Should Philippine Airlines Pursue Additional Used Long-Haul Aircraft?

As Philippine Airlines continues to pursue expansion in the United States, the airline remains in need of additional long-haul aircraft. Although the carrier has not revealed which new aircraft it wishes to pursue, there are presently opportunities in the used aircraft market for PAL to acquire aircraft at a faster pace. If Philippine Airlines decides to wait for the delivery of new aircraft, it could be several years before the carrier is able to proceed with its expansion plans. 

Image Source: Wikimedia
Last April, Air India placed three Boeing 777-200LR aircraft up for sale in an effort to cut costs and retire debt. The Boeing 777-200LR is a smaller, long range variant of PAL's current flagship aircraft, the Boeing 777-300ER. Air India is determined to discard the aircraft claiming that they are fuel guzzlers. However, the Indian flag carrier has had challenges locating buyers at a suitable price.
According to a source at Air India, "The Boeing 777-200LR is not a fuel-efficient aircraft and on average, it burns seven tonnes of fuel an hour. In comparison, the Boeing 787 burns five tonnes and larger Boeing 777-300ER aircraft burn 7.5 tonnes." The source added that the higher fuel burn was impacting route viability, which resulted in the decision to sell or lease the aircraft.
Currently, as many as nine international carriers operate the Boeing 777-200LR including Etihad Airways and Japan Airlines. Last October, Etihad purchased five 777-200LR aircraft that Air India had up for sale at a bargain basement price of $70 million each. However, that is not the type of deal that Air India wishes to replicate. 
Air India used the aircraft on non-stop flights to New York and planned service to San Francisco. But the San Francisco plans were shelved when fuel prices increased and the airline failed to generate sufficient premium traffic, which led to losses. At present, Air India is using the proceeds of the sale of these aircraft to retire the debt incurred in their acquisition.
The tender for the sale of these three aircraft remains open until at least one reasonable bid is received. The carrier also says that it is open to the option of leasing the aircraft in the event that it cannot obtain a suitable price for them. Last month, Air India stated that they wished to either sell the three aircraft or dry-lease them for a period of up to ten years.
"We are open to both the options -- outright sale or lease. These planes are uncompetitive for us and there is no point keeping them in the fleet," said Air India officials. "If you don't get good prices for these planes, we are ready to put them on dry lease too."
A dry lease is when an aircraft is provided under lease, but the maintenance and flight crew are the responsibility of the lessee. The three Air India Boeing 777-200LR aircraft were built in 2009 and configured with just 235 seats. The normal industry standard for this particular aircraft is a configuration of 290 to 300 seats. Air India had planned to operate them on ultra long-haul routes to major cities such as Chicago, New York, and Toronto with a focus on premium fares. However, the plan failed to materialize.
Meanwhile, the decision to acquire additional long-haul aircraft at Philippine Airlines is presently stalled as the two stakeholders battle for control of the company. As PAL President Ramon Ang earlier stated, it is in the best interests of the carrier to resolve the ownership dispute as soon as possible. 
When the Philippines was lifted out of Category 2 status earlier this year, Ang unveiled an ambitious expansion plan to the United States that would involve new destinations on the US East Coast including New York, Chicago, and Florida. Ang noted that the carrier had already began considering its options for fleet expansion, that would enable Philippine Airlines to launch these new destinations using more fuel efficient aircraft as early as this October. 
Copyright Photo: Angelo Agcamaran/PPSG
Ang confirmed that the carrier was studying whether to lease or acquire additional Boeing 777 aircraft, which has the capacity and range required to serve both Europe and the United States non-stop from the Philippines. Ang also revealed that the long-range Airbus A350 aircraft was under consideration. 
Philippine Airlines currently has six Boeing 777-300ER aircraft in its fleet but these are already fully utilised on routes to San Francisco, Los Angeles, Vancouver, and Toronto. The London route has been downgraded to the older and less fuel-efficient A340-300 as Philippine Airlines does not have a sufficient number of modern 777 aircraft to serve all routes on a full-time basis. Although the A340-300 can operate these routes comfortably, these ageing aircraft are not a long-term solution given their fuel inefficiency.
According to the Centre for Aviation, although PAL is considering the new A350 and the Boeing 777, the carrier will likely need to opt for the Boeing as delivery slots for the newer A350 are difficult to attain forcing PAL to wait for an extended period of time. "The acquisition of additional 777-300ER's through leases or new orders becomes more likely as it remains the preferred type for US routes," said CAPA.

