Decoding United Woes In MNL

9 January 2022

Flag carrier Philippine Airlines (PAL) and US-based carrier American Airlines (AAL) has filed regulatory approval for Statements of Authorization, Exemptions, and an Amended Exemption to allow them to provide reciprocal code-share services between the U.S. and the Philippines. 

PAL has filed For statements of authorization under 14 C.F.R. Part 212 (reciprocal codesharing) and exemptions pursuant to 49 U.S.C. § 40109, while AAL filed for an amended exemption under 49 U.S.C. § 40109 (third-country codesharing authority).

The case is docketed with the US Department of Transport (DOT-OST-2020-0033) and filed on March 17, 2020.

Listed points are between the Philippines, Japan as intermediate, to the US mainland and vice versa, Manila to Guam and Honolulu to Mainland and vice versa,  Manila to Los Angeles to other points of the US mainland.

The Woes

Immediately after its filing, United Airlines (UAL) contested said application on March 27, 2020, praying for deferral of DOT action, citing unresolved access issue at Ninoy Aquino International airport.

UAL reiterated its earlier opposition filed in November 6, 2019 on the application of Air Philippines Corporation (GAP), also known as PAL Express for codesharing flights with PAL from Manila to Guam, after Cebu Pacific manifest intent to cease its operations in Guam. 

United stated that 'it made multiple attempts to obtain slots and aircraft parking space at Manila but has been continually denied.'

Same argument was echoed by the airline on its application to fly Seattle.

UAL did not disclosed who denied the slot application in Manila, until PAL retorted to DOT why its application was denied. 

PAL and AAL said that 'United ignores the fact that Manila slots are awarded pursuant to industry consensus standards, not favoritism. The Manila airport is classified under IATA Worldwide Slot Guidelines as a Level 3 Airport (i.e., an airport where it is necessary for all airlines and aircraft operators to have a slot allocated for each arrival and departure during specific periods). Slot allocation at the airport is performed by a private entity, Airport Coordination Australia (ACA). ACA follows the slot-allocation process specified in the Guidelines, which were created by the aviation industry. Access to terminal facilities at Manila is controlled by the Manila International Airport Authority (“MIAA”). 

Applicants PAL and American said they have 'no control or influence over the slot or terminal access and PAL has been denied requested slots and terminal access on multiple occasions. Moreover, this structure provides U.S. and Philippine airlines a fair and equal opportunity to obtain Manila slots and airport infrastructure, consistent with Article 11 of the U.S.-Philippines Air Transport Services Agreement.

United replied that it 'recognizes that Manila is an IATA Level 3 coordinated airport. However, despite the IATA Level 3 designation, the fact remains that PAL continues to grow and further deepen the disparity in the competitive landscape at Manila. United’s position is that regardless of the airport slot situation, the U.S. and Philippines governments must address the growing competitive disparity at Manila.'

US DOT has since deferred approval of the application until UA secures the landing slots the airline contends it was deprived in Manila.

Meanwhile, flights to Manila was suspended from March 19, 2020 due to covid19 pandemic, and was just reinstated on the latter part of last year, with flight restrictions imposed by the Philippine government to curve rise on covid infections brought into the country.

It now appears from the foregoing arguments that their main beef against PAL is their inability to grow Manila while PAL takes on the vacant slots available for growth to the US.

 

So is slot allocation really their bone of contention?

Apparently not. Dispute goes deeper than that. 

Based on the information available at the Philippine Civil Aeronautics Board (CAB), UAL wanted to take slots awarded to other airlines, ostensibly to connect its Honolulu and Saipan flight to Manila.

A quick check from A.B. Won Pat International Airport Authority disclosed that UA201 flight from HNL usually arrives between 6:45-7:00pm, while UA183 departs to MNL at 8:00pm. It seems to suggest that most of MNL departure depends upon the arrival of HNL flight, likely waiting for connecting passengers and vice versa.

While there was no problem with their seven evening flight, it can't have the slots it wanted in the morning to its consternation as this was already awarded to other airlines also operating at Terminal 3. In its filing, it wanted to replace an airline it said was 'not a full service carrier'.

Historically, UAL predecessor Continental Micronesia (CMI) enjoyed multiple slots in the morning until they stopped flying as late as 2019. The airline flew UA191/190 GUM-MNL GUM in November 12, 2013 leaving Manila at 9:50am.   

The last time they have 14 slots allocated to them by ACA which became the airport coordinator of Manila in 2012 (see story here), UAL flew 11 flights to Guam and 2 flights to Palau.

