Saturday, June 27, 2015

EU Lifts Blacklist on All Philippine Carriers

The European Union (EU) has finally decided to lift its five-year ban on all the remaining Philippine carriers.

The decision was arrived after a five-man team conducted a review and series of inspections of the Philippine aviation scene in April.  

Under the ban, most Philippine carriers were not only barred from mounting flights to any point in the EU but they were also prohibited from merely flying through the 28-nation bloc's airspace enroute to other destinations.  

However, the EU  has gradually lifted the ban for several carriers over the past two years.  It started with Philippine Airlines in July 2013.  Last year, Cebu Pacific was also released from the ban.  Eric Apolonio of the Civil Aviation Authority of the Philippines (CAAP) says that this effectively means that the remaining seven Philippine carriers can fly to or through the EU.  This includes AirAsia Philippines and AirAsia Zest.

Copyright photo: Angelo Agcamaran/PPSG

Lubomir Frebort, EU charge d'affaires in the Philippines expressed the significance of this decision.  He said "This is truly breaking news since it is the first time that the entire aviation sector of one country is removed from the European Air Safety List".  

Currently, Philippine Airlines has been the only Philippine carrier to take advantage of the lifting of the EU ban.  Within five months of its own ban being lifted, the flag carrier reintroduced its London service after an 18-year absence.  But Apolonio reiterated that even Philippine carriers that do not fly to the EU directly also stand to benefit from this.  This is as EU residents are expected to feel more encouraged to use local carriers.  EU residents who fly with carriers subject to the ban will not be covered by their insurance in case something happens.  

This move also culminates two years of major international aviation bodies expressing confidence in the Philippine civil aviation system.  Last year, the United States' Federal Aviation Administration (FAA) finally restored a 'Category 1' rating on the Philippines.  With this, Philippine carriers can introduce new services to the US and use more modern aircraft on existing US services.  Shortly after the restoration of 'Category 1', Philippine Airlines started deploying its flagship Boeing 777-300 aircraft to San Francisco and Los Angeles.  In less than a year, the flag carrier also restored service to New York via Vancouver.  Cebu Pacific is currently considering the introduction of flights to US cities such as Honolulu. 

Source: ABS-CBN News

Monday, June 22, 2015

Philippine Airlines to Finance New Long-Haul Aircraft through Cancelled A330 Leases

A clear shift in focus is under way at Philippine Airlines as it shifts its attention from its medium-haul routes to its long-haul future. Reversing the decision of the previous management to acquire A330-300 aircraft for Middle East routes, Philippine Airlines now plans to return the aircraft to help fund the acquisition of new long-haul aircraft. 

Copyright Photo: Angelo Agcamaran/PPSG
It became apparent that the spending spree of former PAL President Ramon Ang had been overly ambitious when it was announced in April 2014 that Philippine Airlines would be cancelling five orders for A330-300 aircraft in favour of additional A321 aircraft.

Since regaining control of Philippine Airlines, the Lucio Tan Group under the leadership of returning PAL President Jaime Bautista has made it no secret that the San Miguel Corporation ordered too many aircraft with no routes to fly. 

Bautista is now acting on the findings by returning eight of the previously ordered mono-class Airbus A330-300 aircraft to German lessors as Philippine Airlines changes strategy and abandons plans to expand in the Middle East. San Miguel Corporation had ordered the aircraft with the intention of competing directly against Cebu Pacific on Middle East routes. 

Since 2012, Philippine Airlines did launch flights to Dubai, Riyadh, Abu Dhabi, and Dammam. However, previous plans to serve Jeddah, Doha, Kuwait, and Muscat are now on hold as the national flag carrier focuses more on lucrative long-haul routes and the non-budget sector. 

Bautista would prefer to fly the carrier's multi-class A330-300 fleet to the Middle East, acknowledging the demand for premium services on the routes, while abandoning the budget model that Cebu Pacific has adopted. Bautista's strategy seems to be working as Philippine Airlines has increased service on some of its Middle East routes, while Cebu Pacific was forced to scale back.

Philippine Airlines posted a $50 million profit in the first two months of 2015 due to what Bautista calls "fleet rationalization." Last October, Bautista criticized San Miguel management stating that, "We have too many A330's and A321's with nowhere to fly to. There were too many orders from Mr. Ang's management," said Bautista. "We really have to check if the markets we're servicing now require all these planes."

Bautista's decision to ditch the mono-class A330 fleet acknowledges the need for aircraft with multiple classes of service, as well as the decision to not open any additional routes in the Middle East in the near future. Furthermore, it is an acknowledgement of the dissatisfaction of passengers with the mono-class budget service, which failed to gain any traction among Philippine Airlines passengers.

Philippine Airlines now plans to use the savings from the cancelled A330-300 leases to fund new orders for long-haul aircraft. According to Bautista, Philippine Airlines currently prefers the A350-900 for its ability to fly Manila to New York non-stop without payload restrictions.