35 comments:

  1. Heard the reason why there are no takers for the Air India 777s is shoddy paperwork. Then again, if PAL is willing to do maintenance in China...

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    1. Exactly what I heard on these 3 frames. Have had several companies examine the MX records and no takers. I flat out would be really disappointed if PAL seriously considered these frames.

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  2. I don't think PAL can afford to buy new planes to modernize its fleet. There's a huge number of PAL airplanes left parked at NAIA, underutilized.

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    1. They should sell some of their A321s to make money for more 777s.

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    2. uhm the a321's are new, so why would they sell the newly ordered/delivered a321s??

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    3. Uhm... Because they ordered way too much? Their utilization rate on these aircraft is way below industry average for them to make money on these planes.

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    4. uhm, they only got what, 8/26 a321's and that doesnt include the a321neo, its way better to just cancel their remaining orders instead of selling the brand new aircrafts they just recieved dont you think?

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    5. Uhm, exactly! Whether they cancel the remaining orders or sell what they currently have doesn't make a difference. The bottom line is, they have way too many planes on order. They can't even figure out where to put these planes.

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    6. I know right? Duh!

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    7. But PAL is planning to replace the older A320s with the 321s isn't it?

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  3. JL does not operate the 777L.

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  4. Many of the retired PAL planes are in Clark. But since many of these planes have high fuel consumption making operation very costly, who would be in his right mind to be buying those antiquated planes.

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  5. This:
    http://www.airliners.net/aviation-forums/general_aviation/read.main/6153648/

    Poor maintenance, higher costs for reactivation and AI's unwillingness to price it lower.

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  6. PAL's solution to new planes is very simple:
    Buy the "teen" Boeing 787-8s. Each one is for sale at $100M!

    These are the 10th-20th Boeing 787-8s constructed. They are slightly heavier and fly around 1,000km less. With a standard range of 14,500km, what is 1,000km less? London is 10,700km. Vancouver is 10,500km. San Diego is 11,800km.

    The planes are smaller (so easier to fill up the seats), much more fuel efficient (5tons/hr vs. 7.5tons/hr), and are already built! They need just a buyer and will be painted right away.

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  7. I think it's best for them to settle the ownership dispute first, sell or at least lease all remaining fuel inefficient planes (747s, A340s), and if/when Ang gets hold of the airline 100% then he can buy modern fuel and efficient planes; either buying more 777-300ERs, wait for 777-9x to be serviceable in the years to come, buy 10 787-8s which Joseph Cheng posted above, 787-9s which will also take a long time for them to receive, A350s again which will take them behind numerous orders by other big airlines, or lessen their ambitions to expand their routes which cannot be materialized until more fuel efficient planes become part of their fleet. They can always cancel their orders, SMC has the budget provided that Ang gets 100% control of the airline of which I think Tan won't easily allow. Maybe it's good if they place their orders as soon as possible so as to reduce the gap of being behind the queue anyways they could just cancel it if they find it unfeasible in the long run at least they may have cheated time a little by being at least halfway for their orders to be delivered. I know it's not that easy to just do it though it's too easy to say but I hope they could find an efficient way to materialize their expansion plans. My opinion. I could be wrong. Just sayin' Peace out.

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  8. if you've ever flown on air india, you'd never ever consider taking their used aircraft. too stinky!

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    1. You're lucky that one can post as anonymous because that comment is ridiculous and an embarrassment to Filipinos. Have some respect!

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    2. air india is better than pal.. and they have a very nice airport in delhi.. gmr, same company that will build new cebu airport. show some respect, filipinos smell to..

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  9. Smell of Indian curry!

