Cusi Quits CAAP

Good Luck to Category One!

By Recto L. Mercene

December 22, 2010

FRUSTRATED by the constant pressure to evict him from his office despite a fixed four-year term, Alfonso G. Cusi tendered his irrevocable resignation as the director general of the Civil Aviation Authority of the Philippines (Caap) effective end of December to President Aquino.

“In spite of my four-year legal term, I submit my resignation for the sake of the Caap organization, the aviation industry and, ultimately, the country,” said Cusi in his letter. “This will give Your Excellency a free hand to choose a new director general who will continue to carry out the needed reforms in the Philippine civil-aviation industry and to whom the administration can give its full trust and confidence.”

“It has been an honor to work in government, and I will always be thankful for having been given a chance to serve the country,” said Cusi.

In Malacañang, Spokesman Edwin Lacierda issued a statement, naming Cusi’s replacement as acting OIC Ramon Gutierrez. “We welcome the resignation of Al Cusi. Now we can move faster in getting our country out of Category 2.” Gutierrez is a retired Air Force colonel and a former commercial pilot.

Cusi, since assuming the post on March 8, 2010, is leaving behind substantial progress in the government’s effort for the aviation industry to regain Category 1 status from the United States’ Federal Aviation Authority (FAA).

In 2007 the FAA downgraded the country to Category 2 status after the discovery of 89 “significant safety concerns” (SSC). Cusi had complied with the 87 SSC since taking over the post.

The last two items—organization and computerization—were within reach when the International Civil Aviation Organization (Icao) postponed its validation visit last month upon learning the Transportation and Communications department had appointed seven key officials, three of whom are outsiders, without Cusi’s knowledge.

Of the three outsiders, one voluntarily resigned, saying he is not fit for the office, while one of the remaining two had reportedly been booted out from an airline company where he used to be an executive.

President Aquino told reporters at Sofitel Hotel, where he attended the Christmas party of the Bulong Pulungan, that his choice for the next Caap director general “is qualified. He’s part of the Air Force; he’s part of the industry also. He is in private capacity already. I think he is very capable to advance the agenda as far as the air travel in the country is concerned.”

He added he wants to fast-track the resolution of the Caap problems.

But spooked by these developments, the Icao said it was postponing the visit, which would have removed Philippine Airlines and Cebu Pacific from the blacklist by the European Union, worried they would be dealing with a new set of officials.

This setback was also noted in the Icao Audit advice on their findings on the SSC and the EU blacklisting of all carriers registered in the Philippines.

Cusi has steered the Caap toward the right direction to regain Category 1 rating with no less than the president of Icao and the recent EU visit declaring that with Cusi’s leadership, the country is on the “right direction” and “it is only a matter of time” before we regain Category 1.

As director general, Cusi dedicated his efforts in transforming the Caap from a government line agency to a government-owned corporation as mandated by Republic Act 9497, otherwise known as the Civil Aviation Act of the Philippines.

A management expert, he was top honcho of the Philippine Ports Authority (PPA) for three years before he was appointed general manager of the Manila International Airport Authority (Miaa). During his six years stint at the Naia, he steered the premier airport to a point where the three passenger terminals were awarded ISO 9000, a world ranking that testifies to their conforming to international standards.

Cusi said he is keen in professionalizing the Caap, which, up to his resignation, was already training scores of people in aviation high technology, pilots, cabin crew and other highly sensitive positions. Most of the trainees were former Philippine Airlines pilots, cabin crew and experts in several fields.

Under the guidance of foreign experts from the Icao, the pilots and crew members are scheduled to undergo training at the Civil Aviation Training Center in Bicutan near Merville Subdivision.

Cebu Pacific and Online Security

Passengers Beware!

By Kevin Anthony Stoda

December 21, 2010

Am I the only one having issues and losing a lot of money trying to book tickets online--an not finding major airlines and regional airlines helpful these day?-- I look at one regional airport in Southeast.

Am I the only one having issues and losing a lot of money trying to book tickets online--an not finding major airlines and regional airlines helpful these day?

SECURITY ISSUES, DOUBLE BOOKINGS AND CEBU PACIFIC AIRLINES

Cebu Pacific's online booking system is often operating internationally illegally and unsafe--as well as passenger-unfriendly.

