-hanging fruit. This presents a challenge as it contradicts how the low-cost long-haul model has worked so far. AirAsia X last month unveiled major changes to its network which will see it drop its longest routes, to London and Paris, as they were highly unprofitable. AirAsia X will instead focus from Apr-2012 on shorter routes to North Asia and Australia/New Zealand.

Jetstar also has made a U-turn with its initial network strategy and has decided against expanding to Europe for at least the foreseeable future. The AirAsia X and Jetstar decisions to stay away from very long routes show that the benefits of the low-cost long-haul model diminish significantly on flights of more than about 10 hours. The cost gap between LCCs and FSCs closes significantly on such flights, making it difficult for the LCCs to compete, as the FSCs typically have the advantage of a bigger network, more partners and more demand from higher-yield corporate passengers.

Cebu has some options outside Asia that are still within a 10 hour flight of Manila, including Australia, the Middle East and Hawaii. These will likely be the carrier’s three main initial long-haul markets, which combined have an Filipino expatriate population of about 3 million, and could potentially support an eight-aircraft fleet. But growth beyond that could be difficult to achieve without straying into longer flights because a majority of the Filipino expatriate population live in Europe, Canada or the mainland US.

Cebu could end up using A330s to compete against PAL on Asian routes

The relatively small number of markets within the five to 10 hour range of Manila makes it likely that Cebu will end up using at least some of its new A330 fleet on Asian routes. Rival PAL now operates its fleet of eight A330s within Asia, including on several routes where PAL now competes with Cebu’s A320s. PAL is now able to close the cost gap with Cebu on Asian and domestic trunk routes by using widebodies - including A330s, Airbus A340s, Boeing 777-300ERs and even Boeing 747-400s.

Cebu will clearly be tempted to try to widen this cost gap by opting for higher gauge aircraft on its densest routes. Cebu last year ordered 30 A321neos to replace smaller and less fuel efficient A320 current generation aircraft on these routes. But A330s, and later potentially A350s, would offer Cebu another even bigger gauge option. The A321neo could provide lower seat economics than the A330, but Cebu will be taking its A330s at least two years prior to its A321neos, giving Cebu the enticing option of using the A330 on its most popular Asian routes as a bridge until the A321neos are delivered.

PAL now operates A330s on seven of Cebu's international routes - Bangkok, Hong Kong, Jakarta, Osaka, Seoul, Singapore and Shanghai - as well as on domestic flights to Cebu. Singapore, Hong Kong, Seoul and Bangkok are four of Cebu’s five largest international destinations (the other is Kuala Lumpur, which is currently not served at all by PAL). Manila to Cebu and Davao are Cebu’s two largest domestic routes (PAL does not serve Davao with A330s but does operate 747s on some flights to Davao).

Cebu in particular may be tempted to use its A330s at congested slot controlled airports such as Hong Kong, Shanghai and Beijing. It could also potentially use A330s to launch service to Tokyo. Manila-Beijing is now served by both PAL and Cebu with A320s while PAL is the only Filipino carrier serving Tokyo (PAL uses 777-300ERs on the route, which is also within narrowbody range). 

Philippines’ price-sensitive market perfect for Cebu 

While Cebu will likely focus on relatively short long-haul routes such as Australia, the Middle East and Hawaii and will likely also end up using some of its A330s within Asia, the carrier will also have the opportunity to test the model out on longer routes and potentially prove its validity where AirAsia X has struggled.

Cebu will have an advantage over the other low-cost long-haul carriers in proving the model on ultra-long-haul flights. Filipinos already demand long-haul flights given its of large expatriate populations in the Americas and Europe. About 12% of Filipinos work abroad and remittances account for about 11% of the country’s official GDP (unofficially remittances are expected to be significantly higher). Overseas workers typically return home at least once a year while some locals also visit overseas Filipinos, creating a large VFR market.

Price is more sensitive in the Philippines, with a GDP per capita of USD2255, compared to most other Asian countries. Low-cost flights to Europe and North America are particularly attractive given the huge Filipino expatriate populations in these regions.