After the merger with Continental in 2010, United flew 18 destinations out of its Guam hub operating B737 aircraft in 2014. 

Bad Blood

One of the highlights of United's assumed network in Micronesia was the "Island Hopper", where UAL operates a widebody (B77W) flight between Guam and Honolulu, flying three (3) times a week. 

This is where the controversy between PAL and UAL started. With the triple seven as the Raison d'être .

Continental Micronesia (CMI) previously flew to the Philippines with one condition. It will only transport passengers bound to Micronesia, and by exemption, Honolulu, and not those bound to mainland US and vice versa. The aircraft allowed is also limited to the narrow body.

This limitation is not arbitrary, unfair, or whimsical as it was agreed by both the United States and the Philippines in its Air Services bilateral agreements (ASA). The provision was incorporated in 1982 and reiterated in 1995.

In 2014, UAL started violating this provision for route 1 by accepting passengers from the mainland United States to the Philippines and vice versa. PAL discovered that UAL issued tickets beyond HNL. PAL protested this practice and CAB told UAL to stop transporting passengers to the mainland via Micronesia. 

United was forced to cut back frequency driven by mainland traffic in 2019 that if flew only six flights out of the fourteen while PAL operated five to Guam. This was the real traffic to Micronesia. The CAB order unfortunately also affected UAL deals with local airlines in Guam prompting it to terminate their respective agreements.

CAB did not however prohibit UAL to mount direct flights to the mainland should it desired to do so.  While it proposed to serve Manila to San Francisco route directly, It never did apply US DOT authorization to fly Manila direct up to this date. 

It used to fly via intermediate points in Osaka, Taipei and Seoul to the mainland until its eventful termination in 1998 brought about by the 1997 Asian Financial Crisis. It came back to Manila in 2012 after the Continental merger. It however claims to be in the Philippines for 40 years, a claim attributed to its predecessor Continental Micronesia which first flew into the country in 1981.

 

Enter Cebu Pacific

Meanwhile, Cebu Pacific (CEB) finally entered Guam market on March 2016 after four years of waiting for their application for exemption to be approve by DOT to fly US territory. (See application here). 

CEB was allocated seven flights to Guam by CAB. The other seven was earlier granted to PAL It managed to secure however only three slots from ACA. CEB failed to secure additional slots from ACA for 3 years prompting it to leave Guam on December 17, 2019, due to inability to grow its slots at Terminal 3.

CEB stated that "With limited slots in Manila, Cebu Pacific will reallocate these slots and re-deploy the aircraft to routes where these can serve higher passenger demand."

United Airlines complaint about Terminal 3 and its slot allocations is not exclusive to them alone but equally affected Cebu Pacific, as well as other airlines operating in Manila.

A costly mistake

What changed everything for United was made in October 28, 2018 when UAL decided to move to Terminal 3 from terminal 1, which also was experiencing congestion problems.

To the management mind of UAL, Terminal 3 appears to be better as it was newer and bigger. The airline never thought that this decision to relocate could ultimately cause them to lose the morning slots, as they squabble with Cebu Pacific and Air Asia for slots, which at the time of transfer for winter 2018 schedule was already taken by both low cost carriers. UAL had the morning slots available at terminal 1 had it not relocated.

Meanwhile, United slots at Terminal 1 was quickly taken by Chinese carriers, which prevented it from relocating back when UAL realized what they just lost. The person responsible for that debacle has since been fired.

 

The dilemma

UA filed landing slots application in August with Airport Coordination Australia (ACA), the independent air traffic coordinator for Manila International Airport and was granted by ACA 16 slots for summer 2022 schedule, seven of which  were allocated between 2100 to 2200 hours, local time. It was not awarded the morning slot it desired. It got the same reason conveyed to them a year before that. No slots available.

In its regulatory filing in the Philippines, UA again hopes to fly double daily flight to Guam and two flights to Saipan, which is a US territory.

After UA secured landing slots with ACA, both UA and  PR moved to have its authorization for reciprocal code-sharing approved on December 21, 2021, arguing that UA 'has now received the number of slots at Manila Ninoy Aquino International Airport (MNL) that it had requested for Summer 2022 from the independent slot coordinator. Therefore, there is no longer any reasonable basis to continue deferring action on the Joint Application.'

On December 26, 2021, UA answered that it has not been able to obtain slots at the times needed to facilitate new, customer friendly, and competitive service between the U.S. and Manila. 