"MOST OBVIOUSLY by ALLOWING DOUBLE BOOKING OF PASSENGERS WITH SAME NAME AND AGES--WITHOUT ANY initial online SECURITY CHECK is only one KEY EXAMPLE of INCOMPETENT SECURITY IN SOUTHEAST ASIA. Any disguised individual could occupy the second sets of seats."--KAS

For example, this past Friday, I was "permitted" on-line with CEBU PACIFIC in a crisis this past Friday to "accidentally book myself and [pay for] two family members" 2 times on the same flight--using all the same names and credit card address.

NOTE: This occurred because the local airline I was in (in Taiwan), UNI Air, is also incompetent and failed to tell me that 3 planes were canceled on December 10--due to weather issues--from tiny Beigan Island to Taipei. This thus made it impossible at the last minute to make my December 11 (1:20am) flight to Taiwan.

Next, when a few minutes later, I understood my error with CEBU's illegally operating system (1. the online system, 2. its fax-address and 3. phone numbers in Taipei for Cebu Pacific) failed to respond to my request to not double book myself and two families--and NOT TO CHARGE MY FAMILY 10,000 PESOS twice for each December 11 booking, i.e. for 3 passengers.

CONTACT THE MANILA PHONE NUMBER, MR. STODA

After getting no help from the Taipei contact addresses for Cebu Pacific, we went to the airport. All the Cebu Pacific staff at the International Airport in Taiwan could do was to tell me to contact Cebu Pacific when I arrived to Manila.

Yesterday, I arrived in Manila with my wife and child.

NOW--TODAY--when I CONTACTED face-to-face CEBU OFFICIALS in Manila, they claimed that the company would REFUSE to refund my second or DOUBLE BOOKING of 3 passengers on December 11, 2010 from Taipei to Manila--stating the company "considered it solely the responsibility of the passengers involved when there is any online booking error."

HOW CAN PASSENGER BE SOLELY RESPONSIBLE IN A DOUBLE BOOKING?

Seaplane project in Clark gets off the ground

December 20, 2010

By Tonette Orejas

CLARK FREEPORT, Philippines—A team of 50 Filipino mechanics and engineers has started building seaplanes inside this freeport.

The amphibious aircraft is called “S-Ray 007,” said Iren Dornier, who designed the latest project of the South East Asian Airlines (Seair), the airline he chairs and co-founded with Nickos Gitsis in 1995.

“That’s a little bit of a James Bond,” he said, when asked on the famous three numbers. It is actually derived from 2007, the year Dornier first flew and landed the S-Ray prototype somewhere in the Philippines. The first five units were produced in Europe.

The Philippines, he said, is the “right environment for such an airplane,” he said, noting that the country, although with 7,100 islands, has no seaplanes at all.

He said the S-Ray 007 was designed for government, civilian, border patrol, search-and-rescue missions.

This aircraft is a “modern and bigger version” of Libelle, a flying boat that his grandfather, Claude Dornier, flew in 1921, Dornier said.

The basic version of S-Ray 007 costs $300,000. The Clark manufacturing facility targets to make 300 units. The seaplane, which weighs 825 kilograms, can carry two persons. Its wing span is 9 meters.

Among the features include a hydraulic-driven tricycle landing gear that “can be lowered inside the water to move up or down a ramp.”

“I got a few orders. The acceptance is quite high,” Dornier told the Inquirer.

To set up the manufacturing plant here, Dornier first sent to Germany at least 10 Filipinos who worked with the Clark-based Seair in the last 15 years.

In 2004, Dornier held a World Tour using the same Dornier-24 that his grandfather flew in 1944 and which had saved over 11,000 people during World War II.

The eight-month tour, done through the support of the United Nations Children’s Fund (Unicef), aimed to motivate the youth to follow their dreams. It raised $61,000 for Filipino children.

Dornier’s grandfather had built several flying boats such as the Rs I in 1915, Wal in 1922, Do X in 1929, Do.24 V/K in 1938, Do 26 in 1938 and Do 18 E in 1935. The elder Dornier also built the light fighter bomber and trainer Alpha Jet in 1973.