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  10. PAL will turn out better if it will fall in the hands of Ang. It will just be difficult for Lucio Tan to show his face to the Fil-Chi community if he will fail to raise the $1B + to get PAL back. That is why I think by hook or by crook Lucio Tan will fight tooth and nail to get PAL. But if Lucio succeeds, will PAL move forward? I doubt that very much. He had his time under very favorable conditions (no LCC) yet PAL did not take off.

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    1. Favorable conditions for Lucio? Sure, if you consider the Asian Financial Crisis, 9/11, SARS, corrupt Presidents, and a weak economy favorable conditions. CEO's are not super heroes - they can only do so much to mitigate environmental factors that reach beyond their control. Let us not forget that during the same time period that Tan was at the helm of PAL, several US carriers filed for Chapter 11 bankruptcy. So, it wasn't only PAL that was struggling and it had nothing to do with the CEO but rather market conditions. The 777 fleet is the best thing that ever happened to PAL in recent years and that is a credit to Tan. While he's not perfect, at least he had the courtesy to install AVOD IFE for passengers.

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    2. But you failed to mention that during the Tan years, PAL had a captive market because of the global displacement of Filipino professionals. PAL had a loyal market with little marketing efforts. You also failed to mention that there were no or little LCCs and the industry was regulated making PAL the only choice for the loyal Filipinos. Even in those trying times, PAL came through because of the favorable conditions at that time . Being the case, Tan was so complacent he hardly made effort to improve PAL and did not understand the business challenge posed by the LCCs so slowly PAL lost the Domestic market to Cebu Pac. If the clamor is for IFE on long haul flights, isnt that a situation that can be easily improved by Ang if he wants to?

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  11. if there are 10 787-8 available, PAL should grab them. There are probably no 77W available for sale or lease since they are so in demand. 787-9 and A350 are minimum 2-3 years away before delivery. A 787-8 with 200 sears in a 2-class configuration would be perfect for PAL's long and thin European routes. ANA flies it from FRA-NRT.

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  12. I note that there are airlines which operate the A340-300 on their long-haul routes, i.e. Swiss, Lufthansa, Cathay Pacific, SAS, Turkish to name a few. I cannot believe that they would continue to operate the A343 if they were not profitable.

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    1. It has nothing to do with profitability. People are slamming the A340's PAL are using because they have not been modernized and equipped with the same amenities as the B777 fleet. Otherwise, they likely wouldn't care. However, while the A340 can still generate a profit, it's not as profitable as newer modern aircraft with twin engines.

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    2. im from Norway and i cant understand pal using a340s, passangers from norway refuse to take a340s to bkk or japan.. and most of the people use either thai or qatar out from oslo. qatar uses 787s and passangers love it. bad move of pal.. they will go down as SAS are doing due to old aircraft.

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    3. It's not like you just grab planes over the shelf. It takes years for them to get delivered. Expect more wide body orders after ownership dispute is over.

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  13. I could never understand why Ang chose to sell the A-340s, which PAL bought brand new, and replace them with second hand A-340s from Iberia. Most airlines are getting rid of their A-340s.

    The Boeing 787 is indeed the ideal plane to use for European routes.

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    1. Iberia 340 are newer than pal orignal 340 which acquired 1996.

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  14. Airbus are selling three of the A350XWB test fleet next year.
    Probably a friendly price and new aircraft warrany?

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  15. pal should invest in 787s wich is much cheaper than a350s.. and those 777s that air India is selling will be taken by Etihad as they already agreed to. what pal should do is fire everyone in the management and let some foreigner with airline experience teach locala how to run an airline.

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  16. http://www.philstar.com/business/2014/08/18/1358634/pal-further-tweaks-aircraft-order-airbus

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  17. PAL, ayan na si Lucio Tan. Palpak Airline na yan uli.

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  18. These 10 B788s from Boeing are in a two class configuration i.e. 18 business class + 244 economy class so 262 in total. No one will also buy AI's B77Ls in its current premium 3 class configuration !

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  19. 에볼루션게임 먹튀검증 안전노리터 go

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