Bautista Transforming Philippine Airlines into World Class Carrier

Less than a year since the Lucio Tan Group regained control of Philippine Airlines, Jaime Bautista, CEO of Philippine Airlines, has revealed that he plans to restore a premium product across all of Philippine Airlines medium and long-haul routes, providing the carrier with a fighting chance of becoming a competitive world class carrier.

Copyright Photo: Diego Roxas/PPSG
The strategic direction is a refreshing change that contrasts with the direction adopted by San Miguel Corporation, the former management of Philippine Airlines, which nearly transformed the carrier into what they referred to as a "hybrid" carrier but looked a lot more like a low-cost carrier. 

San Miguel stripped down the in-flight amenities across the new Philippine Airlines fleet and configured some of the A330-300 aircraft in a single-class configuration, designed to compete directly with Cebu Pacific's long-haul division. The two Philippine carriers now compete directly on a number of routes to the Middle East and Australia.

Now that Lucio Tan has regained control of Philippine Airlines, the new management is eager to reverse the decision made by San Miguel Corporation and to concentrate on offering a higher end product, rather than follow the path of Cebu Pacific.

According to the Centre for Asia Pacific Aviation, the new path forged by the Lucio Tan Group is far more sensible than that adopted by the San Miguel Corporation given Cebu Pacific's lower cost structure and the fact that premium demand does exist on all routes served by Philippine Airlines' fleet of A330 aircraft. 

Philippine Airlines has earned success particularly in the Dammam market, where it is increasing capacity, while Cebu Pacific has had to scale back. As it begins its new strategic direction, Philippine Airlines plans to standardise its A330-300 aircraft by reconfiguring the fleet, which will help the national carrier to better differentiate itself from Cebu Pacific.

Philippine Airlines plans to retrofit the eight aircraft that are currently in the cramped 414-seat all-economy configuration. The aircraft presently feature 375 seats in regular economy and 39 seats in premium economy. The carrier is now contemplating a less-dense configuration of either 311 or 329 seats. PAL intends to complete the reconfigurations within the next few years. 

Although a less dense configuration would result in capacity reductions on certain routes, it will vastly improve the passenger experience and customer satisfaction on board PAL flights. In addition, the reconfigurations will enable Philippine Airlines to offer a premium product once again across all medium-haul routes.

The seven other A330-300 aircraft that are in the 368-seat three-class configuration with 18 Business Class seats, 27 Premium Economy seats, and 323 Regular Economy seats will remain unchanged. The Premium Economy cabin features additional legroom, but is the same seat that is offered in Regular Economy. 

It remains unclear if Bautista plans to enhance the Premium Economy product to bring Philippine Airlines on par with some of the other premium economy services being offered in the region. It is also uncertain what the Lucio Tan Group plans for in-flight entertainment aboard the fleet.

Philippine Airlines is also keen to offer a standard product across its long-haul network. Most recently, the carrier announced the acquisition of an additional two Boeing 777-300ER aircraft to be delivered next year, which will help PAL to offer a more consistent product offering on its existing long-haul routes. 

Currently, Philippine Airlines services its long-haul routes utilising a combination of Boeing 777 and A340 aircraft. However, the Boeing 777 is considerably better than its older A340 counterpart in both the Economy and Business Class cabins. While the Boeing 777 offers individual monitors in all classes, power ports, and angle-flat seats in Business Class, the A340 is dated with overhead in-flight entertainment monitors in economy class and old recliner style seats in Business Class with no power ports.

The A340 aircraft are currently operating five weekly flights to Los Angeles, four weekly flights to Vancouver, which continue onto New York, three weekly flights to San Francisco, and four weekly flights to London Heathrow.

The stripped down A330 aircraft and older A340 aircraft in the Philippine Airlines fleet were all acquired under the leadership of San Miguel Corporation, which controlled Philippine Airlines from April 2012 to October 2014. The A340-300 aircraft that are now in the fleet are all ex-Iberia aircraft that were acquired under a lease agreement with Airbus. They range in age from thirteen to sixteen years old.

The Boeing 777 aircraft, which now serve as the flagship of the Philippine Airlines fleet, were all acquired under the original fleet plan envisioned by the Lucio Tan Group, when they placed the order with Boeing in 2007. Philippine Airlines currently operates six of the aircraft type, with the most recent arriving in 2013. The two additional aircraft that were just ordered are expected to be delivered next year. 

Philippine Airlines plans to finally phase out the A340 aircraft completely in 2018. Although no announcements have been made, it is believed that the carrier will order the A350-900 to replace the A340 fleet. The modern aircraft developed by Airbus will undoubtedly contribute to improving the on-board experience for passengers aboard Philippine Airlines' long haul flights.