The US state of California alone has about 1.5 million Filipinos according to US census figures from 2010 (the Filipino population in California is even larger if people of mixed descent are included). Los Angeles and San Francisco are two of PAL’s largest markets and the carrier has been eyeing a third California destination, San Diego, which could be launched once the Philippines regains US FAA Category 1 status.

Hawaii has the second largest Filipino population in the US with about 200,000 expatriates. The New York/New Jersey area also has about 200,000 Filipinos while Nevada has the fastest growing Filipino population in the US. There are now over 100,000 Filipinos in Nevada and PAL serves Las Vegas via Vancouver.

There are over 600,000 Filipinos living in Canada with a majority in the Vancouver area. The Filipino populations in Europe are relatively smaller but when factoring in the entire region account for a sizeable amount. Spain and the UK have the largest concentrations of Filipinos in Europe with over 200,000 in each country. There are smaller Filipino populations in several other European countries including Italy, Germany, Greece and France.

Ten largest countries with Filipino expats: Dec-2009

Country	Filipino expats
United States	2,877,666
Saudi Arabia	1,159,003
Canada	639,686
UAE	609,704
Australia	336,140
Qatar	263,980
Malaysia	243,877
Japan	210,617
United Kingdom	200,987
Hong Kong	168,550

Source: Commission of Filipinos Overseas

Cebu faces huge challenges in potential European operation

While both the North American and European markets have huge potential for Filipino carriers, Cebu has three major challenges in tapping these markets.

Firstly, Filipino carriers are now prohibited from launching new flights to the US or EU. There is some hope the US restriction, which is also now blocking planned PAL expansion to the US, could be lifted later this year but this is not a certainty. There is also some hope the inclusion of Filipino carriers on the European Union blacklist, which entirely blocks Cebu from serving the region, may be lifted. But this also is far from a certainty.

The second major challenge is the very long length of flight involved with serving these markets. A third challenge is competition, in particular on European routes.

The Philippines-Europe market is now served mainly by the Gulf carriers, which have relatively low-cost structures and the advantage of operating geographically well positioned hubs that can connect a wide range of city pairs. PAL pulled out of Europe several years ago. KLM is now the only European carrier still serving Philippines but plans to drop its non-stop Amsterdam-Manila flight in late March in favour of a new Amsterdam-Taipei-Manila service.

Beating the economics of the Gulf carriers’ one-stop product to Europe will prove to be a tough challenge even for a carrier with a very low cost base. The price difference between LCCs and FSCs is largest on short-haul flights where there is room to decrease costs while the costs that cannot be decreased – namely fuel – account for a smaller fraction of costs. In long-haul such as Philippines-Europe, the price difference is less apparent as non-controllable costs like fuel account for a significantly greater share of costs than on short-haul flights. This means long-haul fares on LCCs may only be 10-25% lower than on FSCs, whereas on short-haul routes LCC fares can be at least half as much compared to FSCs.

Middle East market could be challenging for Cebu due to Gulf carrier competition

Cebu will have a bigger cost advantage in Philippines-Middle East market. But the Gulf carriers have the advantage of offering connections throughout the Middle East (the expatriate Filipino population in the Middle East is spread across several countries). Manila is now served by all four of the largest Middle Eastern carriers - Emirates, Etihad, Qatar and Saudi Arabian. PAL is now completely out of the Middle East market (with the exception of codeshares), having dropped Saudi Arabia last year, because it could not compete against the Gulf carriers. While this length of flight is very suitable for the long-haul low-cost model, the competition challenge will still be there.

In Saudi Arabia Cebu will have to fend off Saudi Arabian Airlines, which now serves Manila with ten weekly frequencies and has the advantage of being able to offer domestic Saudi connections. With a Filipino expatriate of over one million, Saudi Arabia is probably a large enough market to also support a point-to-point carrier. But it is unlikely the other Middle Eastern markets, given their much smaller Filipino expatriate populations, will be able to support a Filipino carrier given the capacity already provided in this market by Emirates, Etihad and Qatar – capacity which is only sustained because of their network models.

