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Opinion: Does the Philippines Need More UAE Flights?

As bilateral talks progress between the Philippines and the United Arab Emirates, many are wondering what the future holds for the nation's carriers in the Middle East. Gulf carriers like Emirates are asking for more flights, while Philippine carriers cannot even fill theirs. Some Filipinos fear that additional flight entitlements for Gulf carriers would bleed our national carriers. But the Philippine government seems to view the issue differently. The issue requires more clarity and perspective than what the Philippine carriers are willing to offer.
emirates manila
Copyright Photo: Angelo Agcamaran/PPSG
Cebu Pacific and Philippine Airlines have been strongly opposed to re-opening air talks with the United Arab Emirates, suggesting that the market is already saturated with carriers and flights. But Gulf carriers are reporting completely sold out flights, having used all of their flight entitlements, while Philippine carriers have not even used their entire allocation of flights. 
In a joint statement, Philippine Airlines and Cebu Pacific asked "the Philippine government to resist any and all pressure to grant unfair advantage to the airlines of the United Arab Emirates in the form of unjustified and unnecessary disruptive additional rights to serve Manila."
Earlier this week, both Philippine carriers dared the Gulf carriers to attempt operating outside of Manila. This is a move that has already been made by Emirates and Qatar Airways, when they launched service to Clark International Airport in Pampanga. Although the Emirates route did not survive, the Gulf carriers demonstrated more courage than Philippine carriers, which have never attempted to operate Middle East flights outside of Manila in recent years. If PAL believes Cebu and Clark are viable markets for Middle East flights, PAL should put its money where its mouth is. After all, the national flag carrier has excess aircraft that need routes to fly. In addition, Clark Airport would like to see the return of non-stop service to the United Arab Emirates.
The Philippine carriers claim that additional entitlements to Manila are unnecessary because supply exceeds the actual demand for the UAE market. However, this statement requires further clarification. The current supply of seats exceeds the demand for Philippine carriers. However, it does not exceed the demand for Gulf carriers like Emirates, which are operating most flights at 100% capacity in economy class. In short, the services of Gulf carriers are in demand, while those of Philippine carriers are not.
Is that something that we should blame the Gulf carriers for? When Cebu Pacific launched flights to Dubai, Emirates did not attempt to match or undercut their fares. Therefore, the travelling public has spoken. If there is anyone to blame, let it be the passengers, most of whom are the overseas Filipinos that the Philippine carriers are targeting. If Philippine carriers are so vital or important to the UAE market, then why aren't the passengers choosing them out of their own free will?
If Filipinos truly believe in standing behind their national carrier, then perhaps they should protest the decision of the Philippine government to re-open air talks by using their wallets and "Flying the Flag." After all, Emirates would not be looking to increase flights if they did not believe the demand was there. 
But again, Philippine carriers are trying to force the travelling public to fly with Philippine carriers by denying them the right to choose out of fear that they might indeed choose the Gulf carriers. We could understand the unfairness of the situation for Philippine carriers if subsidized Gulf carriers were offering the lowest fares but we know that Cebu Pacific has the lowest fares and still fails to attract the same demand. 
According to Emirates, since the carrier lost their third daily flight to Manila, the two remaining daily flights have been operating at near capacity. "Since the removal of the third daily flight, Emirates' two daily flights on the Dubai-Manila route have been operating at 100 percent capacity in economy class on most of the flights - with no seats left for international tourists and overseas Filipino workers," said Emirates Country Manager Abdalla Al Zamani. "Taking this into consideration, we are confident that the restoration of Emirates' third daily flight to Manila will ensure widespread and sustained benefits to all stakeholders." He added that there is a significant gap between the supply and demand for seats.
Philippine carriers are concerned that an increase in flights by Emirates will undermine the investments Cebu Pacific and Philippine Airlines have made in Dubai. But what about the investments that Emirates has made in the Philippines? Having served Manila for the last 25 years, it is safe to say that Emirates played a vital role in both trade and tourism, which has led to job creation. Is denying them the right to grow and satisfy demand for flights to the Philippines the right way to thank a partner and investor in the country, particularly when national tourism goals are at stake?
Having said all of this, it is fair to say that not all the passengers travelling aboard Emirates are bound for Dubai. A good portion of them are connecting to other destinations in Europe and the Middle East. These are important markets for sourcing potential tourists. Unfortunately, it doesn't seem like the market in European cities is large enough for Philippine carriers to serve with more direct flights. Therefore, the Gulf carriers are currently the only hope of attracting more tourists from that part of the world.
If Philippine carriers wanted to obtain their fair share, they could utilize their own existing partnerships to replicate the Emirates model. Cebu Pacific could partner with low-cost carriers based in the UAE to attract more connecting traffic in the region, while Philippine Airlines could work with Etihad to obtain more feeder traffic from cities in Europe. However, neither Philippine carrier has made a move.
What we do know for sure is that the Philippine government wants to build traffic and increase visitor arrivals in order to continue developing the fledgling tourism industry. As noted above, the Gulf carriers are the only airlines with the financial capability and muscle to further connect Europe, the Middle East, and Africa with the Philippines in an effort to grow traffic by providing more flights. Let's be honest, international airlines from the west are not exactly beating down the door to fly to the Philippines. Therefore, if the government wants to even come close to meeting their tourism targets, they must attract sufficient capacity from whatever airline is willing to offer them.