In addition to standardising the medium and long-haul fleet, the Lucio Tan Group is also taking a far more disciplined approach to growth. Since regaining control, Bautista has slowed growth by deferring the delivery of new aircraft. He noted after regaining control of the national carrier that it had approximately seven too many A330 aircraft, which led to the under utilisation of the aircraft in the fleet. 

However, the outlook of Philippine Airlines now looks bright under the leadership of Bautista and the Lucio Tan Group. Providing a uniform product at least in North America, which is the largest international market for Philippine Airlines, will help to improve the carrier's reputation, appeal, and competitiveness. 

Slowing the growth of the fleet to a more disciplined approach also provides Philippine Airlines with an opportunity to concentrate on improving its on-board product and service, following the rapid growth and overly ambitious buying frenzy of the San Miguel Corporation in 2012. 

According to the Centre for Asia Pacific Aviation, the modest growth envisioned by the Lucio Tan Group and the modest number of new long-haul aircraft that the carrier intends to order is an encouraging sign, which is likely to be sustainable in the long-term in the midst of increased competition and healthy economic growth. 

Although Philippine Airlines is presently enjoying lower fuel prices, shifting towards a more efficient long-haul fleet is a sensible decision that will improve the long term competitiveness of the carrier, particularly as it prepares to eventually face competition from Cebu Pacific in its most profitable market on the west coast of North America. 

31 comments:

  1. Retrofitting those A330 is a superb investment by far and hope to see these birds fly the current MNL-HNL tagged to YYC or YEG with traffic rights.

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  2. A340 business class have power ports. Just used them recently on my flight to LAX. This is misleading.

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  3. Back then, I really thought San Miguel was going to save PAL and bring it back to its former glory. Then when they decided to buy those Airbus narrowbodies, I was literally left scratching my head. Here they were talking about expanding to US and Europe and they, but here they were buying A320s and A330s. The moment they got those old A340s raised alarm bells. Then all this talk of single-class configuration was the wtf moment. It's not that San Miguel didn't know what they were doing, it's that they no idea what they wanted to. They wanted to be a 'hybrid' carrier (whatever that means) competing against Cebupac when PALs job was to compete with other regional legacy carriers expanding to many destinations across the globe. They wanted to be everything and ended being all over the place. And when the FAA decided to lift the Philippines to Cat 1, they were caught flat-footed. If not for the 777s the Lucio Tan group ordered, we'd still be flying 747s and A340s through North America. San Miguel clearly lacked vision.

    And while the Lucio Tan group bungled prior to San Miguel, it seemed that now, they have this a clear direction of where they want to go. When Jaime said that they had too many airplanes, I'm sure he meant too many aircraft of the wrong type. I'm sure if they had more long-hauls than short and medium hauls, they wouldn't complain, but it's the other way around. I think we knew then and there that they finally got their game back. Realizing is half the battle, and considering the positive developments happening recently to PAL, things can only look up from now.

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    1. You are delusional. You got it all in reverse. Just go about doing the best for PAL without pointing blame on other people. You just want to have someone to blame in case PAL does not take off for the nth time under LT.

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    2. I'm not pointing out blame. Rather, I'm airing my disappointment. RSA had the opportunity. Opportunity missed.

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    3. I for one is disappointed by the direction PAL took under RSA. PAL livery with some cheap low-cost service and that's his definition of hybrid service.

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  4. I totally agree with the poster above ^^^

    I too, somehow expected San Miguel will be taking Philippine Airlines to be a premier Asian airline once again. Hearing them place an order for 60+ or so Airbus aircraft made me jump for joy! I was telling myself, this is it!!!

    Unfortunately, that joy was short-lived when I soon found out that the aircraft they got were the most basic, unflattering seat design, with no entertainment and super dense configuration! I mean, come on, even the Mabuhay class seats in the new A330 is disappointing!

    I love the A330--it's been my favorite aircraft for a while, and I am glad that PAL is going to retrofit these to a far less dense configuration! I hope they do consider an upgrade and make it similar to the look-and-feel of the B777-300ER...that way, passengers in regional flights, specially with the up-market Japan, Australia, Korea, Singapore routes will really enjoy.

    Just booked my flight to Singapore and flying Singapore Airlines in their new A330 equipped with 10" in-seat video...looking forward to that trip next month!

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    1. RSA knows nothing about airline operation.

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    2. Just remember that San Miguel was co-managing PAL with Lucio Tan. If Lucio Tan failed to provide the correct direction to its partner San Miguel then both of them will surely get lost and it did happen. Besides, it is too early to say if PAL is already on track. Do not count your chickens before they are hatched.

