Philippine Airlines Faces Challenges at London Heathrow

As Philippine Airlines prepares for its return to Europe with new direct flights to London Heathrow following a fifteen year absence, many are counting on the success of the new route to increase trade and tourism between Europe and the Philippines. Although Philippine Airlines will be the only carrier offering a direct link between the two countries, the carrier will need to overcome a number of challenges in order to sustain the route in the long-term. 

philippine airlines london
Copyright Photo: Angelo Agcamaran/PPSG
Philippine Airlines is planning to launch its new services to London on November 4 with five weekly flights on board its fleet of Boeing 777-300ER aircraft. The airline will be joining several established carriers in the Manila-London that will provide intense competition. Although it will be the only airline providing a direct route, the market is well served with one-stop service offered by several Gulf and Asian carriers. 

London is just the first of many European destinations that Philippine Airlines has lined up including Amsterdam, Frankfurt, Paris, and Rome. However, the carrier has yet to officially launch any new European routes beyond London. The airline was originally considering service to Gatwick Airport, but was able to acquire slots at the much preferred Heathrow Airport although it was forced to sacrifice connection opportunities in the process. The Heathrow slots are scheduled at times that do not support the connecting services that Philippine Airlines will need to sustain the London route. 

Philippine Airlines is banking on the United Kingdom's Filipino community to support the new route as well as the attractiveness of the Philippines as a tourism destination. Although the Philippines only attracted approximately 60,000 visitors from the United Kingdom in the first quarter of 2013, a new direct flight could help to boost the Philippines as a major tourism destination in the eyes of British tourists that have long held an affection for Thailand. Ramon Ang, President of PAL, remains confident that the new flight will inevitably help to boost tourism. "With PAL's new non-stop flights, we are sure these numbers will rise even further," said Ang.

The United Kingdom is home to one of the ten largest populations of overseas Filipinos with approximately 200,000 residing in the region. With the UK being home to the largest Filipino population in Europe, the choice of London as the first European destination for Philippine Airlines should come as no surprise. In addition, London also happens to be the largest origin and destination market in Europe from Manila with more than 250,000 round-trip passengers in 2012. 

Intense Competition from Established Carriers

According to the Centre for Asia Pacific Aviation, Singapore Airlines, Etihad, and Cathay Pacific have remained the three dominant carriers in the market. But Philippine Airlines will also have to overcome competition from a number of other competitors including Qatar Airways, Malaysia Airlines, Thai Airways, and Emirates. Emirates was recently voted the World's Best Airline at the 2013 Skytrax World Airline Awards where Philippine Airlines ranked 90th.  To a lesser extent, Royal Brunei is offering a competitive two-stop product via Dubai and Brunei. The carrier recently launched the first Boeing 787 Dreamliner service to Manila. In addition, KLM, the only European carrier flying to Manila, will attempt to defend its position with its two stop service via Amsterdam and Taipei. It remains unclear if the carrier plans to reinstate its direct service between Amsterdam and Manila as it also faces pressure from Gulf and Asian carriers.

Although Philippine Airlines will be banking on the convenience of a direct flight to attract passengers, the Gulf carriers remain a formidable threat as they become increasingly competitive in the Manila-London market. Qatar and Emirates recently launched new direct services to Clark Airport. Emirates now offers a total of four daily flights to the Philippines. In addition, the Gulf and Asian carriers have far more established brands with strong loyalty programs and in certain cases, superior in-flight products compared to Philippine Airlines. 

Philippine Airlines has been given the challenge to market its new London service within a very short time frame of just seven weeks. This is an even greater challenge considering that the airline has not had a presence in Europe in the last fifteen years. In fact, the current Philippine Airlines network did not even come anywhere near Europe until recently as the carrier reintroduced service to the Middle East. Toronto was launched under a similar short marketing window between the timing of ticket sales and the first flight. That route has faced a rough start with Philippine Airlines nearly dropping the route entirely last September after a series of downgrades. The experiences and challenges faced in Toronto only highlight the risky nature of long-haul expansion. 

