How Deep is PAL's relationship with Airbus

PHILIPPINE AIRLINES - A CASE FOR AIRBUS
January 22, 2009

As a Consortium, Airbus S.A.S begun its official relationship with Philippine Airlines with the delivery of A300B4 planes. PAL bought 5 pieces of those great aircraft.

Its relationship with Europe however dates way back starting with Vickers of United Kingdom.

The Airbus connection started with the one eleven.

The BAC 1-11 story began in the 1950s as Vickers Armstrong and Hunting Aircraft. In May 1961, British United Airways, now British Airways, ordered the first 10 aircraft. First delivery was made in July 28, 1963.

By November 2,  1964  Philippine Airlines Ordered two aircraft with one option exercised on December 28, 1965 to replace its Vickers Viscount 784 fleet laid out in a 74 seat single class configuration. Delivery was made in 1966 of the two orders but the option was deferred delivery until. PAL's first 1-11 was a 402AP series (SN 91) delivered on April 19, 1966 registered PI-C1121/RP-C1121. It flew major domestic points starting from Cebu then Bacolod before it went to Davao. The next BAC 1-11 flew on September 16, 1966 (SN 92, PI-C1131).

Vickers Armstrong and Hunting Aircraft Company becomes British Aircraft Company(BAC) so the name BAC-111. By 1965, the Vickers plane officially became BAC. In 1977, it morphed again to become British Aerospace then morphed again to become part of Aérospatiale-BAC which produced the Concorde, the precursor of the Airbus consortium.

Concorde was offered to Philippine Airlines in 1971. It first appeared on Philippine Skies for sale and demonstration tour. It went to 14 airports in 12 countries. The Concorde plane was in Manila 10 June of 1972. It arrived in the afternoon from Singapore and stayed in Manila over night. It flew the next day before 9am to Tokyo. PAL evaluated its potential for US flights and Europe flights. The Oil crisis of 1973 took a toll from 4 possible PAL orders. PAL instead ordered the economically feasible DC-10.

Philippine President Ferdinand Marcos revived interest on the Concorde in 1976 after the airline was brought to back to government control. He suggested operating lease in favor of re-nationalized Philippine airlines. BAC wanted a sale for two. Marcos agreed if the British government would allow PAL to have landing rights at Heathrow. But its feud with Malaysia, its former colony, hampered the deal. The deal was eventually abandoned. Marcos made massive orders to Boeing in the face of the British refusal to let him enter Heathrow. Learning the Concorde lessons, UK finally agreed upon France prodding to let PAL in when Airbus 300B4 was offered.

Philippine Airlines first European made plane is the Vickers Viscount 784 replacing the Douglas built DC-4.

The Philippines first official passenger jet is the BAC1-11 which it owned followed by DC-8 Douglas Corporation now Boeing. It operated the latter on operating lease while the former is operated through finance lease.

Its first Boeing connection was the lone wet lease Boeing 707 before it was replaced by DC-8. DC-8 was replaced by DC-10 and subsequently the B747.

PAL officially owned a Boeing plane when it ordered the 727 and the 747-200 which was delivered to them in 1979.

BAC1-11 at Manila Domestic Airport. Philippine Airlines operated 8 frames of the prototype in 1985.

BAC1-11 served the Philippines for more than 25 years before it was replaced by Boeing 737's in 1992. However, only 3 planes were bought as the rest were operating leases from a Dublin Based Aircraft lessor. You must have noticed the EI-CVO, EI-CVN etc.. registries. Because in 1992 Airbus started courting PAL to get the first generation 320 instead. It succeeded ordering 12 with first delivery starting 1996 (RP-C2021) but managed to get hold only of 4 frames because of the 1997 financial crisis leading to its knees in 1999.

Boeing, at the same time lobbied for its 737, 767, and 777 as PAL ordered already 8 new 744 and 4 leases. Airbus managed to show more tricks on its sleeves by giving more value for money other than the cost of its planes. 

PAL ended up ordering 8 330 with 4 leases and 4 340 with 4 more leases. In 2000, it managed to get 4 320, 8 330, and 4 340. All wide-body orders were completely delivered. PAL on the other hand took only 4 744s. 

For Airbus leniency during its trying times when it deferred the 8 320 orders, it pulled 6 more 320 orders totaling 15, excluding operating leases. Boeing on the other hand pushed them to the wall.

Although on its own, the Airbus economics proved to be better off for PAL's operation than its Boeing counterpart as shown 10 years later, starting with the 767 and the 777. 

It was not after Boeing introduced the 777-300ER series that its fortune started to reverse in 2000. World Orders were later converted to the next gen 777 series. It took PAL six years to order the the Boeing 777-300ER plane because of its rehabilitation and settlement with Boeing, although it manifested to acquire it as early as 2004 converting the remaining order for four B747-400 to the B777-300ERs. 

Beneath John Leahy's smile is a future deal worth more than a billion dollars
and Jaime Bautista is not talking.The next big thing could come with the XWB.

At that time, Airbus marketing crews managed to bring its magic trick to convince PAL to buy the Airbus 346-300. Had it not for the remaining 4 undelivered 747 deposit which would be forfeited in Boeing's favor if its not taken, PAL would have 5 346 and 3 leases. That would proved a blessing in disguise for PAL.

After intense negotiation, Boeing agreed to convert PAL's remaining 744 orders to the 777-300ERs. But Airbus did not stopped there despite the 346 setback. Its starting again a conscious courtship ritual to enable the Tan led airline to consider the Queen of the skies and Mr. Tan is very pleased with the offer.

In sum, all can be told that Airbus is one step always ahead of Boeing.