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    3. Corporate world has many politics. The more money you invest in the company, the more seats you have in the board, the more power you have to drive that company.

      If there has been a clear cooperation with both parties, I don't think that the power struggle and wrestling wouldn't have taken place if that's the case.

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  5. Since San Miguel took over and wanted to transform the airline into a LCC- I personally avoided them like a plague.

    With the economy going for the better, Filipinos and our tourists deserve better. LCC airlines have their own market. I don't know any long haul LCC that lasted. If Garuda can do it, no doubt in my mind we can too. Top airlines in the Middle East are manned by Filipinos, no doubt we can replicate this or even better beat this!

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  6. PAL should also improve services at T2. Airconditioning is bad. There is not even a pay lounge compared to T3 and T1 where there is pay lounge. It seems PAL is pampering smokers as they have an area.

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    1. Terminals are owned by the government.

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  7. The primary things that Mr. Bautista need to do are:
    -Arrange a so-called "spot audit" for his international flight crews to fly competitors like SQ, KE, CX and OZ so that these PAL crews would know, if not learn, how and why these competitors are making money/profit. Jaime should let his crews sign a "document" promising to PAL that they are loyal and industrious and understand fully well about what Is expected of them and that PAL can always let them go anytime when their services are no longer needed by PAL
    (In this scenario, one will exert his/her effort to work harder, if not better than the competition).
    -Jaime Bautista can copy or do what these competitor airlines are having and doing, i.e., inflight food, drinks, amenities, souvenirs (SQ gives you a postcard so you can write a message and send it to your friends worldwide. Give it back to the SQ crew for mailing).
    -If these competitors flying B777s over the Pacific Ocean have 9 seating abreast in their economy class cabins, PAL must also copy them.
    These are the only primary ways to transition PAL to become a real competitor globally. PAL, take note: Pinoys around the world and FilAms from North America are no longer sugar cane planters or vegetable pickers (sorry for the bold statement) but this time they are now sophisticated managers, accountants, doctors, nurses, social workers, enterpreneurs, etc. Good luck Jaime Bautista and PAL!

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    1. I am agreeing with your statement, though 9 abreast seating is too loose for a restructuring carrier like PAL. (Even Etihad which is almost a 5-star airline has 10-abreast economy in its 777)
      9-abreast layout is suitable for A350 and 787 with the former and the latter having a narrower fuselage width than the 777. But its a BIG NO for a A330. (unless you're Cebu Pac or ther low-cost carriers)

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    2. - First, Bautista needs to revamp PAL's crew. If they cannot let them go because of the cost of security of tenure (too bad that hampers the change), then invest in training to train them to better serve the customers. Re-fleeting is good, but this is something that is not going to happen over night. They have to start on customer service.
      - Second, aim higher, strategically improve the R&D based on the global market and anticipate what business will come ahead. Look for what competitors are doing and be prepared. When other carriers knew that EU and Cat 2 bans are lifted, they already know how to attack the airline market in the Philippines. but PAL is still behind to anticipate this. i.e., currently ANA and United are offering good deal for business travelers traveling between Asia Pacific, North, Central and South America. Other carriers are even increasing their flights from manila and use manila airport as a hub to connect multiple flights to counter the local carriers expansion. Fernandez' air asia and g'way CEB are used as cheaper connecting flights to get out of the Philippines and grab a cheaper long haul flights from the neighboring countries going to europe and america. This is something that PAL cannot stop, but instead they have to find strategies to counter this, find its weaknesses to make them the strengths (Take note that weakness is the opportunity for business) otherwise PAL's expansion will only succeed in the other side of business, wherein other competitors are taking advantage of its weakness.
      - Third, airport also hampers the growth of the airline business, but in the Philippines you cannot control the government specially their political motives, so Philippine airlines should not just rely to the fact that they cannot have growth because the airport and terminals have already reached their limit. This is another weakness that PAL needs to find a way to expand their business without relying on T2. Take note that the new airport in the Philippines has been the "talks" for more than 2 decades, and if PAL is waiting for that, it is not going to happen soon. Try to utilize other airport as international hub (work with the government) and utilize PAL express more in T3.
      - Fourth, be part of airline alliance network. This is not free and definitely will have cost to PAL, but in return, this alliance network can bring the name of PAL higher. Because the network will help to advertise PAL around the world where all the member's are flying. For example, if American airlines do not have direct flight to manila, it will connect the american airline flight to PAL. This is the biggest advantage of it. At the end the PAL will be respected and earn good reputation. What does it take to be an alliance partner, it's Bautista's problem to present this to LT. LT may not be convinced with the overhead cost, but in return it will benefit more. Look at Garuda Indonesia. In the past I didn't want to fly with it because it was scary, but look at how many stars does Garuda have now 5 stars, even overtaking PAL, competing with SQ and Cathay.

      my 2 cents....

