Cebu Pacific and Philippine Airlines are poised to expand in US following Category 1 upgrade

The US FAA upgrade of the Philippines to a Category 1 safety rating opens up short-term expansion opportunities for Cebu Pacific Air and Philippine Airlines (PAL), brightening the outlook for both carriers. The upgrade removes the previous freeze on new entrants or adding capacity.

The Category 1 rating enables PAL to immediately replace ageing A340s and 747-400s with more efficient 777-300ERs on existing services to Los Angeles and San Francisco. PAL also plans to add within the next year new destinations in the continental US, giving it a potential alternative to the more risky planned expansion of its European network.

Cebu Pacific is likely to launch services by the end of 2014 to Guam and Hawaii with A320s and A330s, matching PAL on each route. Hawaii and potentially Europe, which is also now an option for Cebu Pacific as the carrier has joined PAL in being removed from the EU blacklist, gives the LCC an opportunity to slow down Middle East expansion and diversify its new long-haul operation.