PAL is hoping to accept delivery of new long-haul aircraft by 2018 as it intends to retire the A340-300 from the fleet permanently in that year. Philippine Airlines is expected to make an announcement on a new aircraft order in the near future.

Most recently, PAL revealed that it entered into a lease agreement with Intrepid Aviation for two additional Boeing 777 aircraft, which will be delivered next year. These aircraft will be used on routes to North America such as Manila to Los Angeles and Manila to San Francisco as Philippine Airlines attempts to standardise its long-haul fleet and in-flight experience.

Air Asia X and Cebu Pacific Race to the US Mainland

Hawaii is about to become the battle ground for what may end up being a race to the west coast of the United States. Two of Asia's long-haul low-cost carriers, Cebu Pacific and AirAsia X, are preparing for what will become the region's first low-cost long-haul services from Asia to Hawaii. The flights to Hawaii will serve as a test of each carrier's respective low-cost model before reaching further to the US mainland.

Copyright Photo: Angelo Agcamaran/PPSG
According to the Centre for Asia-Pacific Aviation, the trans-Pacific market is already one of the most competitive in the world. However, Asian low-cost carriers have a distinct advantage in having some of the lowest unit costs in the world. There are presently no long-haul low-cost carriers from the United States. However, that may change as foreign low-cost carriers from other parts of the world begin landing on US soil.

Honolulu is set to experience a massive drop in airfares as Cebu Pacific and AirAsia X enter the market. AirAsia X submitted an application to the United Stated Department of Transportation in April to operate four weekly flights from Kuala Lumpur to Honolulu via Osaka beginning in November 2015. 

Cebu Pacific secured certification in April of this year, but it is awaiting final approval from the US Transportation Security Administration, which needs to complete an assessment of Manila Airport's Terminal 3 before the Philippine budget carrier can serve the United States. In addition, Cebu Pacific will also need to secure the necessary slots at Honolulu International Airport. However, the carrier remains optimistic that it will be able to begin flights before the end of the year. 

AirAsia X intends to utilise fifth freedom rights between Japan and the United States. Given that Malaysia has a small portion of travellers bound for Hawaii, the majority of passengers on the AirAsia X flights will be sourced from Osaka, Japan.

The Osaka to Honolulu market is large and competitive with three other carriers competing on the route. Delta Airlines, Hawaiian Airlines, and Japan Airlines each offer one daily flight between the two cities. Delta Airlines is presently the market leader with a 39 percent share. 

Copyright Photo: Angelo Agcamaran/PPSG
AirAsia X is also banking on its soon to launch Japanese affiliate, AirAsia Japan, which is set to launch in late 2015. That would enable AirAsia X to offer one-stop connections to the Honolulu flights from a number of domestic cities throughout Japan. 

Cebu Pacific will have a distinct advantage over AirAsia X in that Hawaii to Southeast Asia is not a large sector with the exception of Hawaii to the Philippines. A large portion of overseas Filipinos reside in Hawaii. Filipinos are believed to be the second largest racial group in Hawaii with close to 175,000 Filipinos living in the US state. 

Cebu Pacific is hoping to stimulate the market with its low fares to not only draw more Filipinos to visit the mother country, but also to increase the frequency in which they visit. The Philippine budget carrier has less competition to face than AirAsia X, where Philippine Airlines is currently the only airline flying the Manila to Honolulu route. 

It remains unclear whether AirAsia X will attempt to compete against Cebu Pacific in the Hawaii-Philippines market. Although the route via Osaka would be rather circuitous for Filipino travellers, low-cost carrier operations often have the ability to stimulate unpredictable traffic when the right price is offered. 

AirAsia X currently competes against Cebu Pacific in the Philippines to Australia market, where Cebu Pacific offers non-stop service from Manila to Sydney, while AirAsia offers one-stop service via Kuala Lumpur. AirAsia Philippines does not presently fly to Japan. However, the carrier previously revealed intentions to serve the Japan-Philippines market in the future, making a one-stop service from Manila or Cebu to Honolulu possible via Osaka. 

AirAsia X will serve the route with a two-class 377-seat Airbus A330-300, while Cebu Pacific will operate a 436-seat mono-class A330-300. The Osaka to Honolulu flights are approximately seven hours long, compared to Manila to Honolulu, which is a more than ten hour flight in each direction.

Although Honolulu will be the first US destination for both carriers, which is a challenge in itself, the length of each respective flight is not unfamiliar to either budget airline. AirAsia X already operates s nine hour service from Kuala Lumpur to Jeddah, while Cebu Pacific operates a 10 hour service between Manila and Kuwait. 

