Like the now famous quote of the President of the Philippines in his State of the Nation Address in 2011 "Ang sa Pilipinas ay sa Pilipinas", literally translated to mean that flying in the Philippines remains to be largely a Filipino business. And so it was for Tiger airways and its five year struggle to gain a foothold in the country.
Tiger Airways, (established 2005) a low cost subsidiary of Singapore Airlines, recently announced sometime in February 2011 plans to acquire 32.5% stake in the Philippines only leisure airline, Southeast Asia Airlines (SEAir), the smallest operating airline in the country with regular scheduled trips.
But that was not the first time Tiger's intent to set up a local subsidiary was announced. The Philippine affiliate plan was laid on the table as early as late 2005 after its organization but was made public only September 26, 2006, for a flight commencing February 2007.
The venture involves initially the dry subletting of two Tiger planes in the colors of SEAIR, but desires to implement the agreement was put to the test after Philippine registered carriers objected to the agreement as a clear circumvention of "cabotage rules", thus, the objections.
The airline's international flight plans was approved by CAB, so the long delayed official launching on December 16, 2011 to three international points.
Tiger began international flights from Clark by proxy, to Singapore, Hong Kong, and Macau. It has pending application to fly Kuala Lumpur and Kota Kinabalu in Malaysia. It also applied Kutching, Penang and Langkawi flights from Clark under the Asean open skies initiative.
SEAIR was planning to add two Tiger A320s in Jul-2011 and launch domestic services. It already operated two Airbus 319's out of Manila-Clark. But the CAB forced SEAir to suspend the launch of Tiger-branded domestic flights due to "cabotage claim" by local airlines. Air Asia's local subsidiary cautiously took notice and decided to fly overseas.
Cabotage RightsCabotage rights has its origin in Maritime law, first applied in France, literally meaning to navigate along the coast. The French translation refer to it as coastal Navigation while the English refer to it as Coastal trade.
Navigation refer to nautical operations while Coastal trade refer to sales of services, like freightage and carriage of persons and goods for profit. Aerial cabotage, applying the English rule to maritime, follows the latter.
The English objective for Cabotage was for the protection of national shipping activities within its territory from foreign competition, which as a matter of national policy should be protected from competition by a foreign owned vessels.
From the 1900's maritime cabotage referred to economic protection. It was later adopted to mean the same thing upon the introduction of aerial cabotage. It is fondly associated with the principle of Sovereignty in international civil aviation, as the right of the State to exclude foreign owned airlines from operating within its territory.
The Freedom of aerial navigation (aerial cabotage) was actually introduce by the French in 1910 during its first aerial convention held at Paris. The Germans introduce the reciprocity rule, allowing foreign aircraft operator to operate domestic as long as the other State opens its borders to the latter State's aircraft operators.
The German proposal was not however admitted. Instead, what was adopted was that the right to aerial trade would be subject to limits within the other States territory and further security restrictions, thus formed the basis of the State's Air Services Agreement (ASA) with other countries where they have diplomatic relation.
A Philippine Tiger?
There is no doubt that SEAIR is a local airline entitled to cabotage rights within the Philippine shore. Its partner however isn't, and by carrying the name tag of the latter to its marketing strategy puts its domestic plans in limbo.
For a start, Singapore has no domestic territory to fly. The Philippines has vast area of airspace with 90 million people as market.
The airline's plan to fly domestic via SEAIR to Cebu and Davao ran a snag as it intend to make international connections to Hong Kong and Singapore.
But former Silk Air CEO and now Tiger Airways newly-installed group chief executive Chin Yau Seng said on the joint venture agreement that without a domestic operation in the Philippines, the Tiger Group investment wouldn’t make sense for Tiger and the deal will not be completed until approval is secured for domestic services.
Chin expects the issue to be resolved with SEAIR officially becoming a Philippine tiger following the footprints of LCC heavyweight Air Asia which intends to launch flight out of the country by October.
Legal complications goes back to cabotage rights and patrimonial issues, which the local carriers are very sensitive.
Second, Airlines are grantees of Legislative franchises from the government. Which means that their operation should be subject to control and regulation by the Philippine Government and not that of Singapore to which the airline is based.
“We are engaged in discussions with the relevant people over there” says Chin.
“Were hoping on getting the issue resolved” adds Chin.
Tigers plan in the Philippine is to grow the Philippine fleet to five at the end of the year. It currently operates 28 Airbus A320's with 9 more orders coming by 2012.
Chin said that 6 of the additional 9 aircraft have been allocated to Tiger Singapore, giving it a modest fleet of 20 A320s by the end of the fiscal year, while embattled Tiger Australia kept its current fleet of 10 A320s. The remaining 3 aircraft has been allocated to its Philippine affiliate.
Tiger Singapore already took aircraft deliveries intended to the Philippine affiliate and should start flying Davao and Cebu segments out of Singapore by November.
"Tiger Singapore cans still take another aircraft or two beyond current plans, but the Singapore market would not be able to support the group’s entire fleet" said Chin.
The Tiger group intends to grow its fleet to 68 aircraft by December 2015. Where these aircraft end up depend on Tiger’s progress in setting up its three planned joint ventures and potentially other new affiliates in Asia.
Tiger also has in place a contingency plan to sublease to other carriers some of its newly delivered aircraft, as well as potentially some of the 10 A320s in Australia should that operation be reduced in size, if all three of its three planned joint ventures are unable to launch this fiscal year.
Tiger Airways is the 8th largest low cost carrier in Asia Pacific Region behind Air Asia and Cebu Pacific at number one and fourth place respectively.
