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Australia-Philippines market faces overcapacity concerns as Cebu Pacific, PAL plan further expansion

Analysis

Passenger traffic between Australia and the Philippines grew by 39% in 2015, making it Australia's fastest growing international market. The Australia-Philippines market is poised for more rapid growth driven by expansion at Cebu Pacific Air and Philippine Airlines (PAL).

PAL is planning to use its new A321neo fleet to launch new nonstop flights to Brisbane and potentially add a second frequency to Sydney. Cebu Pacific plans to launch service to Melbourne as it expands its A330-300 fleet.

However, overcapacity is a major concern. Cebu Pacific's entrance has stimulated demand but impacted load factors and yields. In 2015 the average load factor on Australia-Philippines flights was less than 67%, including a dismal 60% at PAL and only 64% at Cebu Pacific.

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