Regulators reject rivals’ plea to halt SEAIR-Tiger flights

By Kathleen A. Martin

December 20, 2010

THE CIVIL Aeronautics Board (CAB) has allowed a partnership between South East Asian Airlines (SEAIR) and Singapore-based Tiger Airways to proceed despite complaints from four local carriers.

CAB Executive Director Carmelo L. Arcilla said the carriers’ request to issue a cease-and-desist-order against SEAIR-Tiger Airways flights to Singapore from the Clark airport over legal questions was not granted.

“The matter is undergoing due process already and it will be set for a hearing,” Mr. Arcilla told yesterday.

Mr. Arcilla said that after four local carriers, namely Philippine Airlines (PAL), Cebu Pacific, Air Philippines, and Zest Air, filed a consolidated opposition to the SEAIR-Tiger Airways deal last month, SEAIR was asked to comment. The four carriers are claiming SEAIR is allowing a takeover of a foreign airline in the guise of a marketing and leasing deals.

“The first step was to furnish the respondent a copy of the complaint and ask them to comment on the allegations, and now that SEAIR has responded, it will be set for hearing,” Mr. Arcilla said.

Mr. Arcilla said a hearing will “probably be scheduled next week,” as this will be the next step in the process.

In a letter dated Dec. 9, PAL wrote on behalf of the other carriers to CAB Chairman Glicerio V. Sicat, reiterating their opposition to the partnership first raised in a letter to the board last Nov. 26.

“We believe that we are raising compelling questions on whether the SEAIR/Tiger service may not actually be a Philippine carrier operation, but instead the first salvo of a foreign (Singaporean) air carrier operating a Philippine-based international route network in the guise of a Philippine air carrier, and making use of Philippine carrier international traffic rights privileges,” Ma. Socorro R. Gonzaga, PAL senior assistant vice-president for external affairs, said in the letter.

“Indeed, the operation may be expanded to include domestic routes as well, raising likewise the question of effectively granting regular cabotage access to a foreign airline for the first time in [Philippine] history,” Ms. Gonzaga added.

The four carriers are pointing to CAB Resolution No. 51, which prohibits Tiger Airways from directly earning money from the partnership with SEAIR.

SEAIR and Tiger Airways announced the partnership in a joint statement last Nov. 23. Under the deal, two Airbus aircraft will be leased to SEAIR, and SEAIR seats will be distributed through Tiger Airways’ Internet booking system.

The first SEAIR-Tiger Airways flight from Clark to Singapore last Dec. 16 pushed through.

In a phone interview, SEAIR President Avelino L. Zapanta, said the complaints of the four local carriers were only a “rehash” of what they had filed in 2007, when SEAIR and Tiger Airways first sought to seal a partnership. The deal did not push through amid a global economic slowdown.

“In 2008, the case was dismissed in favor of SEAIR,” Mr. Zapanta said. “These are the same speculations and allegations three years ago and they have not come up with any new evidence,” he said.

PAL spokeswoman Cielo C. Villaluna said: “There is simply a concern regarding overcapacity and a possible price war among airlines. But PAL, as an airline, welcomes competition.” -- Businessworld

Local Airlines hit SEAir, Tiger partnership

Deal seen violating Constitution
By Paolo Montecillo

December 20, 2010

MANILA, Philippines—The Philippines’ top airlines are protesting the allegedly illegal “partnership” between Singapore’s Tiger Airways and local Southeast Asian Airlines (SEAir).

The arrangement between the two airlines, wherein SEAir flights—using aircraft leased from Tiger Airways—will be sold on the latter’s website, allegedly skirts a constitutional restriction on the foreign ownership of companies in vital industries.

In a letter to the Department of Transportation and Communications (DOTC), copy furnished the Civil Aeronautics Board (CAB), Philippine Airlines (PAL), Cebu Pacific, Zest Airways and Air Philippines called for an investigation of the operations of SEAir and Tiger.

“We earnestly request that the board launch a full and exhaustive investigation into the matter for the purpose of ascertaining, among others, that the marketing agreement entered into between SEAir and Tiger is in strict compliance with the terms of the CAB,” said the joint letter obtained from the CAB.