Besides competition from Gulf carriers, looming is China Southern, which is quickly developing sixth-freedom traffic, including from Asia to the Middle East and Europe. China Southern serves Dubai and Jeddah and prices competitively from those points to the Philippines.

US market offers Cebu the most opportunities

If Cebu is allowed to launch US flights, the situation would be different as competition is not nearly as intense as it is on flights to the Middle East and Europe. PAL is the market leader and the only carrier operating non-stops to the mainland US (the Manila-Honolulu market is served by both PAL and Hawaiian Airlines). US and North Asian carriers also serve the lucrative California-Philippines with one-stop products but Cebu expects that Filipinos will choose to fly with a Filipino carrier if given the choice, especially if its fares are lower.

The challenge for Cebu is that the cost gap between PAL and Cebu on flights to California would not be very big given the long length of flight. With a smaller price proportion gap, passengers typically begin to question if giving up frequent flyer points and an all-inclusive service is worth the cost trade off. But unlike other Asian FSCs, PAL is not part of a global alliance (which reduces the appeal of its frequent flyer programme), its reliability has been hit by strikes and its product is not winning awards. So the PAL-Cebu debate has fewer trade-offs than pitting AirAsia X against Malaysia Airlines, Jetstar against Qantas or Scoot against SIA.

Assuming a 25% discount, and not the 35% Mr Gokongwei suggests, there could be savings of USD250 per long-haul ticket in the US-Philippines market. With a USD250 savings meaning more in the Philippines than in Malaysia, Singapore or Australia, the question could become not if a low-cost long-haul carrier can find room, but rather if a legacy carrier still has merit to operate. The consequences here are enormous as the US is PAL’s biggest (by revenues) and most profitable international market and is now the flag carrier’s key differentiator.

FAA Category 2 poses potential obstacle for Cebu and PAL

But before it can enter the lucrative US market, the Philippines has to upgrade its US FAA safety rating from Category 2 to Category 1. Under Category 2, no new Filipino carrier can launch services to the US and PAL is not able to add capacity or even change the gauge on existing flights. The Philippines hopes to have the ban lifted this year, but previous attempts have been unsuccessful.

The 2008 downgrade to Category 2 is already having a huge impact on PAL. Shortly before the downgrade PAL committed to ordering six 777-300ER aircraft to replace its ageing A340-300s and 747-400s. PAL has since taken delivery of two 777-300ERs but has been unable to deploy the type to the US, which accounts for two-thirds of weekly long-haul sectors. PAL is banking on the ban being lifted in time for its next two 777-300ER deliveries, which are late this year.

Ironically a return to Category 1 could be double edge sword for PAL. It would allow the carrier to finally use its 777-300ERs on US routes but would also pave the way for Cebu to enter the market. PAL actually is footing the bill for a consultant to help raise the standards at the Philippines aviation authority (Category 2 is not a reflection of a carrier's safety standards but the standards of local aviation infrastructure), which will ultimately benefit its rival.

Assuming an upgrade to Category 1, PAL will have an advantage in that its 777-300ERs will have the range to operate non-stop flights to and from California. PAL now often has to route its return flights from Los Angeles and San Francisco via Guam as its A340-300s and 747-400s lack the range to operate the route at full payload in headwind conditions. Cebu’s A330-300s will also lack the range to operate to the US mainland or Europe non-stop. The carrier would have to serve California with a one-stop product, putting it at a potential disadvantage to PAL’s planned 777-300ER operation.

Potential A350s could allow Cebu to eventually serve the mainland US and Europe with non-stop flights. But if opts to wait for A350s before serving the mainland US, PAL will enjoy several more years as the only Filipino carrier in this lucrative and fast-growing market. This alone could help PAL weather the storm, although it already faces stiff challenges from LCCs in the domestic and regional international markets and will almost certainly have new competition in the Australia market after Cebu takes its A330s.

