What's Next After Category 1 Status? Philippine Carriers Contemplate US Expansion
With Philippine Airlines and Cebu Pacific now cleared to introduce new flights to the United States after the country was recently upgraded to Category 1 status, the question on everyone's mind is what to expect next.
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| Copyright Photo: Angelo Agcamaran/PPSG |
Philippine Airlines is already armed with an expansion plan with intentions to open new routes to Chicago, New York, Florida, and other cities on the East Coast of the United States within a year. Nobody could be happier about the news than PAL President Ramon Ang.
Ang has been anxiously awaiting the Category 1 upgrade so that Philippine Airlines can deploy its new fleet of Boeing 777 aircraft on its existing routes to San Francisco and Los Angeles. Under Category 2 status, PAL was forced to fly inefficient Boeing 747 and Airbus A340 aircraft on its lucrative US routes.
Ang expects that the airline will be able to cut its fuel bill on the routes by at least 20 percent while also reducing maintenance expenses by replacing the older aircraft with the Boeing 777. This will help to narrow losses at the airline by nearly 50 percent. PAL will now likely begin phasing the Boeing 747 out of its fleet.
Philippine Airlines is presently the only local carrier operating flights to the United States. It operates 26 flights per week to the cities of Los Angeles, San Francisco, Honolulu, and Guam. Ang is not wasting any time deploying the Boeing 777 fleet to the United States indicating in a statement that the aircraft would begin service on US routes within a month's time. It is expected that the modern aircraft will save the airline $100 million in fuel costs each year and lower its annual maintenance bill by another $60 million.
New Routes to the United States
Ramon Ang has already indicated that the US East Coast is at the top of the list for expansion including the destinations of New York, Chicago, and Florida. Philippine Airlines used to service New York from 1996 to 1997 but was forced to cancel the route due to financial restraints triggered by the Asian financial crisis. Just before the Philippines was downgraded to Category 2 in 2008, Philippine Airlines was also planning to launch flights to Seattle. Although Seattle has not been recently named as an upcoming destination, Ang has indicated that San Diego was high on the list.
Both Philippine Airlines and Cebu Pacific have placed massive multi-billion dollar orders with Airbus for new aircraft. While the majority of aircraft ordered were single-aisle medium range aircraft for domestic and regional routes, both carriers did place orders for new wide-body aircraft. Cebu Pacific placed an order for 8 Airbus A330-300 aircraft while Philippine Airlines placed an order for 20 Airbus A330-300 aircraft. PAL has since cancelled orders for five of its new A330 aircraft due to range limitations.
Ang has been anxiously awaiting the Category 1 upgrade so that Philippine Airlines can deploy its new fleet of Boeing 777 aircraft on its existing routes to San Francisco and Los Angeles. Under Category 2 status, PAL was forced to fly inefficient Boeing 747 and Airbus A340 aircraft on its lucrative US routes.
Ang expects that the airline will be able to cut its fuel bill on the routes by at least 20 percent while also reducing maintenance expenses by replacing the older aircraft with the Boeing 777. This will help to narrow losses at the airline by nearly 50 percent. PAL will now likely begin phasing the Boeing 747 out of its fleet.
Philippine Airlines is presently the only local carrier operating flights to the United States. It operates 26 flights per week to the cities of Los Angeles, San Francisco, Honolulu, and Guam. Ang is not wasting any time deploying the Boeing 777 fleet to the United States indicating in a statement that the aircraft would begin service on US routes within a month's time. It is expected that the modern aircraft will save the airline $100 million in fuel costs each year and lower its annual maintenance bill by another $60 million.
New Routes to the United States
Ramon Ang has already indicated that the US East Coast is at the top of the list for expansion including the destinations of New York, Chicago, and Florida. Philippine Airlines used to service New York from 1996 to 1997 but was forced to cancel the route due to financial restraints triggered by the Asian financial crisis. Just before the Philippines was downgraded to Category 2 in 2008, Philippine Airlines was also planning to launch flights to Seattle. Although Seattle has not been recently named as an upcoming destination, Ang has indicated that San Diego was high on the list.
