Competition among PH airlines heats up

MANILA, Philippines – The news that the Philippines has passed the global audit of a United Nations aviation body signals new expansion opportunities for local airlines — a welcome change in an overcrowded domestic market.

After 5 years of failing, the Philippines finally passed the global safety audit of the International Civil Aviation Organization (ICAO). On March 4, ICAO lifted the “significant safety concerns,” or audit findings, on the ability of Civil Aviation Authority of the Philippines (CAAP) to meet global aviation standards, paving the way for the country’s removal from the EU Blacklist and upgrade to Category 1 status by the US Federal Aviation Authority (FAA).

This new access signals new revenue corridors for local airlines, particularly domestic Philippine Airlines (PAL), which has been focusing on expanding its long-haul operations, says think tank Centre for Asia Pacific Aviation (CAPA).

Following a change of management that saw diversified conglomerate, San Miguel Corp., buy a majority stake, PAL embarked on a new strategy focusing on the international market to offset domestic declines. PAL aims to hike its global route network to 33 within the year.

In a press briefing on Wednesday, March 6, PAL chief executive officer Ramon Ang announced the airline’s aggressive route expansion with the launching of flights to 6 new destinations in Australia, Malaysia, China and the Middle East.

“The PAL Group is increasing its focus on the international market following its decision to exit the budget end of the market, which dominates domestic travel in the Philippines as the local population is extremely price conscious,” CAPA states in its April 4 report.

PAL’s share of seat capacity in the Philippine domestic market is currently about 33%, compared to 43% in April 2012. PAL reported an 80% increase in its net loss during between October to December 2012 to P2.62 billion.

However, according to CAPA, competition is due to heat up as local budget airlines, such as Cebu Pacific, are making plans for international expansion in both the medium and long-haul market.

PAL has already seen its share of the Philippine international passenger market slip from 27.5% in 2010 to 24.9% in 2011 and 23.6% in 2012, Civil Aeronautics Board shows.

A homegrown budget carrier, Cebu Pacific recently announced that it will be launching long-haul destinations to Australia, the Middle East, parts of Europe and the US by mid-2013  It also launched its first long haul destination to Dubai.

As airlines look further afield for less crowded markets, it seems more than one carrier has the same mindset. – Rappler.com