The FAA safety rating has also impacted Cebu in Japan, which follows FAA recommendations and has blocked Cebu’s further expansion in the country. Canada, however, has not followed the FAA and PAL’s operation to Vancouver has been unaffected. Cebu could launch to Canada if the US if off-limits initially. But the Canadian market is much smaller than the US market and Cebu could only serve Canada with a one-stop product.

PAL is already deploying its 777-300ERs on some Vancouver flights, allowing the carrier to serve this market non-stop in both directions (some of its Vancouver flights continue to Las Vegas and have to be operated with A340-300s because of the Category 2 rating). PAL is also now using its 777s on regional routes, which they are not ideal for.

Australia offers Cebu enticing option

Cebu could also deploy the A330 to Australia, a market PAL serves with A340s. PAL tried to introduce the 777 in these markets but found too much capacity was created and reverted back to A330s. Qantas also serves the Manila-Sydney market with A330s. Jetstar currently only serves Manila from Hong Kong and Singapore with A320s (with Osaka service to be added in March).

Jetstar currently does not operate its A330s to the Philippines but the prospects of Cebu launching to Sydney could persuade the Qantas Group to switch the existing Qantas mainline Sydney-Manila service to Jetstar. Jetstar could also launch Melbourne-Manila service with its A330s, providing new competition to PAL and potentially Cebu. Australia is the seventh largest source of overseas Filipinos but is also home to a savvy travelling population that has a high propensity for overseas travel and is receptive to new carriers; AirAsia X has done particularly well.

Cebu to buck trend and go with all-economy configuration

Cebu’s A330-300s will seat “just over” 400 passengers in a single-class configuration, according to Airbus. This means Cebu will seat nine-abreast in the A330 compared to the more common eight-abreast. AirAsia X also fits nine-abreast in its A330-300s, but offers two rows of 2-2-2 configured lie-flat business seats for a total of 377 seats. Even by replacing the more spacious premium seats for economy seats, Cebu will have to reduce lavatories or galleys to exceed 400 seats. The A330-300 can hold a maximum of 440 passengers.

Cebu’s decision to forgo a premium seat goes against the decisions of AirAsia X, Jetstar and Scoot. It also signals that Cebu is potentially not interested in entirely replacing PAL. While Cebu’s expansion into long-haul services complicates its model, the carrier seems to want to avoid straying into other elements of the full-service model such as business class and codeshares.

AirAsia and Jetstar have shown there is demand for a more spacious seat priced more competitively than other carriers’ premium classes. AirAsia X has found the greatest success with its premium cabin, going as far as to offer lie-flat seats whereas Jetstar and Scoot offer recliner-style seats (the two may be restricted to not offering a more superior product that would cannibalise the premium product on their full-service parent companies).

Beyond demand, a premium cabin can be justified by making better use of space. With flights typically hovering at 80% load factors, a question emerges whether to let that remaining 20% of floor space go unused or put in a new product and attract a new type of passenger, as AirAsia X did. The potential for a premium cabin on Cebu is even greater since PAL does not have as comprehensive a premium product as other full-service Asian carriers. But the Philippines also has relatively small premium market compared to other Asian countries, a factor which may persuade Cebu to stick with the intended all-economy configuration. 

Cebu looks keen to stick to pure LCC model despite long-haul operation 

It is unclear for now if Cebu’s decision to launch a long-haul operation represents a broader model shift for the carrier. If the carrier opts against following AirAsia X and Jetstar in offering a business class, connection product and interlining/codesharing, it would shut itself out of a potential lucrative part of the market, leaving PAL as the only Filipino carrier in that space.

PAL itself has not developed Manila into a strong international transit hub and is not a member of a global alliance but it does have a large domestic-to-international transfer business and has several codeshare partners. While the Philippines is growing as a destination in its own right, the Philippines is geographically well positioned for potential international-to-international traffic flows. For example from Australia it is more convenient as a hub to East and North Asia than Southeast Asia, which is further inland and requires some backtracking. As Australian interests continue to grow outside of Southeast Asia, Cebu is potentially well positioned to capture some of that traffic.