The success of the PAL's American routes can be heavily attributed to the fact that Philippine Airlines is the only non-stop carrier between the Philippines and United States. PAL is banking on the same competitive advantage for its flights to Europe but Philippine Airlines will be flying in a far more threatening environment with a larger set of competitors and a much smaller local market from which to source passengers. All of Europe combined has less than 700,000 Filipinos compared to the more than 3 million currently living in the United States. Philippine Airlines is planning to carry the same number of destinations in Europe as it has in the United States in spite of the European Filipino market being four times smaller.  In addition, Philippine Airlines is not forced to compete with the Gulf carriers on their Philippines-United States routes. 

The Gulf carriers compete on a number of factors including competitive fares, superior products, impressive hubs for connecting, better frequency and a wider range of destinations in Europe giving passengers far more choices. Philippine Airlines can be successful if it can attract the majority of the local traffic from the established carriers currently offering one-stop products. The other routes planned for Europe will prove to be even larger challenges given that they are one fifth to one third the size of the Manila-London market in terms of origin and destination traffic. 

Lack of Philippine Domestic Connections

In order to make the route viable and sustainable, Philippine Airlines will need to obtain connecting traffic. PAL does have an advantage in that it can offer an extensive range of connections in the Philippines that cannot be offered by other carriers. This is of particular importance given that the country's main tourist destinations are accessed through smaller domestic airports. However, when PAL opted for slots at Heathrow, it sacrificed better scheduling opportunities that would be more friendly to connecting traffic. The timing of PAL's London flights to Heathrow limit the number of domestic connections on the outbound sector as the flight departs at 8:00am. For example, the first flights from Caticlan and Puerto Princesa, two popular tourist destinations do not arrive in Manila until after the London flight has already departed. Only major routes like Cebu and Davao will be able to offer a connection to the London flight. This will pose a particular challenge for tourists that may not want to end their vacation with a night in Manila as well as the overseas Filipino population that will not want to sacrifice time with their families opting instead for a same-day connecting service with another carrier from domestic airports in the Philippines. Although the return flights from London are suitable for connections as they arrive in the afternoon, passengers are more likely to book a round-trip ticket with a carrier that can service all of their needs rather than two one-way tickets to accommodate PAL. By only offering a connection in one direction, Philippine Airlines may struggle to fill its 370-seat aircraft. 
 
No Connections for Australian Bound Tourists

Philippine Airlines had a strong opportunity to capture traffic between London and Australia. But with the current flight schedule, PAL's flights from Australia arrive in Manila in the late afternoon preventing any connection to services to London. New carriers typically rely on the London-Australia market to help fill up the aircraft. In addition, none of PAL's regional flights from other Asian centres provide any connecting opportunities to the London flights. 

European Connections are Possible

The timing of the Philippine Airlines flight to London is suitable for connections in London to various destinations throughout Europe. However, the thought of backtracking to continental Europe through a congested airport like Heathrow may not appeal to many passengers when there are more practical one-stop products offered through the Middle East which won't require back tracking and possibly reduce travelling time. If Philippine Airlines does intend on proceeding with other destinations in Europe, it will need to rely on European connecting traffic to compensate for the smaller market. But Philippine Airlines lacks partner carriers in Europe and is the only Southeast Asian carrier to not be a member of any airline alliance. 

Although Philippine Airlines faces a turbulent flight path with unfavourable market conditions as it attempts to build a sustainable route back to Europe, one thing is for sure, there are a lot of people that are counting on Philippine Airlines to succeed. While many may view Ramon Ang as overly ambitious, one can't help but praise him for having the courage to try. London is a high profile destination and in the on-going quest to make Philippine Airlines a truly global Filipino airline, London will play a major role in determining whether that vision will become a reality. 


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