But should Filipinos remain worried about Philippine carriers? Firstly, it is highly unlikely that Cebu Pacific will drop out of the market given the demand for low-cost travel. Emirates will never dip into this market so Cebu Pacific is pretty safe with a wide margin against competing airfares. As for Philippine Airlines, they are not in as strong a position particularly with their inadequate on-board product and the absence of code-sharing relationships to destinations beyond Dubai or Abu Dhabi. 
If PAL ends up pulling out, blame the passengers. After all, it is they who voted PAL out of the market with their wallets. Will jobs be cut dramatically? Perhaps at Dubai Airport, but PAL will find another route to fly their aircraft profitably in a less competitive environment. It will not affect any of PAL's other operations. Besides, PAL has pulled out of other markets in the past, where they failed to turn a profit such as Kuala Lumpur. Did anybody cry foul then? 
A similar phenomenon happens in Hong Kong and Singapore, where Cathay Pacific and Singapore Airlines manage to fill multiple wide-body flights per day from Manila, while Philippine Airlines primarily fills narrow-body aircraft. This illustrates once again that demand is higher for foreign carriers that offer higher standards and greater connection opportunities. 
Philippine Airlines is merely jumping on a bandwagon that was triggered by US and European carriers, who are also complaining about the threat of the Gulf carriers in their own respective markets. However, American carriers have far more to lose than Philippine carriers do. Philippine aircraft could easily be redeployed to Russia, Australia, or New Zealand where PAL has a real opportunity to develop promising markets.
Traffic from foreign carriers grew by an unprecedented 47 percent in the Philippines to 2.8 million passengers in the first quarter of 2015. This far outpaced the growth of Philippine carriers. In addition, international commercial air traffic soared by 28 percent with the addition of Turkish Airlines and Oman Air. 
According to Tourism Secretary Ramon Jimenez, pursuing air talks with the United Arab Emirates follows the government's objective to increase tourist arrivals. PAL President Jaime Bautista believes that more entitlements should be coming from the nation's top source markets for tourism such as South Korea, Japan, China, and the United States instead. However, the Department of Tourism is eager to grow and develop tourism from other markets such as the Middle East and Europe, where capacity is presently limited in comparison to the number of flights offered within Asia. Tourist arrivals from markets in the Middle East and Europe cannot grow without sufficient airline capacity.
If jobs do end up being lost in the Philippines resulting from this battle for market share, the Philippine government is banking on the increased number of tourists arriving, which will help to drive growth in other industries such as hotels and restaurants, which will create more jobs. The truth is that there is far more for the Philippines to gain in the development of the tourism industry, than there is to lose in the aviation industry from Dubai. In addition, if Emirates does bring more Filipinos and tourists to Manila, they will most likely connect to flights operated by Philippine Airlines and Cebu Pacific as Emirates does not fly to Boracay or Palawan. The increase for domestic travel will fuel job growth once again.
The two Philippine carriers suggested that they "are not afraid of competition" because they have not objected to Ethiopian Airlines, Turkish Airlines, or Oman Air flying to the Philippines. However, none of these carriers are a competitive threat to either Philippine Airlines or Cebu Pacific in the first place as none of the Philippine carriers fly any of these routes with the exception of Cebu Pacific's service to the Sultanate of Oman. 
According to Maria Elben Moro of the Civil Aeronautics Board, people should come ahead of profits. "More than the competition among the carriers, we should promote the welfare of the overseas Filipino workers," said Moro. In fact, Filipinos in the United Arab Emirates indicated that more flights between the two countries are needed.
Meanwhile, Emirates continues to challenge allegations that the Dubai based carrier receives subsidies or competes unfairly. According to a statement released by the carrier, the accusations are patently false. In the case of the United States, Emirates noted that denying them further access to the US market would only harm American consumers, communities, and the national economy.
Emirates released a detailed statement responding to each allegation. According to Emirates CEO Tim Clark, the carrier has been profitable for 27 years straight and never depended on government bail-outs or protection from competition like their accusers. He added that the government of Dubai told the carrier from the start that they must deliver profit and stand on their own as Dubai has no oil reserves, which is why it diversified its economy through tourism and air transportation. 
"That directive is what led us to pioneer a successful business model as an efficient long-haul connector that offers customers a best in class experience," said Clark. "Our global expansion is funded from our own cash flow, and debt raised in the open market through banks and financial institutions. Our success is due to superior commercial performance. To date we have paid our shareholder, the Dubai government, more than $3 billion in dividends. All of this is laid out in our financials, audited by Pricewaterhouse Coopers. We are financially transparent, and have published fully audited accounts for over 20 years."
Emirates believes that their opponents are complaining out of their own narrow interests. The Aquino administration has stepped away from the protectionist governments of the past and advocated in favour of Open Skies. Emirates says that they proudly contribute to the goals of Open Skies, which are greater competition, increased flight frequency, consumer choice, promotion of business travel and tourism, improved service, and customer-centric innovation. 
Emirates serves the Philippines by offering flights to more than 50 cities that are not directly served by any Philippine carriers. They transport tourists, business travellers, and goods, connecting them to some of the fastest growing economies in the world, in Africa, Europe, and the Middle East. Emirates says that travellers should not become the victims of a protectionist campaign.