In its own letter to DOTC Undersecretary for Civil Aviation Glicerio Sicat, PAL said, “It is becoming apparent that Tiger has a direct stake and participation in the success of the new venture.”

“It is noted that all four Philippine international air carriers took the unprecedented step of filing said consolidated opposition, in which we jointly requested the [CAB] to issue a cease-and-desist order directing SEAir and Tiger to stop selling and promoting the planned Clark-Singapore flights,” the letter dated December 9 said.

The Constitution prohibits foreigners from owning more than a 40-percent stake in companies in industries such as transportation and telecommunications.

The four airlines in their letter asked the regulator to investigate “the matter to determine if the SEAir and Tiger activities and operations fully comply with Philippine laws, rules and regulations.”

The airlines added that Tiger Airways’ plans to put up an operating base in Clark Freeport in Pampanga, through SEAir, would disregard and undermine Philippine laws, to be achieved through a form of “regulatory sleight of hand.”

SEAir officials could not be reached for comment as of press time.

Philippines market good for AirAsia

December 18, 2010, Saturday

NEW ENTRANT: RHB Research notes that AirAsia will be entering the LCC sector in the Philippines as a new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific.

KUCHING - Airline industry player AirAsia Bhd’s (AirAsia) penetration into Philippines market through joint venture (JV) forming with three Filipino businessmen was seen as a smart move by several research firms.According to OSK Research Sdn Bhd (OSK Research), the JV named AirAsia Incorporation (AAI) was expected to commence operations sometime in September 2011, with 40 per cent stake in the JV, would commence with the deployment of at least two aircraft leased from its parent company, AirAsia.

The research house stated that the Philippines would be an attractive market for low cost carriers (LCCs) such as AAI, given the archipelagic nature of its geography, which would provide conducive conditions for air travel.

Coupled with its high number of Filipinos working abroad to boost demand for international travel, the Philippines would also be offering a significant growth potential on expectations of the high propensity for air travel on the back of rising per capita income, said the research firm.

Despite the intensity of competition in the Philippines’ aviation space,OSK Research noted a lot of room for market share gain, notably in the international segment as AAI would be able to leverage on AirAsia’s superior branding and comprehensive network.

OSK Research viewed that AAI’s earnings could start trickling in after two years of operations.

Another research house, RHB Research Institute Sdn Bhd (RHB Research) noted that AirAsia would be entering the LCC sector in the Philippines as a new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific.

However, AirAsia would see significant competition from Malaysia Airline System Bhd’s (MAS) recent expansion of its 100 per cent-owned Firefly into a full-fledged LCC, backed by a fleet of 30 fuel-efficient 189-seater Next Generation 737-800 aircraft by 2015 that would lead Firefly to compete head-on with AirAsia’s A320 fleet.

It highlighted that Firefly, a new entrant to the jet segment would go all out to capture market share at the expense of profitability by heavy price discounting while AirAsia might also want nip the competition in the bud by dropping fares. Borneopost

Local airlines face 2011 turbulence

DEMAND AND SUPPLY
By Boo Chanco
The Philippine Star

December 17, 2010

Don’t greet airline executives a Happy New Year. They are even now wishing they could put the next year on fast forward and get it over with. Fuel prices are again on an upswing and there are some analysts who are talking $100 a barrel oil. And even as mergers and alliances are starting to have some positive impact on the bottom line, the threat of a double dip recession could nip rising passenger numbers all too soon.

Domestically, two more things are major concerns. It is certain that 2011 will bring about open skies and increased competition. Despite the usual noise against it from the usual suspects, I don’t think open skies or the “pocket” open skies version can be stopped. I understand the Aquino administration strongly believes in it and is committed to implement it as soon as it can next year.

I am not going into the pros and cons of open skies because this is one topic that had been discussed widely and for some years now. From a business perspective, the local airlines should spend more effort now planning to live with it rather than trying to stop it. The rules of the game are changing and it is take it or leave it.

Stiff competition is the other major headache in the local airline industry. The smaller airlines are beefing up their fleet and teaming up with larger foreign airlines to give the predominant players, PAL and Cebu Pacific a run for market share.

