September 29, 2012
Philippine Airlines (PAL) has announced yesterday at the sidelines of PAL Holdings Annual Stockholders Meeting that it exercised options to buy 10 Airbus A330-300 aircraft for $2.5 billion, with deliveries planned in 2013-2014.
The listed Price of A330-300 as of August 2012 is US$ 231 Million according to
Airbus. Airlines usually settle around US$200-230 million for the aircraft orders.
Garuda recently ordered 11 A330's with a price tag of US$ 2.54 billion, making each unit cost US$ 227 million. The eleven A330-300 airplanes will also join the Garuda Indonesia fleet
starting 2013 until 2017. Malaysia Airlines (MAS) ordered 25 aircraft in 2009 with delivery schedule from 2011 to 2016 valued at US$ 5 billion, or US$ 200 million each.
So why the huge discrepancy in the price tag?
Reports has it that PAL orders for A330 was for the HGW variant. The upcoming variant to be introduce by Airbus is 240T. And this variant is only available in the summer of 2015. Malaysia Airlines (MAS) is the launch customer for the 240-tonne A330 aircraft variant.
The current HGW variant is the 235T coming off Toulouse plant since 2010. This is the same variant ordered by Hawaiian, Garuda, Malaysia and Singapore Airlines, as well as that of Cebu Pacific. Other users are Iberia, Swiss International Air Lines, China Southern, Air China and General Electric Capital Aviation Services (GECAS).
PAL A330 is the original variant ordered in 1992 with 212T weight. As compared to the latest iteration, that is a whooping 23 ton increase as compared to the 2010 model. More weight, more range, more capacity. Its the reason why Hawaiian A330 can fly Manila without penalty and why PAL A330 can't.
With the price tag above, PAL A330 orders could not be associated with the 235T plane. So it must be the 240T variant.
The 240T A330-300 has 400nm extra range, that is 5,950nm (11,020km) – with 300 passengers and carry nearly five tonnes more payload than today’s 235 tonne aircraft according to Airbus. Compared with the original 212T A330-300 in 1992, the 240T A330-300 can fly 2,000nm (3,700km) further. This plane can reach Manila-Amsterdam or Manila-Vancouver without need to stop going back home.
PAL said they will receive eight A330 next year. But the A330 variant available next year is only the 235T.
What gives?
Here is the likely explanation. When PAL ordered the A330 and A340 in 1992, they all received the leased version from Airbus in 1996 until actual delivery was made in 1997. There was an A330-200 and A340-200 variant in the PAL fleet in 1996 but the airline never ordered those. When the orders arrived later, one by one those planes went to other operators. Such arrangement was discussed in the book "Airbus: The Complete Story" by Bill Gunston.
From that business arrangements, it can be safely presumed that PAL entered soft lease arrangement with the aircraft manufacturer, leasing the earlier 235T version while waiting the line for the newer variant available in 2015. With that scenario it makes perfect sense. Coincidentally, the 240T variant hovers around US$250 million tag.
The PAL lease arrangements has precedence.
Singapore Airlines (SIA) leased 19 Airbus A330-300s from Airbus to replace its Boeing 777-200 and -200ER aircraft. It has 15 additional examples to be delivered between 2013 and 2015, all 235T variant. All
orders has a lease period of five to six years with options for extension.
SIA, Garuda and MAS engineers must not be wrong about the planes merit on medium haul. Airbus 235T plane seating 300 pax burns 16% less fuel per seat than a 302-seat 777-200ER on a 1,800nm mission. Good enough for services to South Asia, China, North Asia, Australia and Middle East markets.
Engine Choice, Trent?
Another offered explanation is the incorporation of engines cost to the purchase price. Philippine Airlines did not announced choice of engines to power the new A330-300 but an insider from their engineering division told of a shift from engine supplier.
The old A330 were all powered by General Electric CF6-80E1 engines, a derivative from successful CF6 engine programme of GE Aviation intended for the Airbus A330. Thus, the extension
301 (0-GE, 1-CFM, 2-PW, 3-IAE, 4-RR, 6-EA)
But taking cue on the success of competing engine maker, PAL is prepared to jump ship to an engine supplier taking hold of the A330 Market.
Rolls-Royce's Trent 700 has established itself as the engine of choice of major Asia Pacific airlines operating the A330 with over 57
per cent market share since it entered service in 1995. It is also the market leader on future engine orders on the aircraft accounting close to three quarters of the total A330 sales. It powers the A330 of
Cathay Pacific,
Singapore Airlines, and
Garuda Indonesia Airlines.