14 comments:

  1. Shame on you Philippine Flight Network! You call yourselves PFN and yet you are pro-foreign interests!

    With that said, you still have a point. CebPac and PAL have substandard products. Why couldn't they, particularly PAL, improve their products? Both are currently profitable, PAL should probably have enough money to retrofit their planes with some form of IFE (and not the wireless one).

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  2. I think PH gov't should delay granting UAE carriers rights. PAL's story is kinda a sad story. It suffered a financial crisis, a category 2 downgrade, several strikes, a mismanagement, all this in under two decades. When you see all this, it gives you an understanding why PAL hasn't been able to up itself. That's why I don't blame them for not matching competitors. They should be given time, especially now that PAL is gaining momentum financially.

    Now as for Emirates' supply problem, while NAIA isn't rated to handle A380s, they did do it once when they switched to Terminal 3 and I don't think there were any problems encountered with the event. Not saying they should do it, but it's an idea worth exploring and I'm sure some will get excited to get to fly an A380.

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    1. Anon August 28, 2015 @ 9:18 PM

      Emirates CAN send their A380 to Manila with no problem, however. You will end up delaying other airlines because If there is an A380 on the taxiway, all aircrafts must stay in the ramp.

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  3. Correct. PAL and Cebu Pacific should upgrade their product. In fact for Cebu Pacific if they improve on their on board services like including meals and TVs even with limited shows and still keep the cramped seats but at much lower cost than Emirates will be more attractive to cost conscious OFWs. I think PAL should do the same. We know for full amenities like Emirates, PAL would have difficulty in matching fares. So PAL have to improvise to still be attractive to OFWs.

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  4. I am not sure, but I think PAL is much expensive than Saudia, Emirates or Etihad?

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  5. Palibahasa sa PAL, nakikisabay sa presyo ng top airlines, ang hard product at service quality naman pang regional lang at its best. Madalas pa low cost airline ang dating.

    Yung gulf carriers full lagi kasi kahit ganoon presyo ramdam mo naman yung ginastos mo. Sa local airlines natin feeling nadaya ka.

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  6. The prose of this article is paternalistic and condescending.

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  7. PAL should have tried their 77W aircraft to compete with emirates i think the demand will flow... And for Emirates flow of demand problem they should have utilized A380 in one of the flights since they have reconfigured their jumbo jets into 2 classes

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  8. As the author said, PHL carriers doesn't even mind filing protest with the other mid-east carriers. So why the heck are protesting this expansion with the Gulf carriers? Who will protect the interest of our flag carriers? If there are unbalance on loading factors, and demand will just be the justifying cause here, whats the use of reciprocity in the current air talks? If the argument is just based on customer preference, then open the NAIA to every carrier and abolish all the levies so these foreign carriers will carry all the tourist you need to boost it's tourism targets and generate jobs for the hospitality industry. Are these position enough to justify the added flight?

