OPINION: Is the Age of Expansion of Philippine Carriers into the US Over?

The mid-2010s saw the expansion of Filipino carriers into different markets.  One of them was the United States, which was made possible by the restoration of the Category 1 the Federal Aviation Administratio.  Philippine Airlines (PAL) augmented its existing flights to San Francisco, Los Angeles, and Honolulu.  In addition, it managed to open up a new Cebu-Los Angeles flight for a brief period and reopen its flights to the New York City area and just last year, it started the first nonstop flights between the said city and Manila.  PAL's management did not even want to stop at this saying they were considering flights to Chicago, Seattle, San Diego and cities in Texas and Florida.  Cebu Pacific joined the bandwagon as it launched its flights to Guam in 2016.  There was also speculation that the low-cost carrier would open up flights to Honolulu, Hawaii, a destination which PAL has long established itself in.  

Fast forward to 2019.  The Centre for Aviation (CAPA) has advised PAL to cut back on its flights to the US to help offset 2018 net losses of  ₱2.8 billion (US$54.3 million).  This is despite claims by newly-retired PAL President and Chief Operating Officer Jaime Bautista that load factors to New York on PAL's new Airbus A350 are "very encouraging".  However, Bautista has admitted that the flag carrier will not pursue planned expansion of its US operations, citing that the carrier wants to focus on making existing US operations profitable and he thinks that opening new routes would not make money for the carrier and require a lot of investment.

Moreover, Cebu Pacific, far from expanding US operations, is going to suspend its sole flight to there.  Effective December 7 2019, Cebu Pacific will no longer fly to Guam, citing "oversaturation and competition in the market".  In an email to the Saipan Tribune, Cebu Pacific's Corporate Communications Director Charo Logarta Lagamon added that "it has come to a point where there is now an overcapacity in the market, with two other carrier plying the same route and, for Cebu Pacific, the route is no longer viable”.  Currently, PAL and United Airlines are the other carriers that fly to Guam, which is home to over 40,000 Filipinos.

It is unclear whether or how the long the expansion of Filipino carriers into the US will be put on hiatus but their focus now seems to be on redeploying their resources into where the money is.  On some level it makes sense.  If a carrier is losing more than $50 million per year, why expand into new markets when there are existing operations that need to be sorted out financially?  Without the money, then there is no money to enlarge operations.  And PAL and Cebu Pacific know very well the markets they can rely on during times that their bottom lines are under pressure, and that's where they believe they can allocate their resources to for the time-being. 

It may not be totally a bad thing for the passenger though.  There are still other alternatives to fly to the US and even if they involve at least one stopover, most of them offer a better quality of service.  Cathay Pacific has opened up a flight to Washington DC last year on its new Airbus A350-1000.  This is on top of Cathay's services to San Francisco, Los Angeles, New York, Chicago, and Boston.  Singapore Airlines offers nonstop flights as well to San Francisco, LA, and New York.  It even has a one-stop flight to Houston for those who want to need to head to the southern US.  The established Japanese and Korean carriers, most of which possess at least a four-star rating, can be trusted to provide plenty of flights to different US cities.  For example, one advantage most of these carriers have is that economy class passengers have an AC power outlet to plug their laptops and tablets into, something that not even PAL's new A350s can offer.  Yes the journey make take a bit longer, but more often than not, a passenger will feel slightly more refreshed knowing that it is the better and more established carriers that could take them to the US.

PAL and Cebu Pacific can always reopen this question of expansion into the US once they experience better times.  PAL has a new leadership team that will decide whether they would agree with the now retired Bautista that expansion plans are too costly right now.  But expanding into the US by either carrier is not likely to happen anytime in the near future.  One can be satisfied though that the flag carrier will keep its nonstop flight to New York flight for now.  And until then, passengers can enjoy the alternatives offered by Asian carriers, most of which are probably going to feature better in-flight amenities and services than what established Filipino carriers have in store anyway.

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