As earlier reported in this column, SEAir is leasing Airbus 320s from Singapore’s Tiger Airways and will thus be in a better position of mounting flights to key domestic destinations too. Tonyboy Cojuangco is teaming up with Air Asia’s Tony Fernandes on a new airline with a 60/40 ownership structure that will also enable it to compete in the domestic market. Zest Air is also beefing up its fleet.

We are now seeing a stiff competition among the airlines not just for passengers but for the services of trained and certified pilots. The flight operations of some of the airlines, including the established ones, may be disrupted next year as pilots are continually being poached by local and foreign competitors.

This early, the President of Philippine Airlines is warning that the domestic market may not be that big and ruinous competition may result. That is probably true. It also complicates an already difficult market for the country’s premier flag carrier.

As I had explained here in some past columns, the big problem of PAL is that it is overstaffed and cannot be as nimble as the budget carriers like Cebu Pacific. PAL has some 7000 employees compared with Cebu Pacific’s 2,500 and at least in the domestic and comparable international regional routes, Cebu Pacific had been flying more passengers already.

This is why even the Department of Labor saw the importance of allowing PAL management to do what it should to improve the competitiveness of the airline. There is no choice for PAL but to try to approximate the efficiency of Cebu Pacific and the host of new and existing budget airlines in order to survive.

The order from Malacañang for both management and labor union to hold their horses will only delay the inevitable. There is no way they can escape addressing the need to make PAL’s structure and business model more in tune with competitive requirements in today’s airline market.
The officers of the employee labor union are doing their members a great disservice by refusing to see the futility of the status quo. The employees union should learn from the example of the American automotive unions. When it became clear that GM, Ford and Chrysler would go belly up unless the unions worked with management and government to save the car companies, the United Auto Workers or UAW decided that cooperation was the better deal.

It was a painful decision for the tough American automotive union who had to give up years of hard won benefits. But the union leaders realized that if they want to truly protect the economic interest of the workers, they will have to save their respective car companies first. It is the same thing with PAL. It is crunch time and every stakeholder must decide if they want to save the airline or bury it for good.

For the Lucio Tan haters, what Lucio Tan is or is not is irrelevant. The key problem now is how to make the airline competitive. The alternative is to let the airline die and allow the new airlines to take its market share. There is something Darwinian in the capitalist system. Weak corporations should be allowed to die.

If PAL dies because it was not allowed by its staff to reorganize to meet competition, the surviving airlines will take over PAL’s market share, routes and even its planes and other assets at no cost to the taxpayers. PAL should not be considered too big to fail.

Even if it wants to, it would be extremely difficult for the government to bail out PAL now. Government has a serious fiscal deficit problem. It is also not good policy to use the money of 90 million taxpayers to save 2,500 jobs, jobs which aren’t going to be there in the long term anyway.

What happens next in PAL is also going to be an important test for the Aquino administration. Will it just do the politically expedient alternative and capitulate? Will it exercise leadership and allow the airline to reconfigure its business model to help it survive today’s new business environment?

PAL employees should learn an important lesson from the pilots who went on strike some years ago. It turned out that the pilots’ union was ill-advised and the pilots lost everything after their strike had been held illegal by the courts.

But pilots have one great thing in their favor that the ordinary airline employees don’t have. Pilots have world class skills that are in high demand in the world market. In fact, retaining and hiring enough pilots will be a major headache for the local airlines next year. What money the airlines have will be used to keep and hire the pilots first.
A PAL strike during the holidays will be a disaster for the airline… but a life changing calamity for the affected employees and their families. It would be better for them to take the million pesos or so offered and then take their chances on a new career. The union leaders are taking on the responsibility for the lives of their members and their families. For their own sakes, I hope everyone will be reasonable.

AirAsia launches RP unit

Eyes Clark hub

December 17, 2010

SOUTHEAST Asia’s budget carrier king Tony Fernandes yesterday launched a joint venture airline with Philippine businessmen, giving a jolt of competition to what he described as an underserved aviation market.

AirAsia Group Chief Executive Officer Tony Fernandes (left) shakes hands with Antonio “Tonyboy” Cojuangco, Jr., a cousin of President Benigno S. C. Aquino III, during a news conference in Makati. Southeast Asian budget carrier king Mr. Fernandes yesterday launched a joint venture airline in the Philippines, giving what he described as an underserved market a big jolt of competition. -- AFP

AirAsia Philippines, Inc. in which AirAsia will hold a 40% stake, should begin flight operations in August next year using either Clark or Subic -- two former United States military bases near Manila -- as its base, the Malaysian said.

