Could Cebu Pacific Invest in Philippine Airlines?

While Philippine Airlines may have struggled financially for several years, the country's largest low cost carrier has not had the same misfortune. The parent company of Cebu Pacific, JG Summit Holdings, is reportedly open to an investment in flag carrier Philippine Airlines.

Copyright Photo: Diego Roxas/PPSG
According to Bach Johann Sebastian, Senior Vice President and Chief Strategist for Cebu Pacific, the carrier is open to exploring new opportunities as long as there is a strong business case. "We don’t have a business case in owning a full-service airline because what we have now is a low-cost airline," said Sebastian. "But we’re always looking at all opportunities." He added that the company is reviewing how an investment might benefit Cebu Pacific as they have an entirely different business model.

Should Cebu Pacific seriously consider an investment in Philippine Airlines, a number of aspects of such a deal would need to be scrutinized given the regulatory implications. Sebastian indicated that this kind of deal would need to pass through Congress in order to comply with the existing congressional franchise. Moreover, the deal would also need to pass through the Civil Aeronautics Board, which would evaluate the competitive landscape to determine if fair competition would be at risk in the industry. The Civil Aviation Authority of the Philippines would also need to be involved to evaluate other possible implications that the deal could have on the nation's airline industry. However, to date, Cebu Pacific and Philippine Airlines have not approached one another to discuss any prospective deal.

MVP: NO INTEREST IN PHILIPPINE AIRLINES

Meanwhile, Manuel Pangilinan has clarified his intentions regarding Philippine Airlines. Two years ago, Pangilinan, a prominent businessman, revealed his interest in obtaining a stake in Philippines Airlines. However, Ramon Ang of San Miguel Corporation got the deal instead. But at a recent announcement of Philippine Long Distance Company (PLDT) financial results, Pangilinan revealed that a possible investment in the airline is no longer on his radar screen. “Our offer at that time was at a different configuration," said Pangilinan. He added that buying an airline is not in their line of business.

-Travelling_bk

28 comments:

  1. No. Lucio Tan Group should invest 100% for Philippine Airlines. Lucio Tan's management for Philippine Airlines, for my own opinion, looks great.

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  2. yeah.. lucio tan's management managed to put PAL in the red.

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    1. Tan prefers quality. Sadly that strategy won't work for the price conscious Philippine market. Aside from the deplorable state of NAIA, PAL has to compete with Cebu Pacific prices. That means more cost cutting or go bankrupt. Tan's strategy of quality over profits (or lack there of) is not sustainable in the short and medium term for PAL.

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    2. well if you're not going to put QUALITY in PAL then don't bother expanding routes because you're targeting the wrong market. Filipinos in New York, Toronto, London, Paris, etc. maybe frugal but they are expecting QUALITY from PAL. Afterall, most of them have been on a QUALITY full service airline or two like Cathay Pacific, Korean Air, Eva Air, Air France, Etihad, Air Canda, KLM, and others. And once they have experienced being on a PAL flight to Manila, I don't think they would go on it again. PAL does not have the product that can compete in the international long haul segment except for the ones currently being serviced by the B777s.

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    3. I'm sorry but being frugal and expecting quality do not go in the same boat. Quality is precisely why Singapore, Garuda, and in many ways Malaysia are losing money to the likes of Air Asia. The Philippine middle class, whether domestic or abroad, is not large enough to sustain an airline dedicated to quality over low prices. Add to that, how can you have quality on business/economy class when your hub is the worst airport in the world. Time to change strategies so this airline can make money.

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    4. PAL is not a low cost brand. If people do not understand how to run a brand like PAL, then just get out of the situation and hand it over to people who know how. Definitely, that would not be Lucio and the way to go is to not partner with a no-star airline like Etihad.

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    5. Being frugal while expecting quality is possible for Filipinos who live in the west. They have a lot of choice among leading airlines if they want to go to the Philippines. While they cannot expect to pay reasonable price and expect quality from PAL, but that is exactly my point. PAL should stop expanding routes to New York, Orlando, Paris, London, Toronto, etc. because they already know that they are not going to get business from Filipinos who live in these cities. They might get those who are curious about PAL, but I'm almost sure that they will not get return business specially from frequent fliers. And that goes for foreign tourists as well. As of current prices, PAL is not the cheapest from Toronto to Manila at this time. Korean and Eva Air is cheaper. Both has 9 abreast on economy compared to 10 with PAL's B777

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  3. Well the PAL service levels are almost on a par with Cebu Pacific, so why not?

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  4. Lucio Tan should just get out of the way so SMC can fully implement its overhaul.

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  5. Absolutely not! Lack of competition would drive up the prices!

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  6. Lucio Tan should just let Ramon Ang do his thing if it is true that PAL will soon be making money. Afterall, if PAL will make money the effect of that is Lucio Tan will also make money because of his 51% stake in PAL.

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  7. PAL does not earn under Lucio Tan. It is only the other businesses of Lucio Tan which are connected with PAL that make money. PAL is just an opportunity for the multitudinous children of Lucio Tan to advance their low-class businesses in PAL. Shame to these people.

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  8. Cebu is a Low cost budget airline while Phil Airlines is a full service airline and never the twain shall meet. They have different identities.

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    1. Spot the differences... PAL flies an old A340 without IFE to Sydney, Cebu Pacific will fly a new A330 without IFE to Sydney (although admittedly cramped with 436 pax).

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  9. I think it's enough for Lucio Tan running PAL, they have done so for nearly 20 years and look at where the airline is now. Gokongwei's will never gain control of PAL in their wildest dream as this will require regulatory and government approval which will never pass. Let's just give a chance to Ramon Ang and hopefully will make the airline turn to profits.

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