Philippine Airlines to Finance New Long-Haul Aircraft through Cancelled A330 Leases

A clear shift in focus is under way at Philippine Airlines as it shifts its attention from its medium-haul routes to its long-haul future. Reversing the decision of the previous management to acquire A330-300 aircraft for Middle East routes, Philippine Airlines now plans to return the aircraft to help fund the acquisition of new long-haul aircraft. 

Copyright Photo: Angelo Agcamaran/PPSG
It became apparent that the spending spree of former PAL President Ramon Ang had been overly ambitious when it was announced in April 2014 that Philippine Airlines would be cancelling five orders for A330-300 aircraft in favour of additional A321 aircraft.

Since regaining control of Philippine Airlines, the Lucio Tan Group under the leadership of returning PAL President Jaime Bautista has made it no secret that the San Miguel Corporation ordered too many aircraft with no routes to fly. 

Bautista is now acting on the findings by returning eight of the previously ordered mono-class Airbus A330-300 aircraft to German lessors as Philippine Airlines changes strategy and abandons plans to expand in the Middle East. San Miguel Corporation had ordered the aircraft with the intention of competing directly against Cebu Pacific on Middle East routes. 

Since 2012, Philippine Airlines did launch flights to Dubai, Riyadh, Abu Dhabi, and Dammam. However, previous plans to serve Jeddah, Doha, Kuwait, and Muscat are now on hold as the national flag carrier focuses more on lucrative long-haul routes and the non-budget sector. 

Bautista would prefer to fly the carrier's multi-class A330-300 fleet to the Middle East, acknowledging the demand for premium services on the routes, while abandoning the budget model that Cebu Pacific has adopted. Bautista's strategy seems to be working as Philippine Airlines has increased service on some of its Middle East routes, while Cebu Pacific was forced to scale back.

Philippine Airlines posted a $50 million profit in the first two months of 2015 due to what Bautista calls "fleet rationalization." Last October, Bautista criticized San Miguel management stating that, "We have too many A330's and A321's with nowhere to fly to. There were too many orders from Mr. Ang's management," said Bautista. "We really have to check if the markets we're servicing now require all these planes."

Bautista's decision to ditch the mono-class A330 fleet acknowledges the need for aircraft with multiple classes of service, as well as the decision to not open any additional routes in the Middle East in the near future. Furthermore, it is an acknowledgement of the dissatisfaction of passengers with the mono-class budget service, which failed to gain any traction among Philippine Airlines passengers.

Philippine Airlines now plans to use the savings from the cancelled A330-300 leases to fund new orders for long-haul aircraft. According to Bautista, Philippine Airlines currently prefers the A350-900 for its ability to fly Manila to New York non-stop without payload restrictions.

PAL is hoping to accept delivery of new long-haul aircraft by 2018 as it intends to retire the A340-300 from the fleet permanently in that year. Philippine Airlines is expected to make an announcement on a new aircraft order in the near future.

Most recently, PAL revealed that it entered into a lease agreement with Intrepid Aviation for two additional Boeing 777 aircraft, which will be delivered next year. These aircraft will be used on routes to North America such as Manila to Los Angeles and Manila to San Francisco as Philippine Airlines attempts to standardise its long-haul fleet and in-flight experience.

30 comments:

  1. I have been hearing good news from PAL ever since Bautista took management!
    Im very happy to see PAL changing things up from the bad choices Ang did.
    So exciting to see what Bautista plan are in the future! :D

    ReplyDelete
  2. How close is PAL to ordering new long-haul jets? The Paris Airshow is over, isn't it?

    ReplyDelete
  3. Since PAL and Airbus apparently had discussions at the Air Show, I expect them to announce an order (for A350s?) very soon. Who knows, PAL might surprise us and even announce an A330neo order as well, but that's unlikely. But I expect PAL to get the A350 for now, then maybe the 787 and/or the 777X in the future if they also want them.

    ReplyDelete
    Replies
    1. I agree! The A350 can support markets not yet reaching the demand for B777s, but the B787 can open new markets that larger long range are not capable. The 787s can be considered a start up to grow long haul low passenger demand routes. For now, it is not yet necessary to make it appropriate for PAL's limited finances. Better lease aircraft and improve cabin interior and services that can make it worth flying for every passenger.