Recently, Garuda awarded Rolls-Royce US$ 200 million for Trent 700
engines to power 11 Airbus A330 aircraft in April. The contract includes
long-term TotalCare® service support, making the price of the two engines at US$ 25 million for each plane. Garuda airline will have 24 A330 aircraft powered by Trent 700 engines by 2015. Similarly, PAL will have 20 A330-300 by 2017. It is possible that the remaining cost covers the engines that powers the aircraft.
Cebu Pacific awarded US$280 million to Rolls-Royce for Trent 700
engines to power eight Airbus A330 aircraft together with long-term TotalCare® service support.
"The Trent 700 has become the engine of choice for A330
operators, selected for around 75% of future engine orders on the A330." says Peter Turner, Rolls-Royce's vice-president of civil aerospace. Rolls-Royce did not confirm nor deny the engine of choice of PAL's new A330. Perhaps waiting for Ramon Ang's announcement.
Cathay Pacific Engineering Director Christopher Gibbs has been very impressed with the performance of Trent 700. Cathay Pacific is the largest operator of A330 aircraft with 48 frames flying for the group and 14 on firm orders.
Emirsyah
Satar, Chief Executive Officer of Garuda Indonesia Airlines is also impressed with the Trent 700’s performance in
technical and economic terms.
Nick Devall,
Rolls-Royce,
Chief Commercial Officer – Civil Aerospace, said: "We are delighted
that Garuda Indonesia Airlines, a valued customer, has again put its
trust in our industry-leading technology and support services as part of
its plans for continued growth. This order underscores the
market-leading position of the Trent 700."
The Trent 700 improvement programme will be finalised this year, with enhanced engines expected to enter service in 2015. Improvements will also be made available for retrofit to the current engine
fleet. The enhanced Trent 700 will complement the improvements to the
A330 aircraft that Airbus has announced for delivery in 2015.
As it now stands, The Airbus A330-300 is the most fuel efficient aircraft on medium-haul. It is the best plane for PAL to Japan, Korea, China, Australia, New Zealand, Hawaii, India and the Middle East.
PAL Express A330
Ramon Ang rebranded Airphil Express to become once again PAL Express. Both units were the budget arm of local carrier Philippine
Airlines (PAL), with the former being brand name of Air Philippines Corp., used to be 99% owned by the Lucio Tan group before SMC investments, while the latter is owned by the company 92% of which is owned by LT group.
Diversified
conglomerate San Miguel Corporation acquired management stake in both PAL and Air
Philippines in April.
The PAL President said there won’t be Airphil Express
anymore as PAL Board approves change of name of the low cost airline. PAL Express flew intra-regional routes in Visayas and Mindanao, flying secondary routes to smaller airports like Caticlan to bigger airport like Surigao
which cannot accommodate mainline PAL jet aircraft. The airline previously ceased operations in March of 2010 and transferred all service to Airphil Express.
Ang said the revived PAL Express will focus on regional and domestic flights while PAL would be aggressively pursuing long-haul flights.
In recent development, PAL surrendered most of its domestic destinations in favor of its low cost subsidiary PAL Express which is planning to go medium haul for Australia, the Middle East, North Asia and South Asia market.
The PAL unit will compete head on with industry leader Air Asia, Scoot of Singapore Airlines and Cebu Pacific. While Scoot may have some of the triple seven units of Singapore Airlines, PAL Express will be powered initially by the old A330 of PAL which is best for major domestic and intra-asia sectors, while the newer models are intended for service to the Middle East Market.
PAL Express is seen to have a lower operating cost than Cebu Pacific despite maintaining a 15 year old aircraft considering ownership issues in the former while the latter maintains operating leases.
According to
Aircraft Value Reference, a UK-based aircraft appraisers, PAL Express will be using LGW A330-300 hovering close to US$25 million minimum to $90 million maximum as to market value as compared to its current model. Operating the same on
lease would cost PAL Express between $280,000 to $900,000 for Cebu Pacific per month, negating operational efficiency of the new aircraft on intra-asian routes.
If the government is not building it for them, they will need to build a new massive airport next year to support its growth, and that new airport is gaining favorable grounds from International Air Transport Association (IATA), presently headed by Cathay Pacific Airways CEO Tony Tyler who went and meet the President of the Philippines Benigno Aquino III last week in support of new airport in Manila.
If the government is not building it for them, they will need to build a new massive airport next year to support its growth, and that new airport is gaining favorable grounds from International Air Transport Association (IATA), presently headed by Cathay Pacific Airways CEO Tony Tyler who went and meet the President of the Philippines Benigno Aquino III last week in support of new airport in Manila.