While realizing success in the Hawaii market would be no doubt an achievement for either carrier, the real prize lies on the US mainland. If Los Angeles was the next target city for either carrier, flights from Japan would range between 10 to 12 hours, while flights between Manila and Los Angeles would be 13 to 14 hours. But Cebu Pacific will need to acquire long-range aircraft before it can enter that market. Even with a low-cost model and low fuel prices, making these long-haul routes viable would be a challenge for even the strongest low-cost carrier. 

Using Hawaii as a testing ground provides both Cebu Pacific and Air Asia X with an opportunity to test the US market before making the longer leap and accepting the bigger risk that is the US mainland. 

Honolulu may be a challenge for AirAsia X, which must rely on the Japanese market, where its brand is less established compared to Southeast Asia. On the other hand, Cebu Pacific already enjoys a strong reputation within the Filipino community at home and overseas, which will give it an advantage heading into the new service. 

Although the outcome remains uncertain for either carrier, there is no doubt that the legacy carriers in Asia and the United States will be monitoring the results of the low-cost models closely as the threat of eroding their market share looms ahead, especially for Philippine flag carrier, Philippine Airlines. 

AirAsia and Cebu Pacific will not be the first long-haul low-cost carriers to serve the Honolulu market. Jetstar Airways already offers non-stop service to Honolulu from Sydney, Melbourne, and Brisbane. 

Canada's WestJet also operates non-stop service from a number of Canadian cities including Vancouver, Calgary, and Victoria. Allegiant Air is the only US low-cost carrier to have tested low-cost carrier service to Honolulu but has since scaled back operations significantly. Virgin America will be testing its own low-cost model when it launches flights from San Francisco in November.

References: CAPA

Air Asia Eyes International Expansion From Iloilo in 2016

Iloilo's Mayor Jed Mabilog has indicated that AirAsia Philippines is planning to launch direct flights from Iloilo to China by September 2016. The planned flights will carry passengers between Iloilo and Xiamen.

Copyright Photo: Angelo Agcamaran/PPSG
According to Mabilog, 80 percent of Iloilo's Chinese-Filipino population come from Xiamen. "AirAsia's commitment is that starting next year by September 2016, they are going to launch the first Iloilo direct flights to Xiamen, China," said Mabilog.

However, Mabilog added that AirAsia is interested in building the airport's international presence further with the intention of opening direct flights from Iloilo to Seoul Incheon, South Korea by the last quarter of 2016.

Iloilo International Airport currently offers direct flights to two international destinations: Hong Kong and Singapore. Both flights are operated by Cebu Pacific. Cebu Pacific's flights to Hong Kong operate from Iloilo three times weekly, while the Singapore flights operate twice weekly.

Meanwhile, AirAsia is set to increase its flights from Manila to Kuala Lumpur to accommodate the rising number of travellers. The budget carrier, which was recently named the World's Best Low-Cost Airline for the seventh consecutive year, will be adding a third daily flight between the Philippine and Malaysian capital beginning on July 12. It is believed that the third daily flight will be operated by AirAsia Malaysia.

Tony Fernandes, AirAsia Group CEO indicated earlier this year that AirAsia Philippines will pursue an initial public offering to raise funds to finance the carrier's expansion. "We can confirm today that AirAsia Indonesia and AirAsia Philippines will hold an Initial Public Offering subject to respective board approvals," said Fernandes. "Business in both Philippines and Indonesia is doing real well. Great support from both governments."

Bicol International Airport to Become Operational in 2017

The Bicol Regional Development Council has indicated that the P4.7 billion Bicol International Airport, currently being constructed in Daraga, Albay is now forty-seven percent complete. Officials expect the airport to be fully operational in July 2017.
Image Source: DX / Skyscraper City Forums
The new airport will feature a two-story passenger terminal with floor space of 13,320 square meters. A number of other structures will also be constructed including a 271 square metre cargo facility, a 1,012 square metre administration building, and an 8,049 square metre vehicle parking lot. 

According to Albay Governor Joey Salceda, the new airport is expected to provide a safe, economical, and fast way of reaching local and international destinations that will trigger economic growth in the Bicol region. 

The new international airport will especially spur growth in the region's tourism industry, which draws tourists from all over the world to visit regional attractions such as the Mayon Volcano, whale sharks in Donsol, CamSur Watersports Complex, and the Caramoan Islands. In addition, the airport will also provide a better travel experience for locals and tourists, while creating benefits for airlines, travel agencies, construction companies, and cargo brokers.

The Bicol International Airport is located in the Guicadale Economic Township, which connects forty resettlement communities surrounding the airport, along with Guinobatan, Camalig, Daraga, and Legazpi City. These communities are expected to prosper and thrive as the airport creates a new economic zone.

Image Source: DX / Skyscraper City Forums
Bicol has been an underdeveloped region of the Philippines for several years and is in desperate need of better transportation infrastructure. The region has long suffered with the absence of a proper international airport capable of night time landing, which has led to stagnant growth. In addition, Philippine National Railways has failed to reconnect the region to Manila deterring growth further. 