      Delete
  4. Good strategy but the question is until when? If Cebu Pacific will enter long-hauled flights I think PAL future plan is 50-50. I agree with Mr. Ramon Ang, PAL Domestic routes is in Bad Shape most are half full. Btw Cebu Pacific order 16 units ATR Aircraft plus 10 option for short regional haul last week during Paris Airshow. If I where PAL if cant beat them.. GOIN THEM!

    ReplyDelete
  5. Logical choice, if these types are not generating revenue and destroys the brand, better dump it.

    -wEel^

    ReplyDelete
  6. PAL might as well consider the 777X since it wants to focus more on long-haul routes, as well as the 787 to be used on low demand long-haul routes. The 777X is a perfect replacement to their retired 747-400, as it can be configured with 10-abreast 3-4-3 seat layout with standard 18'' seat width, but more fuel-efficient than the quad-engined 747. The 777-300ER will be obsolete in less than a decade. The A350 is a good choice though, perfect replacement for their A340 and A330.

    ReplyDelete
    Replies
    1. The problem is the availability of 777X which is beyond 2020 and they need the plane sooner than later...

      777X will surely be a replacement for the existing 77W...

      Delete
  7. PAL might as well consider the 777X since it wants to focus more on long-haul routes, as well as the 787 to be used on low demand long-haul routes. The 777X is a perfect replacement to their retired 747-400, as it can be configured with 10-abreast 3-4-3 seat layout with standard 18'' seat width, but more fuel-efficient than the quad-engined 747. The 777-300ER will be obsolete in less than a decade. The A350 is a good choice though, perfect replacement for their A340 and A330.

    ReplyDelete
  8. Gettting boring, really !

    ReplyDelete
  9. the 777 wont be obsolete in 10 years there will of course be improvements and other options by then but if they dont move with more 777's now they will not be able expand their long haul north America while the timing is good. The need about 6 more 777-300ER/s now and at least four 787's to come in the next 3 years and this will allow for retirment of the 340's and allow for optimizing routes and ticket sales. Then about 2019 they consider replacing the older 777-3ERS wchich will be about 10 years old...continue moving forward....

    ReplyDelete
  10. A350-900 aircraft on Manila to JFK nonstop without payload restrictions. Yes it is possible. But do not forget that Singapore Airlines has ditched a recent Singapore to JFK route nonstop with all first and business class configuration, why? It did not make money, meaning, the cost of sales is higher than sales which equaled to no profit! That's Singapore Airlines, my friend, the second best airline in the world today! Qatar is reportedly the best now!

    ReplyDelete
    Replies
    1. I think the reason of the demise of SQ's SIN-EWR all biz class was the usage of quad engined A340 which was a gas guzzler during the high cost of aviation fuel n was too expensive to maintain on a non-stop flights..jst my recollection.

      Delete
    2. Yes, you are right, sir! It is called Cost of Sales (in Accounting).....LOL

      Delete
    3. Thnx for d enlightenment! Not used to accounting jargons...u learned new things everyday ika nga there's always a first time! ..lol

      Delete
  11. Mr Bautista should consider the Sydney and Melbourne routes on which passengers have to put up with the narrow seats and (in economy) lack of IFE on the crammed A333s, which while only full during our four Australian school holiday periods each year and in the run up to Holy Week are not a particularly nice aircraft.

    While I will mostly continue to patronise PAL on my trips between Melbourne and Manila, because its thrice weekly non stop flights save at least four hours compared with any other airline, it needs to recognise that IFE is standard on almost all planes flying internationally out of Australia.

    In short, Australians need PAL to acquire 77Ws or similar to go back on the two main Australian routes ex Manila. The &&Ws, while 10 across in economy are an excellent plane, far preferable to the current Airbus products. Apart from delivery delays and possible better financing deals, I don't understand why PAL wants to order more Airbuses when Boeing is clearly the preferred choice of many travellers.

    ReplyDelete
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  13. Airbus just asked SIA to return orders for 7 Airbus A350-900 which were supposed to be delivered starting 2016. The 7 planes are to be re-sold to another airlines. Could this be PAL?

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