YEARENDER: A seesaw year for Phl aviation

MANILA, Philippines - The Philippine aviation industry had its “ups and downs” in 2013 as local airlines, both full service and low cost carriers, eye and gear up for more long-haul destinations in 2014.

The year 2013 saw accidents involving several airlines resulting in the closure of international airports for days, several cancelled flights due to typhoons as well as congested airports, the suspension of the permit to fly of one airline, and the merger of two low cost carriers.

Aviation authorities in the Philippines also convinced the European Union to lift the ban that prevented local airlines from flying into the European airspace, paving the way for the launch of direct flights to London by national flag carrier Philippine Airlines (PAL) last Nov. 4.

Authorities also successfully negotiated with several countries new and expanded air service agreements (ASAs) allowing airlines to mount additional flights and servicing more passengers particularly overseas Filipino workers.

Accidents, flight delays and cancelations

Passengers had to deal with flight delays and cancellations this year due to the congested Ninoy Aquino International Airport (NAIA) as well as bad weather catapulted by Super Typhoon Yolanda that battered several provinces

in the Visayas last Nov. 8 and several accidents involving airlines.

An aircraft of budget airline Cebu Air (Cebu Pacific) of taipan John Gokongwei skidded off the runway of the Davao International Airport last June 2 resulting to the closure of the international gateway for several days. Another aircraft of the low cost carrier damaged several landing lights at the NAIA a few days after.

On the other hand, an aircraft of Tiger Airways Philippines stalled on the end of the runway last Aug. 26 resulting in the suspension of operations of the Kalibo International Airport that serves as one of the gateways to the Island of Boracay for several hours.

Both Cebu Pacific and TigerAir got a slap on the wrist as the Civil Aviation Authority of the Philippines (CAAP) only suspended the pilots of both airlines.

However, the CAAP suspended the Airline Operator’s Certificate (AOC) of Zest Airways Inc. of former Ambassador Alfredo Yao resulting to the grounding of from Aug. 16 to Aug. 19 due to six aviation safety concerns in violation of the Philippine Civil Aviation Regulation (PCAR).

Consolidation, mergers, new partners

This paved the way for the consolidation in the industry after Zest Air decided to team up with AirAsia Philippines Inc. to form a new brand known as AirAsia Zest that is now operating at the congested NAIA after the partly Malaysian-owned airline ended its operations at the Clark International Airport in Pampanga.

ZestAir entered into a strategic alliance agreement with AirAsia Philippines last March 11. Under the agreement, AirAsia Philippines would acquire an 85 percent economic interest and 49 percent voting rights in ZestAir as well as a 100 percent interest in Yao’s Asiawide Airways Inc.

The transaction was consummated last May 10, wherein Yao’s ZestAir got $16 million as well as 13 percent interest in AirAsia Philippines. After the transaction, AirAsia Berhad of Malaysia now owns 40 percent of AirAsia Philippines while Filipino investors led by Romero, Yao, Marianne Hontiveros and Antonio “Tonyboy” Cojuangco Jr. control 60 percent.

All the shareholders of budget airline Zest Airways Inc. including AirAsia Inc. Philippines committed to infuse $100 million worth of investments to recover heavy losses and fund the merged airline’s working capital.

Michael Romero, chairman of AirAsia Zest, told The STAR that the rebranded airline is looking at a brighter 2014 after the successful tie up with ZestAir this year.

“2013 is a good year for AirAsia especially with its partnership with Ambassador Alfredo Yao that resulted to the birth of AirAsia Zest,” Romero said.

He added that the rebranded airline was able to mount new international destinations to Kuala Lumpur, Kota Kinabalu, Miri, Macau, Shanghai and Incheon and at the same time expand its hubs in Cebu and Kalibo.

PAL, jointly owned by taipan Lucio Tan and diversified conglomerate San Miguel Corp., is on the lookout for a new partner as it is in the middle of a fleet modernization program with an end view of acquiring 100 new aircraft.

SMC, which infused $500 million for a 49 percent stake in the national flag carrier, is looking for a new partner that would take up the 51 percent interest of the Tan Group who is also into banking, beverage, property development, among others.

PAL has so far inked a $10 billion contract with the EADS Group for the delivery of 65 new Airbus aircraft.

