Budget carriers must adapt

Cebu Pacific has been a phenomenal success in the past few years, even overtaking long time flag carrier Philippine Airlines in domestic passengers flown. CebPac is also reputed to be earning more per passenger mile flown because of its so-called low-cost carrier (LCC) business model. But now it seems a backlash on CebPac’s business model could be a serious long-term threat.

CebPac may have revolutionized air transport in this country but its public image and likeability now seems pretty bad. That’s because of its business model, supposedly copied from Ryan Air/Air Asia. As an industry observer puts it, “if you read blogs, airline forums, Ryan Air is one of the most hated airlines but still profitable and incredibly successful as they continue to offer the lowest fares by sticking strictly to their LCC business model.”

Now it seems CebPac may be forced to take Filipino culture and sensitivities into account. A congressional investigation is in the offing, triggered by an unfortunate treatment of a congressman trying to check in his baggage with his no baggage budget ticket.

There also isn’t a day when Facebook doesn’t have a horror story starring CebPac’s front line people at check-in counters. Of course, there is the Tulfo-Santiago rumble arising from a problem with CebPac operations.

In a sense, the problem starts with CebPac and the way they market their low fare tickets. There is more than a bit of misleading advertising involved because the outrageously, even ridiculously low fare in bold letters is net of taxes, fuel surcharge and other charges. In other countries including the US, this is not allowed. Show the total price that must be paid, in asterisk if you must, but the same ad must show everything.

Then there are the small print conditions that no one really bothers to read and only finds out after missing the cut-off time for check-in and losing the entire value of the ticket. If the ticket was bought at P10 or P1 or even P100, it doesn’t matter even if the amount paid is forfeited. But if the ticket price is close to a legacy carrier’s ticket cost, not being able to rebook it even with a fine is somewhat unjust.

Lesson learned… if you are unable to reserve way in advance and are going to pay a lot more than normal budget fare anyway and there is an element of uncertainty in your being able to make the trip, buy your ticket from a legacy carrier. At least, you can rebook a PAL ticket. With CebPac, you only end up contributing to the airline’s amazing profitability with the forfeiture of what you have paid.

Other common irritants with budget carriers include overweight bags and weight of carry on bags. Apparently, as what happened to Claudine, they also offload checked-in bags without informing you. And frontline staff is not trained well enough to handle angry customers.

The challenge for CebPac is how to make people understand how they are able to sell cheap and still make their money by having absolutely no frills. They will still be hated like Ryan Air but people will buy their tickets because they are the cheapest available. This means CebPac must be more forthright in advertisements in what passengers can expect.

CebPac has never really explained the nuances of their low cost carrier business model and public expectations are more attuned to what legacy carriers provide. Even the thing about overbooking is part of the LCC business model that the public and regulators must be made to understand.

 I know it is difficult to argue with success and CebPac is definitely a success story. But expect congressmen to investigate and pass laws that would force changes. However, legislators must understand how LCCs optimize seats available to make low fares possible and not pass rules that would raise fares for all of us.

Mar Roxas as DOTC secretary says he will impose a passenger bill of rights even ahead of any laws from Congress. Indeed, the Civil Aeronautics Board has started to make noise in this direction. Such bill of rights should not result in killing the LCC model and raise fares for all of us.

But the more compelling reason for CebPac to improve on its current business model is competitive in nature. The other budget carriers, Zest Air and Airphil Express have started to show that a budget carrier can also have a heart and allow rebooking. I am told that they have become more accommodating and friendlier at their check-in counters. Zest Air is also said to still give Zesto juice drinks on their budget flights, for now anyway.

CebPac deserves commendation for democratizing air transportation. Even one of our house helpers who used to take the bus to go home to Leyte every year had instead been taking CebPac the last couple of years. The ticket price is competitive, sometimes even cheaper than a bus ticket and she gets to spend more time in her vacation rather than on a bus over bad roads.

But CebPac must address customers who expect more but want to pay less. The only way to do that is by being forthright in all marketing communications. They have to educate the public how they are able to keep fares low. It is a waste to have CebPac flight attendants try to make it fun to fly with in-flight games if the ground crew make it a living hell before the flight.

People, on the other hand, must learn how to buy airline tickets. Go to the websites of the airlines, budget and legacy. Compare all-in costs before you buy. And read the small print conditions on check-in time and baggage allowance. Don’t expect legacy carrier service from budget airlines. Eat before you board your flight. 

But yes, even budget customers deserve good and courteous service from airline staff. No ifs and buts on that one.

General aviation

Speaking of airlines, I chanced upon former NAIA general manager and CAAP director general Alfonso Cusi at the Eastwood Mall the other weekend. He didn’t want to talk about the chaotic situation at the airport these days but said dealing with general aviation will ease congestion. Cusi, however, conceded it is very difficult to make the country’s big shots who own those private planes suffer any inconvenience for the greater public good.

Other people I have talked to are also skeptical that Mar Roxas will have the political will to deal with the general aviation sector as he should. One observer said that with the election season approaching, politicians will borrow those private planes and will want special treatment.

But it makes no sense to allocate our limited airport slots to private planes that carry two or three passengers and pay $40 per take off and landing. An Airbus A320 carries 180 guests and pays $500 per take off and landing. All those passengers pay the terminal fees and generate economic activities in the form of hotels, food, etc.

The solution proposed by Sec. Roxas and his team already sounds like a big compromise. But it would still free up additional six to eight movements per hour.

Sec. Roxas has belatedly ordered to exclude fish flights during the peak hours at NAIA and let them use Sangley instead. Other general aviation users like the corporate types will be allowed one take off and landing per hour with additional movements charged Airbus rates.

I think everyone should be charged Airbus rates from the start. If the rich folks from Ayala and San Miguel want the convenience of boarding their private jets at their NAIA hangars, they should pay Airbus rates of $500 rather than a measly $40. But can Mar be expected to turn his back on the elite of which he and his family is a part?

And no one is talking about presidential flights that cause even more delay. Maybe P-Noy should set the example and take off from Clark or Lipa. If the President can do it, so could JAZA or Ramon Ang or Manny Pangilinan.

Gas price

Lawyer Sonny Pulgar sent this one.

I went into the Shell gas station this morning and asked for P50 worth of gas.

The gasoline boy farted and gave me a receipt.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco