Cebu Pacific Air

Australia needs to negotiate expanded bilateral agreements with Malaysia and the Philippines

This is the second of a series of articles on Australia’s need to urgently negotiate expanded bilateral agreements. The first part looked at bilateral constraints in some key North Asian markets, in particular mainland China and Hong Kong, as well as with the United Arab Emirates. This part looks at constraints in Australia currently facing carriers from Southeast Asia, particularly Malaysia and the Philippines.

Australia is an important and generally profitable market for airlines from Malaysia and the Philippines, as well as other Southeast Asian countries that have fewer or no limitations on expansion. Australia needs to negotiate new air service agreements with Malaysia and the Philippines or risk having their airlines focus expansion on other destinations.

Philippines regional market presents opportunities but also challenges for start-ups such as SkyJet

This is the fifth and final instalment in a series of analysis articles on the Philippines market. The first part analysed the strong position of Philippine market leader Cebu Pacific. The second part looked at the tie-up between LCCs Zest Air and AirAsia Philippines, which along with Tiger affiliate SEAir compete with Cebu Pacific in the fast-growing budget end of the market. The third part looked at the outlook for Philippine Airlines (PAL) in the domestic market, including the recent decision by the group to abandon the low-cost model at sister carrier AirPhil/PAL Express. The fourth part looked at PAL’s position in the international market. This part examines the opportunities in the dynamic Philippine regional market as a result of consolidation and rationalisation in the domestic market.

Regional carriers have traditionally played an important role in the Philippines as several domestic airports, including some of the country’s most popular tourism destinations such as Boracay, cannot be accessed with Airbus or Boeing aircraft. Even some of the country’s low-cost carriers operate turboprops, abandoning the normal single aircraft type mantra of the LCC model, recognising the unique needs of the Philippine market.

Philippine Airlines banks recovery on international expansion but faces uphill battle

This is the fourth part of a series of articles on the 2013 outlook for Philippine carriers. The third part, published on 3-Apr-2013, analysed the bleak outlook in the domestic market for the Philippine Airline (PAL) Group following its decision to exit the budget sector by transitioning PAL Express, formerly known as AirPhil, from low-cost to full-service regional carrier. This part looks at the international outlook for PAL, which has improved since a determination from ICAO in Mar-2013 that the Philippine authorities are now in compliance with its safety standards.

The ICAO determination should lead to the Philippines being removed from the EU blacklist and upgraded to Category 1 status by the US FAA, opening up expansion opportunities for PAL’s long-haul operation. But the ICAO determination could also lead to new competition in the Philippines to Japan, South Korea and US markets.

PAL now faces only very limited competition from other Philippine carriers to Japan and no competition from local carriers in long-haul markets. But Cebu Pacific and other Philippine LCCs plan to pursue rapid expansion of their international operations regionally and, in the case of Cebu Pacific, in the medium/long-haul market.

Philippine Airlines group faces challenging future after exiting budget carrier sector

The outlook for Philippine Airlines (PAL) remains relatively bleak following a strategy shift which has resulted in the group exiting the budget end of the market. Transitioning low-cost sister carrier AirPhil Express into full-service regional carrier PAL Express may succeed at improving the group’s short-term financials but at the expense of growth and market share. The PAL Group will likely see its share of the Philippines domestic passenger market slip to less than 35% in 2013, compared to 42% in 2012.

The shift in strategy, which leaves PAL focusing entirely on the much smaller but less competitive top end of the Philippine market, follows the Apr-2012 ownership change at PAL and AirPhil. The new majority owner of both carriers, the San Miguel Group, has brought new life into the group, providing a badly needed recapitalisation which is being used to pursue fleet renewal and growth of its long-haul network.

But in the domestic and short-haul international markets PAL is suffering and the prospects are not bright given some of the decisions made by San Miguel during its first year running the PAL Group.

AirAsia Philippines and Zest Air outlook improves following tie-up, but challenges remain

This is the second part of a series of articles looking at the outlook for Philippine carriers. The first part, published on 19-Mar-2013, analysed the strong position of market leader Cebu Pacific.

Part 2 looks at the recent tie up between AirAsia Philippines and Zest Air, which along with new Tiger Airways affiliate SEAir are looking to improve their relatively weak positioning in the highly competitive Philippine market. Part 3 will look at flag carrier Philippine Airlines and the recent rebranding and strategy shift at PAL Express, previously known as AirPhil Express.

AirAsia Philippines and privately owned Zest Air unveiled a strategic partnership on 11-Mar-2013 which included an equity swap, with AirAsia Philippines taking a 49% stake in Zest in exchange for a 15% stake in AirAsia Philippines. The partnership is expected to result in the AirAsia brand entering the Manila market, using the slots and traffic rights held by Zest. AirAsia currently only serves Manila's alternative airport, Clark.

Air Niugini expands in growing economy despite service challenges and weak balance sheet

Air Niugini, Papua New Guinea’s national carrier, has rapidly expanded in recent years as foreign investment pours into the country to develop its wealth of natural resources, driving demand for domestic and international air travel.

The state-owned carrier plans to add more aircraft and up-gauge key domestic services to Boeing 737 in 2013 to keep pace with a growing economy and competitor Airlines PNG. But the financially strapped carrier is struggling with poor on-time performance while also being criticised for charging excessive fares. Deregulation has brought some domestic competition, but airlines from neighbouring Philippines and Solomon Islands are struggling to break through protectionist barriers.

Aviation provides the single most important form of transport in the mountainous country which lacks a major road network linking the capital, Port Moresby, to other major centres. But the poor state of aviation infrastructure including runways and terminals poses a substantial hurdle to expansion of air services.