Philippine Airlines' current US routes are operated by wide body aircraft with the exception of Guam. Most industry experts agree that focusing expansion in the United States is a much safer bet for PAL rather than competing in Europe where it has a much smaller market and stiff competition from Gulf carriers. Both Philippine Airlines and Cebu Pacific have a unique advantage in the US market being able to draw on the large population of overseas Filipinos.
The United States has by far the largest overseas Filipino population with an estimated 3 million currently residing in the country. Philippine Airlines is currently the only carrier offering non-stop flights between the Philippines and the United States. The US is not only the largest long-haul market for Philippine Airlines but it is also its most profitable as PAL faces intensifying competition on other international routes. North America currently accounts for 16 percent of PAL's overall seat capacity.
Last year, Ramon Ang indicated that PAL intended to fly to Sao Paulo in Brazil via Los Angeles in time for the 2014 FIFA World Cup. But the event is scheduled for June and while the US safety upgrade may have come too late for PAL to exploit that opportunity, there is still much reason to be confident about the airline's prospects in the United States as Philippine Airlines will not need to compete with any of the Gulf carriers on any of its existing or upcoming US routes.. However, PAL may not be alone for long as Cebu Pacific contemplates its options.
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| Copyright Photo: Lester Tangco/PPSG |
In 2012, Cebu Pacific was already eagerly pursuing the US market in spite of Category 2 status. The airline applied for authorization from the US Department of Transportation to be allowed to launch scheduled services from Manila to Guam. It also indicated that it intended to later serve Saipan followed by Honolulu, Los Angeles, and San Francisco upon commencement of its long haul operations.
Cebu Pacific's initial US expansion was planned using wet-leased aircraft from an American carrier or an airline leasing company in a Category 1 country as the Philippines remained in Category 2 status preventing the carrier from launching new routes with its own aircraft. The US Department of Transportation granted Cebu Pacific's request for Guam, Saipan, Honolulu, San Francisco, Los Angeles, and four more additional points in the United States. But Cebu Pacific never proceeded with its original plans.
Cebu Pacific's initial US expansion was planned using wet-leased aircraft from an American carrier or an airline leasing company in a Category 1 country as the Philippines remained in Category 2 status preventing the carrier from launching new routes with its own aircraft. The US Department of Transportation granted Cebu Pacific's request for Guam, Saipan, Honolulu, San Francisco, Los Angeles, and four more additional points in the United States. But Cebu Pacific never proceeded with its original plans.
Most recently, Cebu Pacific expressed interest in serving Hawaii and Guam if the Philippines was upgraded to Category 1. Now that the upgrade has been confirmed, Cebu Pacific can decide whether it wants to deploy one of its existing A330 aircraft to Honolulu. The airline could shuffle its existing schedules to make an aircraft available to launch the route this year or it could wait until 2015 when it is slated to accept delivery of a sixth A330 aircraft.
More Aircraft ComingBoth Philippine Airlines and Cebu Pacific have placed massive multi-billion dollar orders with Airbus for new aircraft. While the majority of aircraft ordered were single-aisle medium range aircraft for domestic and regional routes, both carriers did place orders for new wide-body aircraft. Cebu Pacific placed an order for 8 Airbus A330-300 aircraft while Philippine Airlines placed an order for 20 Airbus A330-300 aircraft. PAL has since cancelled orders for five of its new A330 aircraft due to range limitations.
However, if Philippine Airlines and Cebu Pacific intend to push with expansion into Europe and the United States, they will need to place orders for additional wide-body aircraft. When PAL placed its order for 64 new Airbus jets in 2012, it was announced that the order would form part of a 100 aircraft re-fleeting strategy being implemented by the airline. Since the announcement in 2012, Philippine Airlines has not announced what is expected to be another order for wide-body aircraft to make up the balance. It's likely that Philippine Airlines was waiting for favourable news from the United States and Europe prior to ordering any further wide-body aircraft to avoid the risky position of accepting delivery of new aircraft with no routes to deploy them.