Improved access to the area will result in the further development of tourism in the region, growth of the nation's pili nut and pili nut oil industry, as well as more investment and economic activity stretching beyond Manila and into the Bicol region. The new airport will be able to accommodate larger aircraft and the rising volume of tourists coming to the region. 

Legazpi Airport currently serves flights to Manila and Cebu. Although the airport provides a front row seat to the majestic Mayon Volcano, it is also in the middle of a disaster risk area, which has deterred investment. The new airport is located in an area that can handle investment and growth over the long term. 

Local tourism officials are hoping to see inter-island flights come to the Bicol International Airport in the future, connecting the region to the nation's other popular tourist destinations such as Boracay Island and Palawan. 

Image Source: DX / Skyscraper City Forums
Last December, the Department of Transportation and Communications released P781 million for the construction of landside facilities and buildings at the airport including the control tower. A number of other facilities will be constructed with the budget including the administration building, cargo terminal, power house, fire rescue building, maintenance buildings, water pump house, fuel storage tank, and material recovery facilities. 

The Province of Albay welcomed 339,000 tourists in 2013, representing a 47 percent increase over tourist arrivals in 2012. These figures do not include tourists visiting other parts of the Bicol region such as Camarines Sur. 

Sunday, June 21, 2015

Cebu Pacific May Partner with Saudi Budget Carrier FlyNas

As Cebu Pacific aims to strengthen its position in the Middle East, the carrier may look to expansion through partnership opportunities. Most recently, Cebu Pacific enjoyed a successful partnership with low-cost carrier Air Arabia, when it temporarily flew to Sharjah in the United Arab Emirates. But now it seems a Saudi budget carrier may be interested in becoming Cebu Pacific's second partner in the Middle East.

Image Source: The Borneo Post
Saudi low-cost carrier flynas has been focusing this year on building its core domestic market. It is Saudi Arabia's first and only budget airline. The budget carrier is the third largest low-cost carrier in the Middle East region with a fleet of twenty-four Airbus A320 aircraft. Like most carriers, flynas is eagerly searching for new partnerships that can help grow its business.

According to the Centre for Asia Pacific Aviation, flynas is currently evaluating the possibility of a partnership with Cebu Pacific. With the Philippine budget carrier operating flights three times weekly to King Khalid International Airport in Riyadh, a flynas hub, there is a synergy between the two carriers that could be mutually beneficial as both carriers seek to capture connecting traffic.

A partnership between flynas and Cebu Pacific could be as successful as the partnership between Cebu Pacific and Air Arabia. Both carriers worked on a co-operative basis last year to market Cebu Pacific flights from Manila to Sharjah with connections beyond Sharjah aboard Air Arabia flights.

Although Cebu Pacific currently has a minor presence in the Middle East market, the budget carrier could stretch its footprint with minimal risk and drive traffic to its Manila flights with partners such as Air Arabia and flynas, which have a dominant presence in the region.

The partnership with both carriers is complementary in that there is no risk at this point of either Middle Eastern budget carrier launching their own direct flights to Manila as neither flynas or Air Arabia operate wide-body aircraft capable of flying the distance to the Philippines. Flynas did have previous intentions to serve Manila when it had long-haul ambitions. But it has since withdrawn all long-haul flying to concentrate on its domestic network.

A prospective partnership with a budget carrier in the Middle East will help overseas Filipinos, who live in cities throughout the Middle East with relatively small Filipino populations that aren't big enough to support non-stop service to Manila. If a partnership is realized, these Filipino workers will have the option of connecting through Riyadh or Sharjah depending on whether Cebu Pacific partners with one or both of the budget carriers.

According to Cebu Pacific, destinations in Saudi Arabia were some of the most popular connecting markets when Cebu Pacific was partnered with Air Arabia, while operating out of Sharjah Airport. Partnering with a Saudi carrier like flynas could lead to even more opportunities as flynas offers more frequencies and destinations in Saudi Arabia.

Meanwhile, Cebu Pacific is hoping to rekindle its partnership with Air Arabia if it can obtain additional traffic rights to the United Arab Emirates. Air Arabia currently operates nearly 1,000 weekly flights to about 60 destinations, representing 83 percent of all flights from Sharjah Airport.

During its recent partnership with Cebu Pacific, Air Arabia promoted connecting flights to the cities of Riyadh, Gassim, Hail, and Dammam. The promotional fares included checked luggage and a meal.

According to Alex Reyes, General Manager of Cebu Pacific's Long-Haul division, the budget carrier was pleasantly surprised by the transit traffic generated during its temporary operation at Sharjah. Reyes confirmed that the budget carrier wants to serve Sharjah on a permanent basis to leverage the connection opportunities with Air Arabia.