European Take-Off

By Naazneen Karmali

Forbes Asia

Ramon Ang Credit: Jay Directo / afp / getty images

As a young man Ramon Ang enjoyed fixing cars. Today he’s in the throes of a bigger repair job: restoring Philippine Airlines, the country’s legacy carrier, to its former glory. 

Ang, who’s been piloting it since Lucio Tan (No. 2) sold a 49% stake last year to San Miguel (which Ang also runs), is banking on an ambitious international expansion to eventually steer the airline back onto a profitable flight path.

After ordering 65 new airplanes to modernize the fleet and launching services to Toronto, Ang got a lucky break in July when the EU lifted a ban on the airline from flying to Europe. (Other airlines, such as John Gokongwei’s Cebu Pacific Air, remain on the blacklist.)

The much awaited green light came after the International Civil Aviation Organization approved the country’s aviation safety standards in March. The country is also awaiting an upgrade from the Federal Aviation Administration that will open up more of the U.S. market. More open skies could boost tourist traffic; with 4.2 million tourists last year the Philippines lags way behind tourist hot spots such as Thailand, which attracts more than five times that number.

For now Ang is busy preparing for a European liftoff after a 15-year gap with initial flights to Paris, London, Rome, Frankfurt and Amsterdam planned for as early as this fall. But experts say it’s a risky move that will further strain the resources of the moneylosing carrier, which reported losses of $95 million last year. “It’s a high-risk venture. Reestablishing an airline on long-haul routes that are intensely competitive is an expensive proposition with huge, upfront costs,” says Brendan Sobie, chief analyst for Southeast Asia at aviation consultancy CAPA.

Ang has taken a contrarian approach since assuming charge, such as withdrawing budget carrier Airphil Express EXPR -0.97% despite the low-cost segment being the fastest growing. As a result, Philippine Airline’s market share in the domestic market, where Cebu Pacific rules, fell from 43% to about one-third in 2012 even as revenues stagnated. A focus on higher-yielding international routes could more than offset domestic declines, says CAPA’s Sobie, “But it will be a long haul.”

Too long for Tan to wait it out. He’s announced plans to sell his remaining stake, and it seems Ang is willing to welcome another strategic investor on board.

 This story appears in the August 12, 2013 issue of Forbes Asia.