    But what hasn't been answered is the technical part of the current capacity issues in MNL-NAIA. How could you mount additional domestic flights to accommodate this flock of arrive tourist riding these magic carpets if there are not even enough slots especially on peak traffic. How many amount of fuel are wasted and pollution created just by queuing up these traffic on ground and above the air?

    The government should be busy thinking about; firstly, optimizing the current situation in NAIA to manage the traffic and reduce the risk of accidents before taking in more of these flights. How can you attract tourist in the decrypted terminals as some tourist from down under falls into NAIA ‘sinkhole’? Secondly, since expansion on current airport is nearly impossible, the government should be looking forward in the new airport complex that could accommodate and handle all someone's wishlist of 5-star carriers. Just imagine, for NAIA to accommodate an A380 needs to stop all parallel traffic in the taxiway, only small aircraft can be allowed. All of these successful airlines as you notice have very good airport hubs. This allows them to operate efficiently, having a good customer experiences in-flight and on ground.

    The tourism argument seems not to justify these expansion they are seeking, its more on market share. Sixth freedom traffic also give these Gulf carriers the heck of advantage so don't question why demands and occupancy is high. The government should do a better job.

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  9. Why should the country's passengers have to wait for PAL to play "catch up"? More flights equal more tourists and investors into the country. The connecting traffic is filling these planes and if they would bother to really coordinate their partnership with Etihad they could realize their potential faster!

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  10. Part of the problem, that I think is overlooked, is that many OFW's don't have a choice in carrier. When availing of their bi-annual trip home, many times the sponsor pays for the flight directly. So an Arab employer or travel agent is probably going to select their national carrier--however, if the PH carriers marketed their products to travel agents, with competitive rates and incentives, quite possibly more OFW's would have this choice. Personally, I work in Bahrain. When I fly to Manila I have one direct choice - Gulf Air, the national carrier of Bahrain. GA has one flight daily to Manila. It's usually packed. I have in the past looked into flying PAL to be patriotic, but it was just too difficult, and in the end more expensive to fly to Dubai first and then on to PH. My destination in PH is North Luzon, so I would like to try Clark, but again, I would have to pay for the additional flight to Dubai. I have many friends from Cebu, Mindanao, Iloilo, etc, that would love to avoid NAIA if possible. If Cebu Pacific got creative and extended a flight to Bahrain (stop over in Dubai first) they could pick up some of this market and fill their planes. They could do the same to Kuwait and Qatar, where there are thousands of OFW's. Use their rights into UAE (possibly DXB) as a hub to serve Pinoy's throughout the M.E. connecting to Northern Luzon and Cebu. Nobody else is doing this. Create an advertising campaign on TFC as "The carrier connecting the M.E. to North or South Philippines avoiding the pain of NAIA"

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  11. Based in this article Emirates is looking for another flights due to the seat demand or said their 777-300ER allocated for Dubai to Manila is at almost 100% capacity in every flight. Why not utilize the A380 in all of its flights to Manila instead and ask the airport authorities at NAIA to reconfigure part of the terminal and sky bridge to be an A380 capable would that be sound? instead of asking to have additional flight then.

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  13. The Philippines needs more flight from other carriers into the Philippines (specially from the Middle East and Turkey) as long as PAL can't provide "normal" flights included connecting flights. A "normal" flight for me is a flight where I don't need to sit inside a seat as a sardine - as it happens in Cebu Pacific and PAL. PAL has the more expensive prices (more expensive then wonderful 4 and 5 star airlines) but without ICE system as EK has it with more than 1000 movies. Well, honestly, I don'T need 1000 movies in many languages, but maybe 100 would be nice - but not with an I-Pad holding in my hands - anyway on PAL flights there is too less space for everything (in Economy).

    The 2nd thing beside entertainment in the airplanes are the leak of connecting flights with PAL. Most carriers in the world are making money with connecting passengers. Well, if I look for connecting flights (for example DXB-MNL-BKK or HKG or elsewhere) those flights are much more expensive then wonderful flights made by 4 or 5 star airlines. The only "cheaper" connecting flight is HKG-MNL-LHR and back, that's too less.

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