Load Factor Blamed for PAL Domestic Consolidation

Air Asia bleeds hard and Airphil Express quits Clark hub

February 15, 2013

Slipping load factor has been blamed for Philippine Airlines (PAL) consolidation of its domestic route network with low cost subsidiary Airphil Express despite robust 9.6% growth in the domestic  market due to overcapacity of seats introduce by competing airlines.

Data from the Civil Aeronautics Board (CAB) disclosed that passenger traffic rose 9.6 percent in 2012, but the six major airlines reported a seat capacity increase of 16.14 percent equivalent to 28.27 million as compared to 24.34 million in 2011. 

The increase in seats is more than 6 percent of the demand creating an unprofitable lower load factor of all domestic airlines which now averaged around 64.85 percent, down from a better 75.69 percent load in 2011.

Data from the Civil Aeronautics Board (CAB) showed that the number of domestic passengers rose by 9.6 percent to 20.56 million last year from 18.77 million in 2011.

Leading LCC Cebu Pacific (CEB) carried 9.48 million passengers in 2012, up 11.8 percent from 8.47 million in 2011. Its load factor, however, fell to 77.22 percent from 80.68 percent recorded in 2011.

Similarly, Philippine Airlines (PAL) flew 4.09 million passengers, down 4.9 percent from 4.31 million in 2011. The flag carrier's load factor also dropped to 71.76 percent from 74.52 percent.

PAL budget unit Airphil Express registered increase passenger numbers as it flew 4.45 million higher than the 3.69 million in 2011. Its load factor however dropped to 71 .26 percent from 74.17 percent.

Meanwhile, Zest Airways carried 2.06 million passengers, down from 2.15 million passengers in 2011. Its load factor fell sharply to 65.64 percent from 74.26 percent.

Southeast Asian Airlines (Seair) grew its passenger as it flew 317,897 this year from 124,468 in 2011. Its load factor likewise fell sharply to 58.80 percent from 74.85 percent in 2011.

It is all bad news for Air Asia Philippines carrying only 158,519 passengers last year amidst a load factor of 44.48 percent.

Over-capacity and irrational competition has been blamed for budget airline losses in the Philippines except market leader Cebu Pacific which continue to register profit despite intense competition.

Philippine Airlines consolidated its domestic operation with Airphil Express in 2012 to cut losses. Air Asia pulled the plug in Puerto Princesa and reduce services to Kalibo and Davao.Zest airways cancelled some domestic destinations while Cebu Pacific reduces frequency on some routes.

The latest event is Airphil Express pulling out of Clark effective February 22 stopping all domestic and international flights south of Manila citing heavy losses. Airphil Express made Clark its hub in March 2012 as it flies to Hongkong and Singapore, as well as to Cebu, Kalibo, Davao and Puerto Princesa.

1 comment:

  1. Air Asia needs to merge with either Seair or Zest Air. The market is oversaturated with carriers selling ridiculously low airfares that are just unsustainable. I don't know if Air Asia can survive with Clark alone. They need to be in Manila.