Tags: Airline Industry, Tourism, Transportation
By Lawrence Casiraya
MANILA, METRO MANILA — “Less comfort, more travel” is a catchphrase that could best describe the current state of the airline industry in the Philippines.
Budget airlines are expected to become more profitable than major carriers as more and more travelers prefer to choose thrift over luxury. Gokongwei-owned Cebu Pacific is widely regarded as the country’s foremost budget airline serving both domestic and international routes.
Budget airlines such as Cebu Pacific are able to charge lower airfare by keeping operational costs at a minimum. Unlike major carriers, most notably Philippine Airlines (or PAL), budget airlines do no serve food, especially on short flights, and use secondary airports in other countries to cut down on fees. These airlines also fly more frequent flights to maximize passenger volume.
The airline industry in the Philippines is following the lead of other countries in Asia Pacific, where major carriers have opened up budget airlines as subsidiaries in order to offer low-cost fares and cash in on the current trend.
This strategy is aimed at tapering off losses by major carriers due to declining markets.
Philippine Airlines, owned by business tycoon Lucio Tan and still holds the distinction as the country’s flag carrier, opened up its own domestic budget carrier in Air Philippines (recently re-branded as PAL Express).
While major carriers struggle with financial losses, budget airlines are reporting rosier figures and are aggressive in expanding their fleets.
Cebu Pacific, now the country’s largest domestic carrier, is yet to carry on with its initial public offering (or IPO) aimed at raising money to fuel its billion-dollar expansion plan. IPO aside, the company is confident it is profitable enough to finance its plans, including the purchase of 17 new aircraft over the next five years to add to its current fleet of 21 planes.
The company has generously benefited from this current trend in budget travel, reporting a year’s worth of more than 5 million domestic passengers while considering new international routes.
Domestic budget carrier Zest Airways, meanwhile, also beefed up its fleet last year in anticipation of increased passenger volume especially with the onset of the summer peak season in 2010. The company recently purchased two Airbus A320s.
According to government data, domestic travel rose by almost 30% to 11 million from January to September 2009, from 8.6 million the previous year.
This upsurge directly benefits the country’s tourism industry. Travel agencies play a major role in promoting the industry, and are thus encouraged to have better linkages with budget airlines in order to take advantage of the growth.
The Department of Tourism, meanwhile, is expected to soon sign in behalf of the government an “open skies” agreement with other Southeast Asian countries that would help pave the way for more flights into the country from foreign airlines.
There is a two-prong benefit from this agreement. While it is expected to boost tourist arrivals in the country, the expected entry of more budget carriers also gives Filipinos more options when traveling abroad.
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