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Philippine Airlines may cut Middle East capacity and network, and end Etihad partnership

29-Nov-2016

Philippine Airlines (PAL) is considering reducing capacity to the Middle East in 2017 while expanding in several other international markets, including Australia, China and the US. Yields in all seven of the group’s Middle East markets – all of which have been launched over the last three years – have been impacted by intensifying competition and weaker outbound demand.

PAL could suspend services to Abu Dhabi and terminate its partnership with Etihad. The airline group has not benefitted significantly from its Etihad codeshare, and may be better off partnering with another airline.

However, PAL is keen to continue growing its international operation. PAL is about to add capacity to the US using two additional 777-300ERs, and plans to add capacity to Australia in late 2017 following delivery of its first batch of A321neoLRs. New destinations in Europe and the US are under consideration for 2018, using its new A350-900 fleet. [2590 words]

Unlock the following content in this report:

Subheadings:

  • PAL has added 15 medium and long haul destinations in three and a half years
  • PAL regains market share
  • PAL’s growth in regional international market has been modest
  • Middle East expansion has accounted for half the overall growth
  • Competition with Cebu Pacific and Gulf airlines has intensified
  • Local Philippines-Middle East demand has waned 
  • PAL experiences yield pressure on Middle East routes
  • PAL has the wrong product for the Middle East market
  • PAL may cut Abu Dhabi as Etihad partnership is reviewed
  • PAL could seek an alternative partner in the Middle East

Graphs and data:

  • Philippine Airlines new international destinations added over the past four years
  • Philippine Airlines international passenger traffic and share of total international passengers: 2006 to 1H2016
  • Philippine Airlines international ASK share (%) by region: 28-Nov-2016 to 4-Dec-2016
  • Manila to Abu Dhabi capacity by airline (one-way seats per week): Sep-2011 to May-2017
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