What is clear is that PAL's existing fleet of six Boeing 777 aircraft will not be able to handle Ramon Ang's ambitious expansion plans to Europe and the United States. Although the Airbus A330 could fill some gaps, Philippine Airlines will need a replacement for its fuel inefficient Boeing 747 and A340 fleet. PAL announced last year that it was evaluating a number of long range wide-body aircraft models including the Boeing 747-8, Boeing 777-300ER, Boeing 777-X, Boeing 787-9, Airbus A350-900, and the Airbus A350-1000. The most recent industry rumours indicate that Philippine Airlines is leaning towards an initial order of four A350-900 aircraft.
Meanwhile, Cebu Pacific revealed last year that it was contemplating adding the Boeing 787 Dreamliner or the brand new Airbus A350 to its fleet to support further long-haul expansion. However, it remains unclear if Cebu Pacific intends to place an order in the near future.
Service Improvements
Service Improvements
Philippine Airlines is already beginning to market the deployment of all six of its Boeing 777 aircraft on US routes. "With this, passengers can now enjoy non-stop flights to Los Angeles and San Francisco aboard new aircraft equipped with the most modern cabin and state-of-the-art amenities, including lie-flat beds in Business Class," the airline said in a statement. On flights to Honolulu and Guam, the airline plans to continue using its new Airbus A330 aircraft and existing A320 fleet.
However, if Philippine Airlines wants to succeed, it will need to step up its game as competition increases in the Philippine international market. Although PAL is currently alone on its US routes, Cebu Pacific is not far behind and there are currently highly competitive one-stop products between the US and Philippines. Cathay Pacific is especially strong in the Philippines-US market along with Korean Air and Asiana attracting a large share of the premium passengers.
In spite of its new aircraft, Philippine Airlines remains one of the weakest carriers in Asia in terms of product offerings, financial performance, and network. In addition, PAL is also the only carrier that has not yet joined a global airline alliance putting it at a competitive disadvantage. Although the Boeing 747 fleet and Boeing 777 fleet feature modern cabins with personal in-flight entertainment, the rest of the PAL fleet leaves much to be desired.
There is a lot of hope and a lot of opportunity for both Philippine Airlines and Cebu Pacific in the United States and in Europe. However, competition is fierce and pricing is more competitive than ever before. Both carriers will need to expand carefully and deliver their best if they intend to survive in the long-term.
with the upgrade to category 1 orders for long haul wide bodies will be made by CEB and PAL..
ReplyDeleteWhat's next? PAL and CEB should join alliance network like Oneworld or Star alliance. I'm a member of these two flight programs. I don't fly PAL from the US because I cannot earn or use miles to PAL. Right now for Oneworld, flight to PI from US is very limited for oneworld member. The main carier of One world is American Airlines that doesn't have flights to PI compared to United Airlines and Delta. So it requires connection to Asian partners of One world like Japan airlines, Cathay and Malaysia airlines. But because Malaysia airlines having issue recently, probably this is the opportunity for both PAL and CEB. So this is the time to boost PI economy in airline industry and will create more jobs to PI citizens.
ReplyDeleteI wouldn't fly ceb for long haul flights
ReplyDeleteFlying economy class with very cramped seat configuration for such a long distance to U.S. soil with Cebu Pacific is a BIG NO NO!!! 5J should re-invent their cabin configuration with additional class say PREMIER ECONOMY SEATS and the rest with ECONOMY SEATS with reasonable seat pitch of 31 inch and maintain with original 8 abreast rather than full 9 abreast. Philippine Airlines too need to join airline alliance. It is high time now for our own Flag Carrier joining the preferred alliance they want to join in. Also, PR should IMPROVE their BUSINESS CLASS CABIN & enhance cabin service in order to compete fairly with other reputable airlines in the region and around the world as well.
ReplyDeleteHonestly, I really think that PAL should upgrade their cabin IF they keep their prices sky high. I examined flights From Manila to Osaka and back, and All Nippon Airways beat them by about 5000 pesos and they have more amenities at an affordable price. Its either they upgrade, or lower the prices
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