PAL was able to fly back to Europe via London last Nov. 4 after the EU agreed to lift the ban last July 12 as aviation authorities were able to comply with the safety standards of the International Civil Aviation Organization (ICAO) last February.

The application of Cebu Pacific to fly to European countries, on the other hand, would be reviewed by EU in March next year.

Gearing up for Europe, US

 After successfully getting the ban lifted by the European Union, transportation and aviation authorities are confident that the ban imposed by the US Federal Aviation Administration (US-FAA) would be lifted early next year.

In 2008, the safety rating of the Philippines was downgraded by the US FAA upon the recommendation of the International Civil Aviation Organization (ICAO) to Category 2 from Category 1after CAAP failed to comply with safety standards for the oversight of air carrier operations.

Aside from Europe, Cebu Pacific president and chief executive officer Lance Gokongwei earlier said the listed budget airline is also gearing up for long-haul flights to the US as it pursues its $4 billion refleeting program.

Gokongwei said Cebu Pacific is looking at mounting flights to the US particularly Guam and Hawaii once the country’s status is upgraded by the US Federal Aviation Administration (US-FAA) back to Category 1.

 â€œFor the US, there have been some pronouncements that Philippines expects to get out of Category 2 in the fourth quarter. At that point, we will probably look at certain routes in the US including Guam and Hawaii,” Gokongwei stressed.

The Cebu Pacific chief pointed out that the airline is in the middle of a $4 billion refleeting program. Between 2013 and 2021, Cebu Pacific is scheduled to take delivery of 15 more brand-new Airbus A320, 30 A321neo, and four A330 aircraft.

Cebu Pacific was also able to service its 80 millionth passenger last November.

Both PAL and Cebu Pacific mounted flights to several countries in the Middle East including Dubai, Riyadh, Dammam, among others where several Filipinos are working and living.

Phl is low cost carrier capital of the world

 Earlier, Cebu Pacific general manager for long haul division Alex Reyes said the aviation industry in the Philippines could be likened to the capital intensive telecommunications sector.

“Just a few years ago, phones were considered luxury items, and very few people could afford to have them. Along came low-cost phones, and suddenly communication anywhere, anytime was in reach of every Juan. Text messages were so cheap that mobile phone subscribers preferred to text, rather than to call, because it was so cheap. At one point in time, the Philippines became the test messaging capital of the world,” Reyes explained.

Now, just like mobile phones which were once considered luxury items air travel is in reach of every “Juan” as low cost carriers (LCCs) are now dominating the aviation sector.

 â€œEight out of 10 seats on the domestic market are low-cost carrier seats. No other aviation market in the world has this kind of market share for LCCs. You can thus call the Philippines the LCC capital of the world,” he said.

Another low cost carrier, newly rebranded Tigerair, is also undertaking a massive re-fleeting program as it intends to beef up its existing fleet of five aircraft to 25 within the next three to five years.

TigerAir, a unit of Tiger Airlines, has an existing fleet of three Airbus A320s with a seating capacity of 180 and two A319s.

TigerAir president and chief executive officer Olive Ramos said the airline is excited about the prospects of the industry next year but stressed the need to promote the habit of travelling to Filipinos whether locally or internationally.

 â€œI am very hopeful about next year. I am looking at a very exciting and vibrant year for the airline industry,” Ramos said.

More air agreements

 The Philippines through the Civil Aeronautics Board (CAB) is looking at signing and expanding air service agreements (ASAs) with several countries next year after finalizing pacts with six countries this year.

The Philippines successfully concluded air talks with Israel, Japan, Italy, Macau, Brazil, and Australia this year.

President Aquino has signed Executive Order 29 authorizing the CAB and the Philippine air panels to pursue more aggressively the international civil aviation liberalization policy.

Volume of passengers travelling by air climbed 4.6 percent to 28.46 million in the first nine months of the year from 27.2 million in the same period last year. The number of domestic passengers was flat as it reached 15.42 million from January to September while the volume of international passengers posted a double-digit growth of 11.6 percent enough to 13.05 million.

CAB executive director Carmelo Arcilla said the regular would start the ball rolling early next year as the Philippines is scheduled to hold air talks with France and Singapore in the first quarter.