Philippine Airlines

Cambodia Angkor Air plans network and fleet expansion ahead of PAL-backed Cambodia Airlines launch

Cambodia Angkor Air is planning rapid fleet and network expansion as competition intensifies in the Cambodian market. The Cambodian flag carrier is expected to more than double its fleet by the end of 2015 and launch services to several new markets, including mainland China, Hong Kong, India and South Korea. Cambodia Angkor Air was established in 2009 as a joint venture with Vietnam Airlines but remains one of the smallest flag carriers in Southeast Asia, only operating domestically and to two neighbouring countries.

Cambodia Angkor Air has already seen its most dramatic expansion in its four-year history, launching three international routes over the last six months. Further rapid expansion of Cambodia Angkor Air and the planned launch of a second Cambodian scheduled carrier that will be affiliated with Philippine Airlines (PAL) should lead to more rapid growth in the Cambodian market. The Cambodian passenger market grew by 18% in 2012 and by 21% in 1Q2013, based on figures from Cambodia Airports.

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.

Cebu Pacific sees bright outlook for 2013 as rationality returns to Philippines market

Cebu Pacific is planning more double-digit capacity expansion in 2013 as the Philippine LCC launches widebody services and expands its limited Japanese network. Cebu Pacific expects to expand seat capacity by 11% in 2013 and grow its fleet by 17% to 48 aircraft. The expansion, which includes the launch of its new long-haul operation, should allow the carrier to extend its already leading share of the Philippine market.

Cebu Pacific recorded 11% growth in passenger traffic in 2012 and a 7% operating profit margin despite intense competition, particularly in the domestic market. The carrier’s load factor and net profit dropped slightly. But Cebu Pacific’s outlook for 2013 is brighter given the recent rationalisation and consolidation in the Philippine domestic market and the new opportunities for international expansion created as a result of Philippine authorities passing an ICAO safety audit in Feb-2013.