United added that it 'has not been given any confirmation of infrastructure support, such as the availability of aircraft parking, even if the requested slots were awarded.'

UAL also said that 'its requests for incremental slots during this same period (Jan-Dec 2020) were continuously denied.'

From the foregoing claims, it is very apparent that UAL problems is not cause by PAL but by MIAA, its airport operator, and ACA its traffic coordinator, and the Philippine government, for not building a terminal it wants and time it desired. And from all indications, UAL has not been honest about its claims with DOT.

First it complained about slots from ACA which it says it never got, but belied by ACA which awarded all 16 of them. Two more from the previous years. 

Second, It insisted on taking desired slots in the morning which it 'needed to facilitate new, customer friendly, and competitive service' but are already operated by other airline, knowing fully well that they are no longer available. UAL advocated to be a full service airline which should have priority in gate assignments than the lesser class carriers. 

Third, it insists on parking availability when none is available. UAL was notified and made aware by the airport coordinator ACA when it applied for summer 2022 slots that there would be no aircraft parking at NAIA.  (See ACA 2022 summer restrictions here) Still they complained about it.

 

Why can't United Airlines secure aircraft parking at NAIA?

Manila International Airport operates 24 hours a day. Which means that all international gate assignments at Terminal 3 are being used. UAL could also not used existing temporary apron parking areas  because all were already taken and filled.

What UAL really wanted to have is a parking area at Terminal 3 reserved for them. Which demand is so ludicrous that you cannot help but wonder why exactly at an already congested airport.

UAL further argued that 'OAG data seems to suggest that PAL held slots in the time ranges requested by United for a new arrival and departure that are not currently being used by PAL, yet United continues to be confounded in its attempts to grow competition at Manila.'

It said further that 'In the arrival time range requested by United, PAL has reduced operations from six flights to one, but United was not granted any of the five other slots. And in the departure time range requested by United, PAL has reduced available seat capacity, implying PAL is potentially using smaller aircraft to operate slots at coveted times and which could be allocated to United but have not been. (6)'

NAIA Terminal 2 

If we follow UAL argument, it seems they also like to operate at Terminal 2 or Terminal 1, which terminal assignment they forfeited earlier. Are they saying now that they should be operating at Terminal 2 too? 

If we follow that line of argument, then clearly they should be allowed to use Terminal 2 in addition to Terminal 3 as well because it has plenty of slots available at the moment. As if that is possible at all under normal set of things. 

Truth is, Manila is not UAL home airport, and they have chosen their terminal of choice at Terminal 3. They cannot now jump from one terminal to another to suit their needs because that is counter productive and logistical nightmare. They also did not ask for it, implying MIAA to just relocate the obstructing airline to another terminal so they can take over its place. Sound unfair and unreasonable isn't it?

Truly, United's argument is untenable since it cannot use Terminal 2 which is contracted exclusively to PAL. Even if PAL doesn't fly Guam, they cannot used Terminal 2, nor its assigned ramps. 

In a similar fashion that PAL cannot use Terminal 7 or Terminal 8 in Los Angeles International Airport because that was contracted to be occupied by United.  It is that simple.

And perhaps UAL is oblivious of the fact that Manila was and still is a restricted airport since March 2020, preventing all other airlines not just United operating at NAIA from mounting flights. It is simply no brainer that PAL has reduced operations from six flights to one to Guam. 

In fact, entry into the country is severely restricted just like anywhere else in this world at this time of pandemic. It still is to this day.

'United acknowledges the situation is clouded by the slot waiver granted by the Manila coordinator for the current winter 2021-2022. United does not doubt the importance of the waiver in order for airlines to review future network plans amidst an unclear future booking environment. But the lack of clarity and transparency about what is going on with current and future slots at Manila is reason enough for the Department to continue to hold actioning the American/PAL application until United’s access issues are resolved', it said.

Indeed, it accepted the slots and acknowledges the waiver it signed with ACA but doubts the clarity and transparency  of its independent judgement. Clever, but not clever enough. By accepting the slots, it already bound itself to its restrictions, in a similar fashion provided in the exceptions by the US DOT. Manila is very congested airport. There can be no doubt about that.

United alleged that it 'is ready to continue discussions with ... relevant Philippines Government authorities to find a resolution to its access challenges '(7)

It seems UAL is not really listening what the airline operators, traffic coordinators, airport operator, and the Philippine government is saying about Manila airport. Perhaps it should start listening now.  It may just find its way through.

 

P.S.

Here is the joint AA and PAL reply to United, published a month later, just like the way we described it .