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    3. We are talking urgent matters here so that PAL will not go bankrupt very soon. PAL needs to convince back Pinoys who have been flying those competitor airlines like SQ, CX, OZ and KE. Like me and my family, we now love Asiana (OZ) because of the services and amenities that PAL is unable to surpass or get on par with said airline! Jaime, show me what I am asking for and I will go back to PAL right away! This is what we need now: compete. Those airline alliances will come later when PAL is a real 4-star or better airline!

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    4. And the urgent matter that u r talking about is to go back with PAL? Everything is urgent with PAL now. They've been on business since 1941, first airline in asia, but still struggling to compete. If they don't start somewhere, then there is nothing to expect for a change. I am not sure how PAL can convince other Pinoys to go back with PAL. There are too many factors to consider which is part of the competition. Pinoys are all smart now. If you're looking at the business side when u r flying, loyalty is not gonna help u anything. Don't forget that PAL is doing just business and so as the passengers as well. It's a 2-way approach. Passengers deserve comfort level where they can fly freely with satisfaction and on bugdet. If passengers are looking or aiming something they cannot see from PAL, why get stuck with PAL. Move on, there are even opportunities from other airlines that you can get what you want which may not be profitable for PAL, but profitable for you. Don't forget that. And in due time, when PAL realized all these, it would help PAL to improve. That's how it is until the trust and reputation are earned. Like what R. Ang did. Why he backed off anyway from PAL? I dont know, but I believe its all about business. Maybe PAL is a failire for him. He had some ideas that I was not convinced too. Like planning to build his own airport replacing NAIA which I knew it was a joke. SMC is running the airport in Boracay, which was a disaster. It was a 25-year rehabilitation contract originally approved bu DOTC. Now it's trying to expand but still below In the average airport standard. How can u buy such idea. I bet that in few years time when boracay gets crowded it will introduce another problem, like NAIA now that would end up to reinvent the wheel. Jaime bautista has a good vision. I would advise him to continue to aim higher. And consider or try to understand what some people's advice from this thread. He may not know the experiences and professions of some people that are contributing in this thread.

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    5. Blah, blah, blah.........

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  8. Mabuhay si Jaime Bautista!

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  9. Wow i fly pal lax to mnl on b777 .good foods, ife in every seats,attentive fa and the plane is 100% full of passengers.

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  10. @ June 19/1:59 AM Hindi ko kailangan ng expanacion pero ang masasabi ko lang ay gusto kong makita ang PAL na makaahon sa mga financial problems niya. Dahil lagi kaming nagbibiahe mula LA to Manila, ay gusto naming balikan ang PAL kung and servisyo at amenities niya ay 4-star caliber (o higit pa) kagaya ng competisyon. Simple lang ito di ba? Iyon lang ang gusto kong ipa-alam kay Jaime Bautista dahil sa artikulong gagawin niyang world class airline ang PAL. Por favor, ayoko nang reply sa Ingles dahil ang daming nagmamarunong na problem solver para sa PAL.! Good bye, see you when you are a world class airline, PAL!i

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    1. I don't think the contributors in this thread are "nagmamarunong". Everyone is entitled to give their own opinion in a healthy conversation. Using the word "nagmamarunong" seems like refering to a a person with lack of knowledge and experience. Please don't judge other contribitors as they may really have experience and business education needed like an MBA degree obtained from a well respected university in the U.S. as they may only be sharing their knowledge.

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    2. It is the fare, the amenities, the service and the aircraft.......That's all!

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  11. Dear PAL, If you plan to acquire additional aircraft, no matter what model, please don't forget your economy class passengers. IFEs with USB ports are needed instead of the old school overhead screens or purchasing WiFi time, decent legroom, warm hospitality and other amenities. If PAL desires to be a WORLD CLASS carrier, it's in ALL CLASSES. Hint: Singapore, Cathay and Emirates. Best wishes!

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  12. Will Jaime Bautista transform PAL's Airbus A330-300 into 8-abreast seating configuration for economy class?

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    1. They will reconfigure the A330s soon.

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    2. Dapat lang, kagaya ng Singapore Airlines A330.

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  13. 7 months on and zero changes.
    PAL needs to put its money where Jaime Bautista's mouth is.

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  14. 검증카 먹튀검증 안전놀이터

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