“We do expect to be profitable straight away,” Mr. Fernandes told a press conference.

The partners have approved an authorized capital expenditure of $25 million for the joint venture.

“The amount does not include the cost of putting the terminal. We still have to compute that. Our aircraft will be leased from AirAsia Malaysia. We will have three to five 150-seater Airbus 320s to be used in the next few months,” he said.

Mr. Fernandes said internal funds would capitalize the joint venture, in which investors led by Antonio “Tonyboy” O. Cojuangco, a cousin of President Benigno S. C. Aquino III, hold a combined 60%, the minimum local equity stake set by the Constitution.

“Many of the routes that AirAsia Philippines will be going to are already being exploited by other AirAsia companies, so the setup cost for AirAsia Philippines is very low,” enabling low fares, Mr. Fernandes said.

Local competition includes successful budget carrier Cebu Pacific, which recently went public, and the loss-making flag carrier Philippine Airlines (PAL).

“Cebu Pacific has done a fantastic job,” Mr. Fernandes said, praising its equally low-cost, no-frills model but saying there was more than enough room for the AirAsia group to grow.

“I think PAL could have, I’m sure, done a better job,” he added.

Kuala Lumpur-based AirAsia has set up similar joint ventures in Thailand and Indonesia and previously announced plans to set up a unit in Vietnam.

However, Mr. Fernandes said AirAsia was now giving priority to the Philippine joint venture before proceeding with the Vietnam project.
The flashy 46-year-old tycoon, who also heads the Lotus Formula One team, said that just a tiny segment of the Philippine population of 95 million people were currently making use of air travel, giving the project huge potential.

Marianne Hontiveros, a music industry executive, will be the AirAsia Philippines chief executive, with Mr. Cojuangco as chairman.

“We need tourism badly in our country, and we have so much to offer,” Ms. Hontiveros told the press conference yesterday.

Transportation ministry Undersecretary Glicerio Sicat welcomed the airline investment as a boost to a tourism sector that is seriously falling behind its Southeast Asian neighbors due to bad infrastructure and security problems.

“As Tony Fernandes himself said, more people would be able to fly,” Mr. Sicat told reporters.

He said the government expects AirAsia to serve certain areas not adequately served by local carriers.

“He (Mr. Fernandes) said some of their routes would be pioneering.

We will improve the airport facilities, that will be our contribution,” Mr. Sicat told reporters.

The Aquino government has singled out tourism as a potential key growth driver, and had warned PAL, which is facing labor problems, to shape up or face tougher competition under an “open skies” regime that will let more foreign airlines in.

The Philippines tourism ministry hopes to double annual tourist arrivals to six million, raising annual tourism revenues to at least $4.6 billion and creating three million new jobs.

Michael L. Romero of the local port operator Harbour Centre will be the vice-chairman of AirAsia Philippines.

“AirAsia Group has been interested in putting up a hub in the Philippines for the past three years. It was only last year that we finally decided to have this joint venture,” Mr. Romero said.

“We believe in the reputation of the budget carrier as it was able to have 25 million passengers today from 100,000 passengers when it started. Carriers around the world are going to the low-cost model as it is more attractive to the passengers,” he added.

Victor Jose I. Luciano, president and chief executive officer of Clark International Airport Corp., told reporters in the same briefing the airport in Clark, Pampanga is “always ready to accommodate AirAsia Philippines.”

“We are just waiting for them to decide whether they will have their hub in Clark. But we will respect their decision if they opt to have it in Subic,” he said.

Mr. Fernandes said the company was “still weighing options” whether to choose Clark or Subic as the hub for operations.

“We will have the decision within the month. Hopefully, we can have our maiden flight by March or April next year,” he said.

Last month, AirAsia said net profit for the September quarter rose to 327.29 million ringgit ($62.89 million) from 130.07 million ringgit in the same period last year. -- AFP and Aura Marie P. Dagcutan. Businessworld.