United Airlines Seeks Expansion in Philippines

American carrier United Airlines is interested in expanding its operations in the Philippines as it explores new destinations and routes beyond its existing routes from Manila to Guam and Koror. The airline is currently contemplating growing its four percent market share in the Philippines by launching new routes to San Francisco and Honolulu.

Copyright Photo: Angelo Agcamaran/PPSG

United Airlines currently operates thirteen weekly flights from Manila to Guam and Koror, using a Boeing 737-800 aircraft. United inherited the route, when it merged with Continental Airlines, which previously operated the route under Continental Micronesia.

According to United Airlines Country Manager for the Philippines, Maria Concepcion Perdon, the Philippines is an important market for the US based carrier. "Right now we have a four-percent market share and we hope to grow it," said Perdon. "The Philippines is a very important market for United that is why we have been here for 30 years."

Perdon noted that United Airlines currently enjoys a load factor of 80 percent for its Philippine operations. "The Manila-Guam route has been profitable for us," said Perdon. "There are many Filipinos living in Guam." With United Airlines' success in the Philippines over the last three decades, the airline sees an opportunity for expansion.

United Airlines is presently considering launching its own flights between Honolulu and Manila, to capture the market share, previously held by Hawaiian Airlines, that stopped serving Manila in 2013. If United was to launch a route to Honolulu, it would compete directly with Philippine Airlines, which currently operates the only direct flight between Manila and Honolulu. 

When it cancelled the route, Hawaiian Airlines cited the lower cost-base of Philippine Airlines, which put them at a competitive disadvantage, unable to match the low fares offered by Philippine carriers to make the route viable. United Airlines may face a similar challenge, when the market becomes even more price-competitive as Cebu Pacific prepares to launch its own flights to Honolulu later this year. The entry of Cebu Pacific could pose a serious challenge as United seeks to gain market share on the route.

Meanwhile, United Airlines is exploring other US destinations that could prove to be profitable routes for the carrier from the Philippines. It may even consider serving other Philippine destinations such as Cebu. According to Jake Cefolia, United Airlines' Vice President for Sales in Atlantic and Pacific, the airline is currently exploring non-stop service to Manila from destinations such as San Francisco. 

"The Manila-San Francisco route is always on the drawing board," said Cefolia. He added that United is carefully studying opportunities to ensure that it only enters markets, where it has a presence below the gross domestic product growth in order to avoid overcapacity. "We intend to keep the capacity growth between the level of GDP growth in the markets that we serve because we want to keep from a situation wherein there is more supply than demand."

Philippine Airlines has long been the sole carrier operating non-stop routes between the Philippines and the United States. With the largest population of overseas Filipinos, the United States is a highly lucrative and profitable market for Philippine Airlines, which has been uncontested on its Los Angeles and San Francisco routes for the past several years. "There is a tremendous amount of demand," said Cefolia. "Sometimes it seems insatiable demand in Manila. It is the highest volume market between Asia and the US. However, it is also an incredibly price sensitive market."

The price sensitivity of the Philippine market is likely one reason that US carriers have avoided the Philippines, preferring to enter routes with higher yields and stronger demand for premium services such as Business Class. But with the rapidly expanding economy, growing middle class, and rising popularity as a tourist destination, the Philippines is becoming a highly attractive market. 

"The Asia-Pacific region, including the Philippines, remain a critical asset for our airline," said Perdon. "We operate ideal Pacific gateways in San Francisco and Los Angeles, the two largest local markets on the west coast, and offer our customers an unmatched level of service to Asia Pacific."

United Airlines is currently in the process of a re-fleeting program that will see the carrier accept delivery of more than thirty brand-new Boeing aircraft including the Boeing 787-9 Dreamliner. Although the airline has not confirmed what aircraft it may deploy on any new routes to the Philippines, the Boeing 787 may be a possibility.