Cebu could also potentially connect the US with other Southeast destinations such as Singapore, Indonesia and Malaysia. In all three cases these markets are only served with a one-stop product (with the exception of SIA's all-premium service) and Cebu's fares could be extremely attractive.

Management has previously remarked the necessity of a simple model. It is hard to imagine Cebu sticking with this approach once it launches long-haul flights, where the need for feed is typically essential. Not even offering domestic to international connections, an important PAL market, is almost unfathomable. Regardless of what Cebu decides in the end, many passengers will self-connect, as more than half of AirAsia X passengers do.

Cebu Pacific route map: Feb-2012

Source: Cebu Pacific 

Cebu ready to exploit PAL, and its stagnated development 

Cebu’s targets of Australia and the US potentially place it on a collision course with PAL’s long-haul network, which comprises service to only Australia and North America. Cebu will be more nimble, have a lower cost base, a larger domestic network and a growing regional international network. It also has a very powerful brand especially in the Philippines and expatriate Filipino community; though Cebu is a lesser known entity internationally than AirAsia or Jetstar.

These characteristics also apply to AirAsia X. Although AirAsia X caused significant dents in Malaysia Airlines’ yields, MAS has a bigger corporate market, more partners and is in the process of joining a global alliance (oneworld). PAL has largely survived because it has been the country’s only long-haul carrier.

Indications are Cebu will not have a premium product, but this could be quickly and easily reversed to help it win much of PAL’s premium traffic. Cebu had a frequent flyer programme but ended it in favour of having customers earn loyalty through credit cards. Re-establishing a programme, if done correctly, can be its own profit centre. 

How will PAL respond, and will it be enough? 

If Filipino aviation had to be re-created from scratch, low-cost would be the model of choice, possibly with one carrier adopting a hybrid model. The case for Cebu long-haul services is clear-cut, but the medium-term opportunity for PAL less so. Reducing a cost base to be more competitive can be done, but when PAL outsourced certain divisions in 2011, strikes crippled the airline, nearly shutting it down for a number of days. No carrier has successfully stripped costs out to be competitive against LCCs. Half the solution is to cut costs while the other half is to improve positioning.

That is the path being pursued by Malaysia Airlines as part of its latest turnaround plan, unveiled in Dec-2011, but the outlook for PAL is less certain. Within three years it will need more partners to expand local feed in international ports while shoring up a robust domestic market, where it languishes as low-cost sister carrier AirPhil Express (with the same primary owner as PAL) battles the more successful Cebu Pacific. Joining a global alliance always brings additional passengers, but the question is if the revenue gains offset joining costs. Alliance membership could also preclude individual partnerships with more strategic airlines.

In Honolulu PAL and Hawaiian Airlines could consider whether joining forces to offer a daily schedule is effective to combat Cebu's likely launch of non-stop Honolulu services. PAL could also look to tie up with a Canadian carrier to have greater feed across Canada than just Vancouver. Having a reach extending beyond main cities would lessen Cebu’s damage on PAL, as would PAL offering a wider network, such as releasing its additional long-haul destinations currently stymied by FAA restrictions. Having those restrictions lifted ideally this year, or possibly next, would give PAL time to enhance its network and demonstrate, in what could become a global case study, if it is possible to fend off a serious LCC threat.

PAL is already a weak carrier with a bleak outlook. But Asia's oldest airline has time to respond to the new threat Cebu’s long-haul operation will bring and revise its strategy accordingly. The new fleet of 777-300ERs and US expansion, if allowed, could help PAL’s viability. But it should seek out new airline partners, improve its premium product and look to join a global alliance (persuading an alliance to accept PAL however could prove to be a challenge). Elements of the new MAS strategy, although far from proven, could be worth replicating. To fend off the latest threat, PAL will need to work hard, make changes and hope that Cebu really sticks to the pure LCC model. A true hybrid model for Cebu would create a far more challenging scenario for PAL. © CAPA