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Zest Air, formally Asian Spirit, is a LCC based in Manila. With hubs at Diosdado Macapagal International Airport, Kalibo International Airport and Manila’s Ninoy Aquino International Airport, Zest Air uses a fleet of narrow-body Airbus and MA regional aircraft to serve a network of domestic and regional destinations within the Philippines and Asia. On 10-May-2013, AirAsia Group announced plans to integrate AirAsia Philippines into Zest in order to maximise fleet utilisation between both carriers and slot allocations from Manila. The two airlines will remain separate with Zest falling under the AirAsia brand and AirAsia website.
Location of Zest Air main hub (Manila Ninoy Aquino International Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Zest Air fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
195 total articles
12 total articles
The Philippines-Japan market is poised to see a huge influx of capacity, driven primarily by expansion from Philippine low-cost carriers. The expansion is made possible by a new air services agreement between the two countries and the lifting of restrictions by Japanese authorities on Philippine carriers.
Cebu Pacific Air, which currently only serves one destination in Japan with three weekly flights, is seeking the biggest expansion with at least 80 additional weekly flights and eight new destinations. AirAsia is planning to enter the Philippines-Japan market with 32 weekly flights while Tigerair is looking to enter with 56 weekly flights.
Philippine Airlines (PAL) and its regional subsidiary PAL Express are seeking to add 63 weekly flights. PAL is currently the market leader with 31 weekly flights to Japan. In the total there are currently only 76 weekly flights between the two countries, a figure which should quickly double and possibly triple depending on how many of the proposed new flights are implemented.
AirAsia is attempting to turn around its struggling operations in the Philippines by closing its base at Manila alternative airport Clark and focusing on expansion at Manila Ninoy Aquino International Airport using slots held by new partner Zest Air. AirAsia is also seeking approval for Zest to adopt the AirAsia brand, giving the LCC group two carriers in the Philippine market but a single product.
AirAsia has struggled in the Philippine market since it launched Philippines AirAsia in Mar-2012. The new affiliate’s base at Clark has been highly unprofitable with limited growth opportunities.
Shifting focus to Manila significantly improves AirAsia Group’s outlook in the Philippines. But AirAsia will still need to overcome intense competition from market leader Cebu Pacific, which has a much stronger position at Manila, as well as the Philippine Airlines Group and Tigerair Philippines.
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.
The Philippine Airlines (PAL) Group is implementing a misguided new strategy that involves its budget airline subsidiary pulling off several domestic trunk routes. AirPhil Express, which is planning to be soon re-branded as PAL Express, has redeployed capacity from trunk to leisure and secondary routes, which it has taken over from PAL following a surprising decision by the Group that the two brands should remove nearly all overlap in their route networks.
The move, implemented on 28-Oct-2012, goes against the grain of typical two-brand strategy at Asian airline groups, which have discovered that they can successfully use their LCCs to operate alongside their full service brand. As Philippine Airlines and AirPhil Express (soon PAL Express) brands cater to different sectors of the market, the two should be able to co-exist on trunk routes with minimal cannibalisation. Most crucially, PAL Group needs the second budget brand on domestic trunk routes to compete with rival LCCs. The Philippines has a crowded and intensely competitive LCC sector and it will be the Philippines’ four other LCCs that stand to gain the most as the PAL Group removes its budget brand from several of the country’s largest domestic markets.
It comes as a welcome sign that diplomatic, if back door, talks are beginning between China and Japan as well as the Philippines, two nations with territorial disputes with China that have flared in recent months, causing air traffic capacity between the nations to make double-digit percentage drops.
While some of the extreme public protests in China against Japan have become more subdued, consumer sentiment continues to be affected, as airlines on each side extend capacity cuts and offer special fares to stimulate traffic.
For individual carriers, the cuts are not as pronounced as at the market level given their large networks. Profitability will undoubtedly be affected, but if diplomacy prevails and the status quo is restored, these summer 2012 incidents will be a blip but reminder of the region's fragility. Imminent leadership issues in China and Japan have played no small part in the recent surge of nationalistic rhetoric and, as those political events are put to rest, so hopefully the often-orchestrated demonstrations of nationalistic fervour will be quietened too.
Philippine carriers expect to significantly expand their China operations over the next several years and remain confident in the opportunities in the Chinese market despite a current government warning on holidaying in the Philippines. Philippine low-cost carriers – including AirAsia Philippines, Cebu Pacific, PAL Express/AirPhil Express and Zest Air – are poised to be the largest beneficiaries from increasing demand in the Philippines-China market.
In recent years an influx in charters has catered to a large portion of the growth in the Philippines-China market. But charters between the two countries have stopped operating in recent months due to a Chinese government warning against travel to the Philippines, an unfortunate politically-motivated byproduct of the dispute over the Scarborough Shoal in the South China Sea. The return of charter operations and a significant increase in scheduled flights are expected once the warning is lifted.
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